In an interview by Mint's Aparna Kalra, Jhunjhunwala, one of the more prominent professors at IIT-M, says this about the issue of institutional autonomy:
I have had plenty of conversations with IIT directors. In some issues, government has acted Big Brother with us—in terms of increasing number of students (because of reservations) we were not given much choice. There is some very loose kind of thing on faculty reservations. There are some national-level policy issues on which government will have a say.
I don’t think beyond this government tells IITs anything.
I really think there is significant amount of autonomy. Government gives us money, we have to have salary structure in tune with government pay. MHRD (ministry of human resource development) gives each IIT Rs120-180 crore per year. Compared to the money we get, interference is negligible. How they are run, what is the promotion policy, things are fairly flexible.
To a question about whether IITs can ever become financially independent (like IIMs have done):
I don’t think so. I have tried to work it out in terms of fees. Some of the alumni talk big, but no IIT has been able to create that kind of corpus. Unless you are ready to charge Rs5-6 lakh per student in which case there will be a lot of problem. I don’t mind moving in that direction, but it is going to be tough. People are not used to taking this loan and then paying heavily.
We can charge this fees only to undergraduates. Even with this fees, (we will) not even come close to one-third of our budget.
And then there's this section where he lists the (hidden) benefits of working in an IIT:
IIT Madras has a beautiful campus, where I have free housing. There is a hospital, which my family can use. There are two schools. My children can go to these schools. Maintainance of the house is free. Five days a month I can build consultancy capability. I am allowed to go on boards of companies and retain board fees. For 60 days a year, I can go abroad on a fellowship. After six years, I can go for a sabbatical for a year, three times in my career. Of course, we have to excel. Industry will give us consultancy only if we excel.
That autonomy is very precious to us. Nobody can force us to do anything.