If you are an employee working in a public sector company, the salary -- and associated perks such as leave travel concession, children's education allowance, etc -- is your only source of income (aside from that from your investments / assets). But this is not the case for universities, and especially INIs -- Institutions of National Importance -- whose faculty are legally allowed to augment their salaries through various routes.
Perhaps it's a good idea to enumerate these routes; as I show below, this exercise also suggests a reform with wide-ranging benefits for pretty much everyone. So, here we go:
Research grants from industry: Unlike grants from government funding agencies, grants from industry allow the researcher to set aside a sum of money for "personal remuneration."
Industrial consultancy: No need to elaborate on this.
Lectures / short courses / technical development programs: These are the equivalent of the Executive Development Programs run by B-schools.
Lectures in private (mostly, engineering) colleges: I keep hearing about faculty who do this on the sly, but it is possible to do it legally as well.
Serving on job interview panels.
In addition, faculty get paid during the summer months (three months at IISc, and probably a little over two months at the IITs). Many faculty use this period on visiting professorships, some of which -- let me hasten to add here, only some of which -- could be lucrative.
I'm sure there are other ways as well -- all legal. Also of note is that faculty members can officially set aside N days in a year. At IISc, it is 52 days, or one day a week -- you can think of this as a version of Google's much-praised 20% projects.
I am sure many of you are enthusiastic about merit-based compensation schemes in which high performers make more money. This is our universities' version of merit-based compensation.
As you can see, all of them are in line with a university's goals of societal outreach, information dissemination, knowledge sharing, industrial interaction, teaching a broader set of students, etc.
Here's the flip side: Most of these activities (except the first) will count for very little when it comes to an evaluation of a faculty member's work at the time of his / her promotion. This is a quirk of our system, which seems to say, "you have got the money, so don't bug me for recognition."
The second point is that most of these routes for salary augmentation favour engineering faculty whose knowledge and skills can be put to use in industry right away. How about science faculty -- especially those with interests in deep fundamental research with no immediate application?
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As I said, this suggests a reform that would go a long way in making it generally fair for everyone, and help strengthen a system of performance-based compensation.
I have argued for a reform [here's a shorter version] that would allow research grants from government agencies also to build in a component of "personal remuneration" just like the industrial research grants do.
As I pointed out above, this reform is something that all faculty will love: you get recognition -- promotion, awards, etc. -- for the work you do with the research grant, and you get extra money.
Institutions will also love it because it provides a strong incentive for their faculty to go out and get research grants, which raises their research profile.
Government agencies should (I don't know if they will) love it because it helps raise the level of research in the country by making it more competitive.