Will a billionaire philanthropist's new American-style university stem the flow of Indian undergraduates heading West?

British universities which assume there will be an unending stream of students coming from India in search of a quality higher education may be in for a shock in a few years. Indians are beginning to think about building their own elite, private universities – and are ditching the erstwhile British model for American-style higher education.

California's Stanford University will be the template for an ambitious $3.5bn (£1.7bn) international institution in the Indian state of Orissa, called Vedanta University. Anil Agarwal, British mining and metals magnate, is behind the plan. A savvy businessman, Agarwal will capitalise on the Indian demand for universities, and for a more multidisciplinary, American approach to higher education.

Among Indian students who go abroad for their university degrees, the majority prefer to go to the United States – not to the UK – despite the historic ties between India and Great Britain. Of 123,000 Indians studying abroad, nearly two thirds are enrolled in US institutions. This preference is part of Indians' efforts to distance themselves from British influence, according to Alan Goodman, president of the International Institute of Education in New York.

More and more Indians are willing to shell out large sums of money for quality higher education, whether overseas or at private institutions in India. A seven-year-old American-style business school, the Indian School of Business – which charges four times the tuition of the country's most elite, government-run business schools – is gaining international recognition and producing some of the highest-paid graduates in the country. And last year, Indians spent $1bn on education overseas, 60 per cent more than in 2005.

India's government-subsidised university system, a relic of British colonialism, is starved of funds and has been criticised by Indian academics for being too rigid and providing too little room for innovation. In addition, Indian higher education is geared toward producing babus, says Indian sociologist Shiv Visvanathan. Babu is a pejorative term used to describe clerks and petty bureaucrats, a class developed by the former British rulers. They encouraged education for Indians, thereby creating legions of career underlings. That mentality lingers in independent India, according to Visvanathan.

Agarwal's proposed Vedanta University is expected to be different. Undergraduates will study diverse subjects on the way to earning degrees, rather than focus exclusively on one discipline, as is typical at Indian universities. "An engineering student will be able to study literature or economics if he wants to, like in the US," says C.V. Krishnan, chief executive of the university project. Vedanta University plans to offer undergraduate, graduate and doctoral programmes in a huge variety of disciplines. The first phase of the university's growth, to about 3,000 students, is scheduled to begin next year. In 2023, when it is destined for completion, Vedanta University will house 100,000 students, as well as 40,000 faculty and staff members.

Agarwal, who has a fortune of $3.8bn, plans to donate $1bn to his university project. His is a rags-to-riches story: he started his business in Bombay, now Mumbai, in the mid-1970s at the age of 20, collecting scrap metal. Agarwal first came to the attention of the British media in 2000, when he was sued for reportedly throwing his digital diary at a senior employee who disagreed with him. A London employment tribunal awarded the employee £805,000 in damages.

The 53-year-old billionaire, who declined to be interviewed for this article, never attended college. Neither does he have any experience in setting up an educational institution. "There were extraordinary ambitions and hopes and dreams from the outset, but no one who could define them, and that was my job," says William M. Chace, a former president of Emory University in the US, who last consulted with Agarwal in January. Chace had to spell out "all these ABCs", he adds, because Agarwal "was not au fait with how a university was organised."

Nevertheless, he has huge ambitions for Vedanta University. According to promotional materials, Vedanta will boast faculty members and students from all over the world and will produce "tomorrow's Nobel laureates, Olympic champions and community leaders." Agarwal and his public relations staff talk a good game – he has even likened himself to Leland Stanford, an American who made his fortune building railways in the US and founded Stanford University.

However, the billionaire has been criticised in India. His university project has attracted some controversy. As many as 3000 farmers and landless labourers on the proposed site for the university will be driven out – by India's laws of eminent domain – to seek new jobs and a new way of life elsewhere. "How did the government allow this?" asks Sudhir Patnaik, editor of a local magazine that has criticised the project.

Other critics say the billionaire is simply trying to prettify his much-maligned mining operations in the state, as well as to acquire valuable land for eventual industrial use. Mr C.V. Krishnan, chief executive of the university project, expresses irritation at suggestions that the project is merely a land grab in disguise. "Have you seen the master plan?' he asks.

The intended uses for the land – all connected in some way to the university – are clearly outlined there, he says. "A university is not just classrooms. It is going to be a live environment for thousands of people."

Agarwal's mining operation in the state's dirt-poor Kalahandi district has come under fire from India's Supreme Court – which has stayed the project for the interim – for environmental violations and for endangering the indigenous population. The court's investigation in 2005 discovered that the company had failed to disclose that it planned to encroach on endangered forests.

Last year, activists from Orissa travelled to London during Vedanta Resources' annual meeting to protest about the company's environmental record in India. "When people who have been investigated for falling short of regulations talk about setting up a university, it makes you wonder. And everyone knows the land earmarked for it is a dream area for setting up industry or dealing in real estate," says Pattnaik. He says that despite the university's insistence that the land will solely be used for the university.

Still, for Vedanta University's supporters, its sheer scope is what makes it worth backing. "It could set a new revolutionary benchmark in higher education – and just the force of that argument should allow this project to go ahead," insists Pratap Bhanu Mehta, chief executive of New Delhi's Centre for Policy Research.

As it is, the country's 350 public universities serve only seven per cent of its 18- to 24-year-olds, a rate that is half that of other Asian countries. If Vedanta University succeeds, it could stem the rising tide of Indian students seeking an education overseas.

Vedanta University: in brief

Founded

By the Indian business tycoon Anil Agarwal, who has given $1bn of his personal fortune, reportedly the biggest single-person contribution to the endowment of an educational institution in the world.

The aim

To provide world-class higher education for Indian students and create an internationally recognised Indian university along the lines of Stanford, Harvard and Oxford to attract researchers, staff and students from around the world.

The scale

Large. Eventually there will be 100,000 students and 40,000 staff.

The campus

Is being designed by an American architect in Baltimore who has developed Duke, Carnegie-Mellon and Johns Hopkins universities in the US. It will be built on 8000 acres of land near the Puri-Konark marine drive in Orissa state and the buildings will be arranged in the form of two overlapping circles. The Orissa government has begun to build a four-lane expressway from the new campus to the international airport which is being constructed near the state capital, Bhubaneswar, 70km away. A railway station will also be located on campus. The area will be developed into a large university township that will house a permanent population of 500,000 in addition to the 100,000 students.

Any more?

Yes, there will also be a research and development park serving as an incubator for spin-off companies. Eventually, it is hoped that this will evolve into a large research-cum-education complex resembling Silicon Valley, the economic hub that surrounds Stanford.

Will it work?

The university system in India is under financial strain and is not known for its research strength, except in one or two areas, or for the quality of its academics. Although it has large numbers of keen and well-prepared students, India is not a global player and, unlike China, is not making super-human efforts to build up a stellar university system by recruiting retired or semi-retired university presidents and other staff from the US. That is why Indians spend large sums on getting a good higher education overseas. And it is why India's Prime Minister, Manmohan Singh, announced that he wanted to set up 25 new universities funded by the centre to augment the handful of centrally funded universities already in existence. It is also why he supports Vedanta University.

Whether Vedanta will succeed is debatable, according to Lord Parekh, the British peer who was educated in Bombay and the London School of Economics, and was later vice chancellor of the University of Baroda. First, he wonders where the quality staff will come from for a new university containing 100,000 students. Second, he asks who is going to manage a 40,000-strong faculty.

"Three Chinese universities have invited retired or semi-retired American professors and executive officers to staff their universities," he says. "Singapore is doing the same. These countries are paying well. They have the confidence to hire foreigners." LH