Companies in the education sector have expressed inability to participate in vocational educational projects run by the central and state governments. Sources told Moneycontrol that the inordinate delays in payments by the government agencies has led to companies withdrawing from these projects.
Both the Centre and the states follow a process of tenders for selecting agencies for implementation of their vocational education projects across various institutions. After the bidding process is completed, a successful bid is selected from the list of applicants.
“Delays in payments are impacting the books. While the size of the projects are huge, we are giving it a miss because it profitability gets hit,” said the chief executive of a large education sector company.
For large-scale tenders released, the government has primarily received interest from state-run and quasi-government agencies for project execution.
For the sector players, retail as well as corporate/institutional training account for almost 85 percent of the revenue of the companies. The rest goes into other businesses like publishing or educational infrastructure.
"One win in a government contract will be an instant revenue positive for companies. However, considering the track record of government payments, nobody is willing to risk it. We are however, completing the old projects that will be due in 2018 and 2019," added the managing director of a large educational services firm.
About three years ago, vocational education was one of the largest revenue generation streams for education companies. However, as the defaults by government agencies started to get more frequent, companies started to slowly withdraw from these businesses.
Skill India
A large proportion of projects under vocational education are part of the Skill India Mission that aims to train 400 million people by 2020. Initiatives like Pradhan Mantri Kaushal Vikas Yojana are part of this initiative.
Here, this scheme is being implemented by the National Skills Development Corporation (NSDC) under the guidance of the Ministry of Skill Development and Entrepreneurship (MSDE). Owing to the its successful first year of implementation, the Union Cabinet has approved the scheme for another four years (2016-2020) to impart skilling to 10 million youth of the country.
Past instances
In other government-led programmes like implementing smart classrooms in schools, players like Educomp Solutions and Core Education had faced payment delays from the government. This had impacted both their top-line and bottom-line which consequently led to loans taken from banks to turn into non-performing assets.
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