Tuesday, April 01, 2008

Business Standard on IIM fee hike

BS today has an edit today on the IIM fee hike. Let me dissect a couple of points it makes because these reflect the conventional wisdom:

1. Amazingly, faculty at the IIMs and IITs, being government institutions, are subject to these (UGC) pay-scales too. They not only lag their global counterparts by a huge margin — even in purchasing power parity terms — but also their colleagues in private institutions in India who are by no means generously paid.

We should expect compensation (including housing) at the IIMs to amount to around Rs 15 lakh after the Sixth Pay Commission. This does not include consulting income. Now, Rs 15 lakh is about Rs 45 lakh in PPP terms- or $ 110,000. That does not strike me as "lagging global counterparts by a huge margin".

2. To be sure, the UGC scales will continue to apply, but with higher fees the IIMs will have the flexibility to consider solutions similar to those followed by many public sector banks. Like any government-owned institution, senior bankers in public sector banks suffer the malady of low pay scales. To get round this, many such banks offer valued senior executives contracts that are more in tune with private sector salaries and outside the purview of government scales.

I don't know of many quality institutions that offer superior pay to faculty on a contractual basis. That's because you can't set targets for output over a contracted period. Even chair positions at top schools abroad are on a tenured basis.

In any case, I must question the presumption that higher fees will translate into higher pay for faculty. None of the IIMs, so far as I know, has made this connection. As far as I can make out, higher fees are meant to cover increased costs on the existing basis and to preempt the need to go to government for funds.


Freelance Procrastinator said...

... in PPP terms- or $ 110,000. That does not strike me as "lagging global counterparts by a huge margin"

I have noticed that, among the top B-schools in the US, a starting faculty makes almost twice that amount (i.e ~ $ 200,000) and tenured faculty make much more. This does not even include consulting, book fees etc. So if IIM's are to attract, at least, the Indians flooding the US B-school faculty then this gap would be a matter of concern.

T T Ram Mohan said...

Freelance procrastinator, the salaries you mention apply only to the top b-schools and only in a few areas.

My figure for the IIMs does not include consulting income; the base figure may also understate the value of housing on the campus and other benefits