IIMs: Whose business is it, anyway?
Shastri Ramachandaran


Aspirants on way to appear for the last CAT in Chandigarh.
Over a lakh took the test in the country

IF Macaulay's minute, in another era, was driven by the need to create a nation of clerks, Murli Manohar Joshi appears to be seized by an urge to build a nation of managers. Yet, paradoxically, in what has been cast as a battle between babudom and the champions of excellence in management, it is the minister who has won. The government has decreed that the fees of the Indian Institutes of Management (IIMs) should be slashed from Rs 1.5 lakh to Rs 30,000 per annum. And the fees have been slashed. End of matter.

After all, Joshi is the sarkar and the best of managers, even those in management education, are bureaucrats of a sort. They might not be in government service but, like government servants, they too are unable or unwilling to stand up to the powers that be. They are as adept as politicians at managing contradictions. So, it is hardly surprising that those who rose in protest to defend the IIMs against a "populist, political" onslaught eventually retreated, their own cause ill-served.

Such a result was only to be expected once the issue emerged as a contest between the private sector and the government to be debated in simplistic terms such as elitism vs egalitarianism. The real issues were ignored and are unlikely to be brought up again for fear of reviving the controversy and raising political hackles.

The government ought to have no say in running the IIMs, be it in deciding the fees or the admission process. There can be no two views on that. The IIMs are in the business of producing managers who serve domestic and multinational industry and commerce. In the prevailing global economic climate where the state sector is being wound up and public undertakings privatised, there is not the slightest reason why the government should concern itself about a clutch of institutes catering to a few thousand in a country of one billion plus. Those who use the skills of these managers should pay for the institutions that deliver them. It is immaterial whether these are centres of "excellence" and "merit" churning out cr`E8me de la cr`E8me or mere cogs for the corporate community.

A related issue, that came up incidentally, needs to be touched upon. This is the neglect of secondary and primary education. "Why is the government wasting scarce resources to subsidise IIM students, when this money should more deservedly go to support and strengthen the infrastructure for primary and secondary education", lamented those wanting to protect the IIMs from Joshi's decision. This was to impress that they were no less concerned about the millions in need of the attention and resources of an uncaring state that was preoccupied with reducing IIM fees. Never before, in recent years, has the cause of school education been espoused so passionately, especially by the corporate sector. One would like to believe that this was not cynical opportunism. That is possible if only the defenders of the IIMs, who are in the business of wealth-generation, put at least some of their money where their mouth is. It is anybody's guess whether private sector industry in its pursuit of profit centres would be hamstrung by the social reality they cited in this instance. However, the motives that prompted the advocates of autonomy for IIMs to argue that the money would be better spent on school education does not invalidate the case.

Central to the real issues that were sidelined by the high political drama is the state's role in higher education. The state has a function that calls for a strategy. It needs to be recognised that the IIM, long before its ownership as a centre of excellence got appropriated by the private sector, was created by the Union Government in collaboration with some of the states and industry. Those who did this were informed by a different vision and felt that such an institution would contribute to the objectives of public policy dictated by circumstances of that period. By that very logic, in today's conditions, the government does not need to expend effort or money on these ventures that have taken off and matured to carve out a niche for themselves. It would be futile to deny the government a role in what was its baby. The government certainly has a role: to keep away from the IIMs. These institutes have come of age and no longer need looking after by the state.

Unlike during the early years of the public sector undertakings (PSUs), today there is no dearth of management manpower, although of varying quality. In the so-called mixed economy, managers were needed not only in the private sector but also to run PSUs. The present situation is vastly different. PSUs thrive or collapse by the rules of the market, and in any case (ought to) fend for themselves in the matter of manpower recruitment and development.

Joshi speaks of the need for managers beyond the conventional corporate mould; in areas like cooperatives, traffic and transport, sports and local self-government institutions. This cannot be a basis for the government seeking to run the affairs of IIMs. The best course would be for the government, as a client, to engage the IIM and others such as the Indian Institute of Rural Management, to develop courses that would serve these objectives.

The issue is not the quantum of fees over which the government and the IIMs have locked horns. The issue is whether the government should have a say in this, and the answer is a resounding "No". The government should not be allowed to have a say in this, for that would provide the opening for interference in other areas including the conduct of admission tests - which is already on the anvil - selection criteria, course content and so on. Yet, if the fee cut is being resisted so stoutly, it is to thwart the government from gaining the ground to go ahead with this larger agenda.

Hardly fee(l) good

"The more important issue is how should a talented student from an economically weaker family avail of such education. FICCI has conducted research, which shows that the State ( the government) often becomes the facilitator not through subsidies but by providing easier access to low cost funds to deserving students.

"In the United States, for instance, there is a concept called the Free Application for Federal Student Aid (FAFSA). In this case the State takes the role of a compulsory lender. And deserving students can avail of loan to the extent of 18,000 dollars repayable over time period of 30 years provided he or she gives authentic evidence that the parents do not have the money to pay for the cost of education in a management or technical school.

