Saturday, March 29, 2008

Oh no!- IIM fee hike again stirring up a storm

IIMA had announced a fee hike from Rs 2 to 3 lakh per annum. IIMB wants to raise- or has decided to raise- fees from R2.5 lakh to Rs 4 lakh. As I have argued repeatedly, IIM fees set the benchmark for other schools. I read in the papers this week that MDI is going to raise its two year fee to Rs 7.9 lakh; SP Jain to Rs 2.5 lakh. Others are following suit.

The IIMA move is being opposed by the central and state governments, TOI reports. There are two issues here. One is the principle of raising fees in order to recover costs. My contention is that in the non-profit model- which is where you get quality in education- you do this only upto a point. For the rest, there is a subsidy. The subsidy may come from government - as in Europe and most parts of the world- or it may come from private endowments- as in the US.

The top IIMs say they do not wish to take money from the government as that may compromise their autonomy. I am not sure. Whether the IIMs take funds or not, they remain public institutions accountable to government. Just as SBI or Bhel is accountable for government no matter that they give funds to government- through dividends- and don't take any.

Alright, the IIMs don't want to take funds from government. They must then declare where they will raise funds from- other than from student fees. Student fees can form only a small proportion of revenues. The rest must come from consulting- to an extent- and from government or private charity. Passing increasing costs on to students is inconsistent with the non-profit model and not just for financial reasons. Dependence on student fees for funds means more courses, more programmes and more teaching load. That works to the detriment of research which is the big strength of the non-profit model.

The second reason why higher fees for IIMs are a matter of concern is that fees at lower business schools go up. And lower busines schools cannot place students at quite the same salaries- so the load of loan repayment for the middle class goes up. Besides, I don't know how many private business schools have generous scholarships of the sort that the IIMs have whereby those from families with income of under Rs 2 lakh are given support.

Higher fees at IIMs thus have implications for the long-term business model at the IIMs themselves and for inclusion in education in general. The danger that leading educational institutions have to guard against is the gradual dilution of the non-profit model with its implications for quality and reduced access to quality education for large numbers of people. Caution must be the watchword.


Anonymous said...

Rohit : Your logic of IIM fees driving fees of lower B-schools does not sound reasonable to me.
The fees of B-Schools is driven by their ownership structure and cost v/s profitability concenrs more than anything else.

For example - Fees at FMS, Delhi and other University B Schools is rock bottom and they (FMS) do provide comparable placements to some of the IIM (L,I,K).

Also MDI fees has always been 20-30% higher than IIMs. MDI's quoted fees includes mess and hostel charges, while IIMs quote only tuition fee, if you add mess and hostel charges it will come very close to MDI.

On the other hand schools like Amity, IIPM (totally private) charge high fee irrespective of the fees at IIMs.

Does FMS fee drives the fees at other B-Schools in Delhi region? Your logic is not completely right.

Paresh said...

I remember back in 2004-05 when Arjun Singh proposed to lower the IIMs fees to somewhere INR 25000, there was a huge uproar by IIM alumni, students and faculty that the fee being charged about INR 200000 p.a. (in those days) was justifiable and government should stay away from this.
I guess the fee decision committee took this support from alumni etc too enthusiastically. Agreed, 25000 is too low but 6 Lakhs is too high. I have a few points to make:
1. With the 2 years fees at INR12 Lakhs, will the support from previous supporters be as strong as it was 3 years ago? [the support does not matter anyway! The now outsiders can hardly influence anything going on campus]
2. Lets say, that in 2004-05, the fee of 4 Lakhs per students was justifiable. In 3 years, how can you justify almost 200% raise? That too when the input costs (staff salaries, infrastructure etc.) haven't risen as much?
3. The logic of placement salaries rising and hence the fees going up should not be applied here. If you take that view, you better agree that IIMs are mere placement agencies.

In my view, the fee rise is because of the following reason:
Most IIMs have come up with several new cources. (PGPX, PMP and all that). Since all these new cources are in a nascent stage, they can not charge a higher fee. An example is the PGPX programme. I guess the first batch had to pay INR 8 Lakhs compared to some INR 17 Lakhs for similar program at ISB. SO the flagship PGP is not used to subsidise the other programs

It would be interesting if IIMs also publish details about the raise (if any) in such non-PGP course fees

Paresh said...

Correction - Previous Comment -Second Last Para - Last Line:
SO the flagship PGP is now used to subsidise the other programs

HEMANT said...

It is not at all justifiable to invest the taxpayers money on someone who is not willing to pay back.Why should government of India should pay for the education of someone who is going to serve either some investment bank or some MNC's.

Being a student what I have noticed
1)Getting loan is not at all difficult if you are from in any of these elite institutions like IITs and IIMs.
2)Just after the end of the course from any of these institution the individual is able to pay back the fees in the very first year.Also Banks even provide a holiday for a year after the course also.

So the argument that fees hike in these institution will deter students from middle/lower class is not logical.

As it has already been mentioned that there shouldn't be any cascading effects of this hike on other B schools of the country It is pretty much justifiable for an autonomous institution like IIMs to increase their fees.

Anonymous said...

IIM-A has hiked it fee to 5.5 lakh for first year and 6 lakh for second year amounting to a whopping 11.5 lakhs. Its more than 200% increase. I think its partly driven by greed since other IIMs have fee way below that number. BTW author's numbers for IIM-A fee are incorrect. Shame on IIM-A board for being so greedy as has been reflected in the opinion of many prominent IIM-A faculty even though they stand to be benefited by this hike.

Anonymous said...

Fees completely Justified......

IIMs are at No. #1.
Their quaility is the best.
Anyone clearing IIM can get loans..
I comletely trust that IIMA will increase its quality to better than the best....

What I am afraid of that following IIMA, other lower rated B-Schools will also increase fees without much change in quality eduaction..

Anonymous said...

IIM-A board is driven by greed for power and money in their recent decision for a fee hike.
Being #1 institue or #1 in placements has nothing to do with fee. Are they selling jobs now? If so, say it out loud. They get the best and the brightest of the nation and whoever got them regardless of the name would see big corps lining up outside. These kids deserve what they get. As far as IIM faculty is concerned, I say give them competetive salaries, invest more in infrastructure, but that still does not account for the sudden almost 200% increase in already significant fees. After all they already had surplus last year, so where did this need to more than double it come from?
Suddenly I feel we need some change in philosophy and top management at these prestigious institutes.

Anshuman said...

IIMs are charging too low a fee. The fees should be increased to at least 8 Lakhs per annum.

IIMs shold be given more autonomy. They should not be held accountable to the government. IIMs should be gradually privatized.

Anshuman said...

The whole world moves on money and profit. It is everybody's right to make money and enjoy profits.

India can become a superpower only when every citizen of India is given incentive for their work and given loads of money. Only profits can make India wealthy.

Jai Hind!