Thursday, April 03, 2008

Fee hike at the IIMs

CNN-IBN had a show yesterday on the fee hike at the IIMs -- and IIM-A, in particular. Since gains from higher ed -- particularly the kind that leads typically, to jobs with astronomical salaries -- are largely private, I'm generally sympathetic to the idea that students pay for their college education. Still I can't help feeling that IIM-A has decided to go for the kill, with annual fee in the range of 5.5 to 6 lakhs (US $ 14,000 to 15,000 at the present exchange rates). It appears to have decided that students in its flagship program will fund all its activities (infrastructure, faculty salaries, research grants, research students, the works).

The CNN-IBN show's panel featured Premchand Palety, Director of Centre for Forecasting and Research, who started with the following objection.

I oppose this hike simply because it is not transparent. We don’t know why they need the money and we don’t know where they will spend it.

This points to the failure of IIM-A administration to explain the need for such a huge fee hike; as a public institution, it cannot shirk this duty -- a report or white paper would be a good place to start.

Rashmi Bansal, an IIM-A alumna, tried her best to defend her alma mater. The main question, for her, appeared to be this: why are we arguing for a subsidy for a bunch of folks who are going to earn tons of money? To which Palety offered this counter: What if the MBA graduate wishes to be an entrepreneur? What if he/she joins an NGO where the salaries are far lower? [I would add a third group of (possibly a small number of) students who join the course, but are unable to complete it (for any reason); these students wouldn't have a degree, and would have spent serious amounts of money in the process.]

There was quite a bit of discussion about affordability; the new fee structure is bad news for even middle class families -- leave alone poor ones. A partial answer to this problem, of course, is either scholarships or soft loans (most likely it's the latter). Rashmi did offer this as a defence, but it's a weak one at best. T.T. Ram Mohan, Professor of Accounting at IIM-A, shows that his institution's current plan would still leave its beneficiaries with a hefty financial burden. Also, Reality Check has some telling counter-arguments to the plan proposed by IIM-A:

... Words like “eligible”, “need-based”, “family limit”, “deserving student” - are evil, no matter how well intentioned they are. They act as barriers and only encourage groups which are confident of negotiating them. ... The whole “no deserving student left behind for economic reasons” argument holds no water. ... There is a risk of making the whole program unapproachable due to perception of cost and nervousness with the proposed aid system. “What if they reject my financial application on some flimsy grounds ? What if the loan officer does not like my looks, caste, religion, whatever ? My dad earns 7 lakhs, but is in deep debt, can I pull off the aid ? Is this “IIM” thing for rich kids, like Manipal, I do not know if I should try out ? What if by chance my aid gets rejected, I dont have a backup plan ?

RC goes on to demand a system of "guaranteed financial aid" that is "automatic for those who apply." I agree. I find the Australian scheme of funding college education very persuasive: it has a lot going for it for everyone -- the government and the students with great careers; and, it doesn't punish or burden those who end up in jobs that do not pay a lot.

Coming back to the CNN-IBN show, its anchor ended it with the following editorial statement, which is admirably blunt:

A hike is warranted in the fees for IITs and IIMs. The reasons for IIM-A’s phenomenal hike though seem unconvincing. Recovering costs and retaining talent don't tell the full story. Many questions remain unanswered. The promise to increase scholarships can't be a reason to charge more; nor can the availability of finance. IIM-A needs to communicate its reasons more transparently. The bottom line is, for a public institution to charge more simply because it can, is vulgar. The country's leading management institution needs to be clean and transparent. [Emphasis added]

* * *

Let me end this rather grim post with something light: IIT/IIM dating site [caution: it's an April Fool prank, but a good one]


  1. Pratik said...

    But, the point is, how many of the IIM alumni get into the NGO sector? And are the entrepreneurs incapable of earning enough to offset the fee hike (or is it the chances of failure because of which Palety brings up this point)? In which case, the question must be asked: "What did the fabled IIM education do for the entrepreneurs?"

    Lots of reforms are overdue in the educational system. And fee-hikes, and BIG fee-hikes is only one of them. But, like you say, this better happen in conjunction with a revised taxation system like the Australian model.

    While transparency is needed, I can't, however, agree with the CNN-IBN anchor's rather scathing "bottomline". Is charging more money by hiking fees any more vulgar than giving the (few) hard-working and highly qualified professors, or the (once again few) honest conscientious police officers, a pittance while those in the industrial/media/fashion sectors a ton for the same effort?

    At the end of the day, if there is a high demand and limited supply, the price of goods are bound to rise. Industry leaders lament the shortage of skilled personnel amongst recent college grads. Which is why they are ready to fork out large salaries to the good candidates. Isn't it funny that people who are in the private sector seem to decree that those in the public sectors have virtually signed off all rights to get a decent pay and are basically in the public sector to do philanthropic samaj seva?

    BTW, on a totally different note, after seeing how people react to increases in fee-hikes (as well as from some of the negative reactions in the letters to the editors of various newspapers about salary hike for govt employees) I cant help recollecting Cho Ramaswamy's quote: "A country that can't respect its teachers and police is a country that will never prosper"

  2. rishabh said...

    on a lighter note: the dating site is good :P

  3. Rohit said...


    Please succinctly explain the case for subsidizing management education.

    In a country where millions have no access to primary education, we are ready to subsidize IIMs! Interestingly enough, the current students in IIMs seem to have no problems. Maybe they know the value of the education they are getting.

    I am sorry to say this but that's just nonsense.

    As far as RC's comments are concerned, I have responded to them on my blog.

  4. Abi said...

    Pratik: I don't know how many eventually turn to NGO or entrepreneurship (I would think quite a few, particularly for the big E), but to the extent that they do, and to the extent that IIMs' mandate includes training such students, their concerns must be addressed, no?

    Rohit: Nice try, but no cheese! Please tell me where I have said IIM students need a subsidy?

    I did clearly state that I'm sympathetic to the idea that students pay for their college education. But I am also concerned that this would exclude poor people from the opportunities that become available through college education. And the CNN-IBN show brought up the issue of graduates going into NGO sector and entrepreneurship, so their concerns also deserve attention. I wouldn't want to wish these concerns away (and I don't understand why you would).

    Thus, I'm looking for ways in which both these things -- access for poor people without subsidizing college education -- can be achieved. One of the solutions that really appeals to me is the Australian scheme of automatic loans, funded by the government.

    The rest of the post is largely about IIM-A tying itself into all kinds of knots. So, let's get this thing right: it's IIM-A that says taking care of those in middle classes and below is an important mission. Given IIM-A's own position, it is entirely legitimate to criticize its proposed mechanisms for helping students from non-rich families. Ram Mohan and Reality Check have done precisely that; RC may be saying many other things, but I don't have to agree with those other things (explicitly) to highlight the part where he criticizes IIM-A's plan.

    I read the part just before where you said "that's just nonsense", and I had a good laugh. Thank some comic relief!