"Financial institutions such as Citibank has several banking products, through which students can avail of loans repayable over 20 to 30 years at interest rates as low as four per cent.

"India could also adopt similar models of student aid and funding. For those who are not able to pay, the state could play the role of a lender through various instruments ( not necessarily subsidies) and also through long-term loans of financial institutions."

Ranjit Singh, VP Sales, Groz-Beckert Asia Pvt Ltd

As far as government interference goes, it should be kept out, only then will quality be preserved. Whatever has government interference only goes down the drain and not touch heights.UBS education is excellent, it equipped us and gave us the wherewithal necessary to compete and succeed. As far as the IIMs are concerned, it is a question of pre-selection. It’s not what they do to the students is radically different from the other institutes but only candidates who have reached somewhere get into the IIMs. They are ranked as amongst the best business schools internationally. Bringing down the fees will dilute the quality considerably.The days of free lunches are over

The slashing of the fees is an interference in the working of the institutions. For a good faculty, you have to pay. For a low ratio of students too one has to have a higher investment. For a bright student there is no bar. Although there has been a mushrooming of coaching centres, they really do not help. If the institution is good, the placements are good, which in turn further attracts good students, it is a cycle that can not be broken. We at the UBS were ranked 12th by the Business World. In all the surveys we have been rated high in terms of intellectual capital but low on governance. The resource crunch and lenghty procedures make it difficult for us to function effectively.

IIMs: Not the Government’s business

In the case of IIMs, research shows that there is no existence of market failure. Therefore, the case for subsidising is theoretically untenable.

According to research, in the lower end of the educational spectrum, there is significant amount of market failure. In other, words, mainly in the structure of primary education in the country, there is market failure. Economists define market failure as "a situation where there is a large amount of demand-supply mismatch which cannot be corrected by market forces." That is the reason why the government has to intervene. In the case of primary education, the demand supply disequilibrium exists and government intervention has resulted in rise of positive externalities. In other words, the gain to the child to whose cost of education is being borne by the governments much less than the gain to society. The benefits accruing to society is much higher "The higher up one goes in the educational spectrum, the extent of market failure comes down significantly. The Indian Institutes of Management (IIMs) represent the extreme case of this phenomenon.

"From the students point of view, the cost of being educated at an IIM amounts to Rs 1.5 lakh per annum or Rs three lakh for a two-year course. However, the average IIM graduates earn about Rs 6 lakh per annum from entry-level jobs they get immediately after graduating from IIM. Effectively this means that the cost of education at IIM is recovered in less than an year's time. This means that there is no market failure. "There are two basic instruments through which government's address the issue of market failure. Either through subsidies ( if there are positive externalities accruing to society) or through taxes ( if there are negative externalities such as pollution etc).

It is simply a poll gimmick. Why didn’t Murli Manohar Joshi slash the fee five years ago? More than subsidising higher education, the government should do something about primary education, the mushrooming of fake varsities, the CAT leak, Chhattisgarh degree scandal,etc. A higher fee of IIMs should be seen as an investment, a tag of quality that begets lucrative jobs after pasing out.

If you are getting good education, you should pay for it. It is only in India that we think that we should pay less for higher education, unlike the perception the rest of the world over. The government should not interfere. The faculty of the IIMs teach for one semester and take one off. This may no longer be possible for them with more students and work load. That is bound to affect the quality of education and there will be considerable dilution of quality.

It has to be a win-win situation for all. Institutions like the IIMs impart quality education and hence should be able to charge high fees. At the same time it should not be so high that meritorious students from disadvantaged backgrounds cannot afford it. It is difficult for poor students to get loans because most banks are shy of advancing loans to such students. How many poor students can even approach banks? Unless these mindsets change loans will not be easily available to students from financially weak backgrounds. Ideally, IIMs should retain their image as prestigious institutions and at the same time there should be some system of providing funds to those students who can’t afford the high fee.

Looking at the big picture, I feel there should be a regulatory authority to regulate the fee structure of all courses, medical, engineering or management. The fee should be commensurate with the income of the average Indian. Private institutes should not be allowed to charge as much as they choose. Besides, institutes like the IIMs get funds from their alumni and other sources and don’t need to charge very steep fee from their students.

"The fee cut was needed as these institutes are squeezing students for money. A high fee structure smacks of a bias for urban students. Loans are no solution to bring higher education within the reach of poor students and not everyone can furnish the securities the banks demand. The institutions should themselves make it affordable for poor students to get higher education without extraneous help."

The students resent the fee cut. We feel that we do not need government subsidies and are capable of paying our way through the course. If the government really wants to help the poor students, it should offer 100 per cent need-based scholarships to students from financially weak backgrounds after these students get admission in IIM. It is also noteworthy that no student has, till date, been unable to take admission to IIM because of financial constraints.Slashing fees and putting a cap on the amount that can be charged from consulting assignments, etc, would make the IIMs dependent on the government for funding, and this would allow the government to interfere in the functioning of the IIMs. If this happens, the sanctity and brand value of the IIMs would be lost forever.

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