According to a CRISIL report, despite low penetration of higher education in India and healthy demand for skilled manpower, higher educational institutions are struggling to fill seats and over one-thirds seats in engineering colleges and B-Schools are vacant

Low occupancy has impacted the ability of several lower-rung colleges to sustain operations and, as a result, a number of colleges would either close down or change hands over the next few years, said CRISIL.

Ajay Srinivasan, head of Industry Research, CRISIL Research, said, “Low occupancy rates are making it difficult for many lower-rung colleges to sustain operations. As a result, we expect a number of colleges to face closure or change in ownership over the next few years.”

Despite low penetration of higher education in India and healthy demand for skilled manpower, colleges are struggling to fill seats. As per CRISIL Research estimates, the average occupancy rate declined in 2011-12 to around 67% for engineering colleges and to about 65% for business schools (B-schools). CRISIL analysis indicates a wide variation in occupancy rates across various states and grades. For example, engineering colleges in Andhra Pradesh (AP) and Uttar Pradesh (UP) had an average occupancy of around 60% and 40%, respectively, which is much lower than the all-India average. Tier-4 B-schools, estimated to account for around 36% of the total seats, had an average occupancy of only around 50%.

Occupancy levels are under pressure due to the significant increase in the number of seats across colleges, shortage of skilled faculty, absence of industry link-ups, increasing awareness amongst students about the quality of education imparted by colleges, the ratings agency said.

The number of seats offered by AICTE-approved B-schools has increased almost fourfold to 3.52 lakhs in 2011-12 from 0.94 lakhs in 2006-07, while that for engineering colleges has zoomed to 14.85 lakhs from 5.50 lakhs during the same period. Moreover, there is also a significant concentration of supply, with Andhra Pradesh, Uttar Pradesh, Tamil Nadu, Maharashtra, Karnataka and Madhya Pradesh together accounting for close to 65% of the engineering seats on offer.

Quality of education is another major concern, as an overwhelming percentage of students passing out from lower-rung engineering colleges and business schools (B-Schools) lack skill sets needed to start working, after graduating, without extensive training. A number of corporates have actually started in-house courses to train students for the exact job roles.

In fact, CRISIL’s education grading programme for B-schools is aimed at bridging the gap between existing education quality and corporate expectations. “There is an urgent need for education institutes to re-establish their quality paradigm with the corporate sector. Our grading centrally factors corporate feedback, apart from it being based on parameters that are most relevant to the corporate sector, which include industry interaction, entrepreneurship, and practical exposure,” said Akash Deep Jyoti, Head of CRISIL Ratings,

Supply-demand factors are not the only troubles for private engineering colleges. Political decision-making is also a source of viability questions in Andhra Pradesh. According to a newspaper report as many as 75 private engineering colleges from Andhra Pradesh have stopped admissions for the current academic year and have put themselves up for sale in view of the state government’s decision to stagger the tuition fee reimbursement programme. As per the new guidelines, students with 75% attendance, 50% marks in the first year of plus-two, and an income of below Rs1 lakh a year, are eligible for reimbursement of tuition fees in Andhra Pradesh.

There are reports that some political leaders were busy negotiating with the troubled colleges for purchasing them at a cheaper rate. Recently, three such engineering colleges in Telangana region were sold to relatives of a politician, said a report.