Medical College Fee Regulation Gap: Non-Profit Colleges Charge Highest Fees

The National Medical Commission's (NMC) 2023 regulation permitted only Section 8 companies—non-profit organisations under the Companies Act—to establish medical colleges. This rule aimed to ensure that any surplus is reinvested in charitable objectives. However, a recent amendment now allows all companies incorporated under the Companies Act, 2013 to start medical colleges, potentially altering the landscape.

Historically, the Medical Council of India (MCI) amended regulations in January 2017 to allow all companies registered under the Companies Act, 1956 to set up medical colleges. This change also permitted any autonomous body, society, or trust to convert into a company. However, when the NMC replaced the MCI in September 2019, its fresh regulations restricted eligibility to Section 8 companies only.

In May 2017, Vedanta, a mining conglomerate, became the first private limited company to establish a medical college—Vedantaa Institute of Medical Sciences in Palghar, through its entity Vedantaa Institutes of Academic Excellence Private Limited. The institute argued to the Maharashtra government that as a private company, it could make profits and thus its fees did not require approval from the state fee regulatory authority. Although it later complied with fee regulation, its fees remain among the highest in the state (Rs 15.7 lakh for management seats in 2025), second only to deemed university colleges.

Ironically, fees at deemed university medical colleges, which are established by trusts and societies and are legally non-profit, are among the highest. These institutions are not subject to state fee regulation, and states have no quota for lower-fee seats in them. No regulatory body controls their fees.

The Supreme Court held in 1993 and again in 2002 that education is a charitable activity and prohibited profiteering, though it allowed 'reasonable surplus' for expansion. Until 2009, the official stance was that education could not be a for-profit venture. Consequently, most private colleges operated as charitable trusts or societies despite charging high tuition fees, illegal capitation fees, and other charges.

In February 2010, the government allowed companies registered under the Companies Act to open medical colleges, with the condition that permission would be withdrawn if colleges engaged in commercialisation. By 2016, the government argued that the no-profit rule discouraged companies from establishing colleges and that profits were being made in non-transparent ways. Legalising profits, it claimed, would at least generate income tax revenue. This led to the 2017 amendment.

The current regulatory framework leaves a gap: non-profit colleges, whether Section 8 companies or trusts, are not subject to fee regulation, resulting in some of the highest fees in the country. The recent amendment expanding eligibility to all companies may increase the number of colleges but does not address fee oversight.