New Delhi: With the decision to hike fees by the Indian Institutes of Management (IIMs), students will have to shell out between Rs5 lakh and Rs6 lakh to complete their course. This also includes the essential expenses students incur during their two-year stay on campus. The fees charged by these institutes, which vary between Rs4 lakh and Rs5 lakh, are not abnormally high. After all, other top league schools in the private sector are also charging similar amounts. Then there are banks to help. The salaries students get after graduation are also decent enough to pay back the loan.
But, what is alarming is that in the last two years, the fees have been hiked between 40% and 66% in spite of an annual government grant of over Rs5 crore to some of these institutes. Also a cause of concern is the high component of student fees and lower share of revenue from management development programmes (MDPs) and consultancy in the overall income of the institutes. The trend of hiking fees is likely to continue if these institutes don’t lower their dependence on fees for their sustenance.
In the West, top business schools such as Harvard, Kellogg and Wharton actually lose money in their flagship programmes. They offset the losses by way of earnings from short-term executive education programmes and consulting projects.
In our country, very few institutes—for instance, IIM-Ahmedabad, IIM-Bangalore and the Managament Development Insitute based in Gurgaon, just outside Delhi—earn more from MDPs and consultancy, compared with the revenue from fees. For IIM-Ahmedabad and IIM-Bangalore, the annual revenue from fees is about Rs8 crore while revenue from MDPs for 2005-06 was between Rs10 crore and Rs12 crore. Revenue from consultancy for IIM-Ahmedabad was about Rs12 crore, while for IIM-Bangalore, it was about Rs1 crore.
On the other hand, for the same period, the earnings for IIMs in Indore and Kozhikode from MDPs was only Rs50 lakh and Rs35 lakh, respectively. The revenue from consultancy for IIM-Indore was about Rs27 lakh, while for IIM-Kozhikode, it was only about Rs3 lakh. The low earning figures of IIMs in Indore, Kozhikode and Lucknow are primarily due to their location, which results in low industry interaction. The government needs to give priority to commercial hubs such as Mumbai, Pune, Delhi, Chennai, Hyderabad and Chandigarh for setting up of new IIMs so that they can complement their income from industry interface and keep a check on fees. Besides the reluctance of faculty to join institutes in remote places, the institutes also lack intellectual pull to attract industry to their campuses.
The unfortunate part is that this latest hike in fee is not translating into a corresponding hike in the payscales of the faculty. The faculty gets between Rs3 lakh and Rs5.5 lakh per annum, which is much lower than what their counterparts industry or even in some private B-schools get. The government needs to give autonomy to these institutes to decide the salary of their faculty. High payscales will have a positive impact on the competence and numbers of faculty joining IIMs, which, in turn, can lead to a higher student intake.
The present annual student intake—which varies from 120 to 250 for each IIM—can be increased to at least 500 to get the benefit of economy of scale. High intellectual capital and industry interface has a direct bearing on revenue from consultancy and MDPs. This will help in their reduced dependence on government aid and on fees.
This sudden hike in fee, it seems, is to accommodate a higher number of reserved category students. Ironically, it is they who will suffer the most with the hike. Dalit students are already getting a raw deal as far as placements are concerned. Some of them don’t even complete the course in two years. Their average salary is about 20% less than general category students. Moreover, as of now, their major recruiters are public-sector companies. For other backward caste students, if reservation is implemented—which, in all likelihood, it will—they will have to depend more on private companies for jobs. If there is an economic downturn, some of these candidates may not even get placed and will find it difficult to repay the loan taken to finance their education.
Premchand Palety is director of Centre for Forecasting & Research in New Delhi, from where he keeps a close eye on India’s business schools. Comments are welcome at email@example.com