'Yes, the new reservation policy will apply in these institutions when they come here,' said Singh after a meeting of the Group of Ministers that is examining the proposed Foreign Education Providers (Regulation) Bill under government consideration.

In fact, applying the new reservation policy in foreign educational institutions when they come to India is one of the many issues that Singh has taken up against the commerce ministry's proposal to allow Foreign Direct Investment in education.

The commerce ministry has recommended that the government should approve FDI in education. Already, a number of foreign universities and companies that operate in the education sector have shown keen interest to enter India.

Explaining the need for foreign investment in education, G K Pillai, special secretary, ministry of commerce told rediff.com earlier this month that every year the outgo from India on education to foreign countries is more than $4 billion (about Rs 18,350 crore).

"If foreign universities are allowed to set up shop in our country, this money can be saved," he pointed out.

Last week, the commerce ministry submitted a discussion paper on FDI in education to the HRD ministry and the Prime Minister's Office.

The ministry argued that higher education sector in India should be 'freed' and the country should open the doors to foreign investment.

Some of its key arguments were:

• India spends just $406 (about Rs 18,600) per student on higher education. That is just a fraction of countries like China ($2,728 or Rs 125,000), Brazil ($3,986 or Rs 182,000) and Malaysia ($11,790 or Rs 540,000) spend.
• Public expenditure on education is only about 3 per cent of the Gross National Product and only 0.37 per cent of Gross Domestic product is spent on higher education in the country.
• There are only 10.5 million students enrolled in all higher education institutions in India -- that is just 11 per cent of the relevant age group (17 to 23) population. Even South-east Asian countries show much higher enrollment: Philippines (31 per cent), Thailand (19 per cent), Malaysia (27 per cent) and China (13 per cent).

Officials at the HRD ministry say Arjun Singh has already informed the commerce ministry not to hurry the proposal. The HRD ministry's objection is that not many countries are pushing for FDI in education under the Word Trade Organisation agreements.

The HRD ministry has recommended a 'cautious approach' to FDI in education considering that many other Third World countries and Muslim nations have told the WTO that they would not open their education sector as doing so would affect local political and cultural sensitivities.

The HRD ministry also wants the proposed bill to incorporate a clause that existing reservation pattern in Indian educational institutions be applied to foreign varsities setting shops here.

The ministry also insists that that foreign universities should be brought under the University Grants Commission and treated as deemed universities. They should also follow the stringent UGC norms.

Officials said the commerce ministry and a section of the Group of Ministers that are examining the bill are against Singh's insistence that the new reservation policy should be applied in foreign varsities.

Singh's government's proposal to add 27 per cent reservation for Other Backward Classes to the existing 22.5 per cent reservation for Scheduled Castes and Scheduled Tribes in elite educational institutions had provoked a countrywide agitation in June

Forced by the agitation, the Prime Minister's Office had constituted an Oversight Committee to monitor the implementation reservation for students coming from the socially and educationally backward classes of citizens.

The interim report of the Oversight Committee on the reservation policy has recommended that the new quota regime should commence from the 2007-2008 academic year. To implement the policy, the seats in all central government institutions will be hiked by 54 per cent.

The committee, headed by senior Congress leader and former Karnataka chief minister M Veerappa Moily, studied the implementation of 27 per cent reservation for OBCs in higher education institutions and requirements for increasing seats without reducing the number in the general category.