National Skill Development Corporation: A flawed structure?

The country’s ambitious plan to skill 500 million youth by 2022 is skidding on inter-ministerial fights, government lethargy, tardy implementation and a far from robust public-private model for skill development. In a three-part series, Business Standard looks at how the skills mission is not just running behind schedule, but is in real danger of getting derailed. Today, we present the challenges that National Skill Development Corporation faces.

It hardly takes any prodding. Dilip Chenoy, CEO and managing director of the National Skill Development Cor-poration (NSDC), is straightforward in admitting the magnitude of the challenge his organisation faces.

“It is not an easy thing, this skilling programme. You are changing mindsets; you have to match aspirations; you have to get people to work together; and you have to get industry to part with money. It is a difficult, difficult thing to do,” says the former director-general of the Society of Indian Automobile Manufacturers and a veteran of the Confederation of Indian Industry.

“But the good news,” Chenoy adds, “is more and more companies and organisations are getting aligned to it because they are seeing a bottom line benefit.”

Date of launch- October 2009
150 million
Total target
Total trained
Total placed
No. of training organisations approved
No. of sector skill councils (SSCs) approved
No. of training organisations funded
No. of SSCs funded
Rs 1,356.41 crore
Total commitment
Rs 2,500 crore
(including Budget 2012-13 allocation)
Total corpus
* All numbers as of March 2012, unless otherwise specified Source: NSDC

The formation of NSDC was announced by Finance Minister Pranab Mukherjee in his 2008-09 Budget speech, to achieve about 30 per cent of the country’s overall target to skill and up-skill 500 million Indians by 2022.

For NSDC to execute its mandate of imparting skills to about 150 million people in 10 years, through public-private partnerships and facilitating funding to private enterprises in the sector, the government has put a substantial corpus of Rs 2,500 crore at its disposal, including the allocation made in Budget 2012-13.

While there is little doubt about the government’s intent on upgrading India’s largely unskilled workforce, some of NSDC’s largest partners—so far, it has 32 training partnerships with private entities that have been funded—have expressed concern over the very structure of the corporation, apart from apprehensions on the way it plans to meet its ambitious targets.

R C M Reddy, managing director and chief executive, IL&FS Education and Technology Services, which has a joint venture with NSDC to train 1.95 million individuals, questions why the corporation has been tied down to the 150-million target in the first place.

“NSDC should have looked at capacity building in the sector and worked with all the stakeholders involved, without looking at a number. The moment you begin to monitor a target, proposals can be passed quickly. Instead of implementing, NSDC should have been the anchor,” he says.

“It should focus on creating value, getting industry onboard, building good quality delivery capacity and looking at large-scale institutions,” Reddy says, adding competition between NSDC and ministries scheduled to participate in the mission could create more problems.

Currently, NSDC’s primary function involves “providing financing, either as loans or equity, providing grants and supporting financial incentives to select private sector initiatives,” according to its website. It, therefore, attracts a host of private players—old and new, small and big—into the sector.

For Sanjeev Duggal, chief executive and director of Centum Learning, one of NSDC’s major partners, with the target to train 11.57 million, this model is part of the problem. It’s not just about building capacity, he says, “but creating deep engagement with big players.”

“This (the target of 150 million by 2022) cannot be delivered otherwise. Regional or smaller players can only be niche players in specialised segments, in very specific regions,” he says, since “this is going to take a couple of years and you need to have the courage to lose money before you can make it work.”

“Small companies believe you can take the money, get out there and think it’s going to happen. But it’s not going to happen like that. The scale of a large player allows you to sustain and grow this business,” he adds.

The head of one of NSDC’s top five partners, in terms of targeted skilling volumes, on condition of anonymity, says the current execution model is a “huge risk”.

“When you look at life as capacity-building, and that’s your objective, and that, too, in a market where there is need but no demand, you end up taking all the wrong actions. If the FM (finance minister) mentions NSDC needs 60 more proposals, that means 60 more people come with proposals, and because you’ve funded 60 companies, you think you’re doing something,” he explains, “All you are doing is creating bad debt. You’re spreading money out to 60 more companies who will never be able to pay you back.”

Chenoy, however, claims NSDC is partly prepared for such failures. “We are not expecting a 100 per cent outcome from each of our training partner. Our (official) target is 150 million, but we are targeting to fund entities that propose to skill 210-220 million people over the period. We are catering for that, and it is built into our model,” he says.

210 million, though, is more than the entire population of Brazil.


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