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Indian edtech firms scramble to adopt self-regulatory code as government mulls reforms

Written by Moulishree Srivastava Published on     4 mins read

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India is creating a regulatory framework for online education companies to prevent a monopoly and the exploitation of students.

At a time when the Indian government is mulling over regulating the fledgling online education sector, local edtech firms including Byju’s, Unacademy, and Vedantu have kicked off a process to create and adopt a self-regulatory code of conduct.

In a letter sent to the country’s education ministry earlier this week, over a dozen edtech players said they will adhere to a common code of conduct to ensure transparency in business, a report by local media Economic Times said.

Edtech players have set up an autonomous body called the India Edtech Consortium (IEC) under the umbrella of the tech industry lobby, Internet and Mobile Association of India. The new edtech body currently has 15 members. Aside from decacorn Byju’s and unicorns Unacademy and Vedantu, IEC includes Simplilearn, Doubtnut, Classplus, Toppr,  Careers 360, Harappa Education, and Times Edtech, among others. More education tech companies are expected to join in.

Last week, union education minister Dharmendra Pradhan, during a public event, said that the Ministry of Education has been in talks with the Ministry of Law as well as the Ministry of Electronics and Information Technology to create a regulatory framework for the online education sector to prevent monopoly and student exploitation by edtech companies making tall promises.

The government is not against the growth of edtech firms, “but there cannot be a monopoly…you cannot exploit students,” the minister said.

After observing that some edtech firms are exploiting students in the name of loan-based courses, last month, the government had directed all departments of school education, higher education, skill development, and entrepreneurship to issue advisories asking students to take caution against unfair practices deployed by edtech firms.

“It has come to the notice of the Department of School Education and Literacy that some edtech companies are luring parents in the garb of offering free services and getting the electronic fund transfer mandate signed or activating the auto-debit feature, especially targeting the vulnerable families,” said the advisory from the government on December 23.

“Do not blindly trust the advertisements of the edtech companies. Do not sign up for any loans of which you are not aware. Do not install any mobile edtech applications without verifying the authenticity,” it added.

A wake-up call

The advisory note came ten days after Karti Chidambaram, a member of parliament for Sivaganga, a district in the southern state of Tamil Nadu, raised the issue of a lack of oversight on edtech firms.

“There are online educational companies which are worth billions of dollars. Some of them are worth even more than the entire educational budget of India,” he said in parliament on December 14. “These companies offer online courses which nobody vets.” He added that no one knows the content and quality of these courses or the caliber of the tutors on the platforms.

Without naming any company directly, he also brought up predatory marketing practices and unethical conduct by big edtech players that include making exaggerated promises, forcing parents to buy courses, and auto-debiting course fees from their accounts even when parents want to discontinue it.

“These auto-debits are happening regularly month by month. In fact, they are becoming like loan sharks where they are force-selling these courses,” he said. “These companies are engaging in predatory marketing practices where they prey upon the aspirational poor people, who want to give their children a better education, who want to supplement their education which they are not getting in government schools.”

Chidambaram said the power of one such company is so much that it is able to remove complaints on social media.

“This company is worth 21 billion dollars. Our entire Indian educational budget is not worth that much. So, it is essential to make concerted efforts to monitor these companies,” he said.

He was referring to Byju’s, which received flak on social media last year for allegedly making false claims, aggressive marketing tactics, and abusing and exploiting parents.

The newly set up edtech body is primarily looking at resolving and monitoring two issues—misleading advertisements and misleading payment structures—in a bid to escape a crackdown by the regulators. Reportedly, this code of conduct will ensure appropriate and ethical sales practices, marketing communications, and fair practices on financing, loans, and refunds. The aim is to regulate how edtech firms sell online courses.

In the letter, IEC said it would also establish a grievance redressal mechanism to ensure that business is conducted with high transparency and customer interest in mind. Major edtech players have already held multiple discussions following the advisory note issued by the government.

Since the COVID-19 pandemic in early 2020, online education has been witnessing hypertrophic growth. Online education startups raised USD 2.3 billion and USD 3.8 billion in 2020 and 2021, respectively, according to a recent report by market intelligence firm HolonIQ.

Aside from the growing demand for online education services amid the pandemic, the policy reforms by the Chinese government for the local edtech industry—which required companies teaching academic curriculum to go non-profit and barred them from pursuing IPOs and taking foreign capital—also fuelled the funding boom in India’s edtech sector.

“China’s edtech investment collapse was offset by an incredible surge in investment in the US and across Europe,” said HolonIQ in a note. “India is now Asia’s investment leader in education, surpassing Europe as a whole, yet less diversified.”

India’s online education market is expected to be worth more than USD 3.5 billion by 2022—almost five times the USD 735 million it was worth in 2019, as per an October 2021 report by BLinC Invest. Overall, the edtech market is estimated to reach the USD 30 billion mark by 2030.

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