The Hindu : The IIM controversy

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Thursday, Feb 26, 2004

Opinion

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The IIM controversy

By P.V. Indiresan

Though it appears fair to keep IIM fees low, it willonly make the rich richer and the poor poorer.

"Is there any point to which you would like to draw my attention?" "To the curious incident of the dog in the night time." "The dog did nothing in the night time." "That was the curious incident," said Sherlock Holmes.

— Sir Arthur Conan Doyle in the Silver Blaze

IN THE three main and cash-rich Indian Institutes of Management, there are over 250 faculty members. In the seven Indian Institutes of Technology, there are 2500 more. In recent times, the Education Ministry has been ordering them about, treading on their autonomy. Why is it that none of them has raised their voice?

Our Minister for Human Resource Development, Murli Manohar Joshi, loves to shock. He is unafraid of the controversies he creates. His latest foray has been against the IIMs with his order that they bring down the student fees. He has justified his decision (and quite a few agree with him) that high fees will hurt the poor. Apparently, he has a strong case. In truth, that is an illusion.

The economic worth of any individual has three parts. Current income is the most obvious one. Inherited wealth is the second one, and that too is well known. There is a third component, which is not as well appreciated, namely, creditworthiness. The Ambanis can raise thousands of crores of rupees with no greater effort than making a proposal. Typical readers of The Hindu may raise a few lakhs of rupees but only by mortgaging property worth much more; most others can raise nothing at all. The variability of creditworthiness is much greater than that of wealth or income.

Some IIM candidates are bound to be income-poor. They may have no inherited wealth either. Yet their creditworthiness shoots up the instant they are admitted to an IIM. There is no bank in the country that will have any hesitation in advancing successful candidates the full cost of their management education. Hence every IIM student is potentially rich — far, far richer than most taxpayers.

Then, when IIM education is charged below cost, much poorer taxpayers will be subsidising students bound to become very rich. Hence though it appears fair to keep IIM fees low, in reality, that will only make the rich richer, and the poor poorer.

I must confess that I started the controversy. For sometime, I have been arguing that our university fees are comparatively much higher than what private universities of the United States charge. For instance, in universities such as the Harvard and Stanford, the average fee is of the order of $11,000, which is about a third of America's per capita income. On that basis, to provide the same social access to quality university education, Indian fees should be around Rs. 6000.

Unfortunately, India buys equipment at the same market price as the U.S. does. Then, in per capita terms, equipment costs are 60 times more in India than in the U.S. Government salaries too are higher in India in per capita terms. For that reason, proportionate to per capita income, the cost of Indian education is, as in the case of cars or computers, much higher than in the U.S. Therefore, it is not feasible to price education in India as low as the U.S. does.

Logically, this cost should be paid for by the beneficiaries of higher education. There are three of them: the student who gets a better career and higher income; the employer who will not prosper unless there are educated youth to hire, and society too which benefits from the services rendered by highly educated people.

The Committee on AICTE has recommended that the cost of engineering education be shared equally among the three beneficiaries, by the student as fees, by the employer in the form of cess, and by society as grants from the Government. Unfortunately, the Committee was unduly focussed on engineering education, and did not appreciate that management education stands on a different footing. That was a mistake. As a member of the Committee that stirred up this particular hornets' nest, I admit my error, and express my regret for this oversight.

The formula that the cost of education should be equally shared among the student, the employer and the Government is not universal. For instance, those who wish to study ancient literature have poor career prospects; they sacrifice personal gain to maintain a valuable part of our heritage. Such students may have to be charged less than the one-third share, and may even have to be offered a stipend as an inducement. At the other end, it would be fair to ask management students (and their prospective employers) to bear the full cost. What is sauce for the goose is not sauce for the gander.

Further, the important feature of American practice is that the average fee may be low but in individual cases it may be far higher than the average, or for some others it may be nothing at all. This aspect, that fees should be related to the capacity to pay, has been completely lost in this controversy.

The Minister has been criticised widely for his actions. At the same time, the IIMs and the IITs by not exhibiting elementary pluck appear to have lost the battle even before it has begun. They have also chosen the wrong ground to fight on: the issue is not fees but academic autonomy.

Does that mean the Minister has won? Most probably he will, this time. Yet as the Minister himself is fond of saying, "sustainable consumption" is the ideal. Sustainable consumption applies not merely to material goods but to the exercise of power too. There is the story of Nahusha who used the extraordinary powers he had acquired to force the venerable sapta rishis to carry him around. It is possible that Nahusha's sad fate has a moral for the present age too.

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