IIM fee hike: What are the consequences

Fee hike in unregulated IIMs and the lack of it in regulated institutions elucidate a grave concern. Did the autonomy play a significant role in incentivising the IIMs to hike fee?

By Swapnil Soni, Ganesaraman K
Published: Thursday 04 March 2021
In mid-2020, about half the IIMs increased their fee for two-year full-time course. Photo: Wikimedia Commons

The concept of Indian Institute of Management (IIM) was initiated by the first prime minister of India, Jawahar Lal Nehru, on the recommendation by the Planning Commission in 1960.

Subsequently, IIM-Calcutta and IIM-Ahmedabad were established in 1961, with support from Ford Foundation and Harvard Business School. Other IIMs followed; India has 20 of them today.

The IIMs aim to produce human capital with managerial and decision-making skills needed to promote industrialisation in the country. Such managerial skills took a catbird seat, especially after 1991, when investment and privatisation buttressed the emergence of giant corporates in the liberalised Indian economy.

Given their role in nation-building, IIMs were declared ‘institutions of national importance’ by the Union ministry of education after the passage of the IIM Act, 2017.

The Act also awarded autonomy to the IIMs for fee regulations apart from selection and removal of the chairperson and director, as well as student intake and institute expansion. With this autonomy, the government and bureaucracy could not intervene in the day-to-day or strategic operations of the IIMs.

Fee hike

In mid-2020, about half the IIMs increased their fee for two-year full-time course. The IIMs with significant fees increase include old (Lucknow, Calcutta and Bangalore), as well as the new IIMs (Jammu, Tiruchirappalli, Sirmaur, Nagpur, Udaipur, Rohtak).

The fees increase ranged between 3 per cent (Rohtak) and 36 per cent (Lucknow), averaging to around 13 per cent. The already existing difference in fee structure between the old and new IIMs has been furtherwidened due to the current hike.

With the hike for the academic year 2020-2022, the average fee in old IIMs is Rs 20.7 lakh; that in new IIMs is Rs 13.7 lakh. The management of these premier institutions attributes fees-restructuring to prevailing inflation and the associated cost of faculty and infrastructure. However, no quantitative assessment as such was provided to justify this argument.

Lack of accountability owing to an absence of government intervention leads to more questions than answers.

On the other hand, the management institutions under the ambit of University Grants Commission and All India Council for Technical Education are restricted to amend, or rather, increase their fee structures.

In its notification dated May 1, 2020, AICTE asked the B-schools offering Post Graduate Diploma in Management programmes to not increase either admission or tuition fee for the academic session 2020-21 for students — old and new.

The contrasting discourses — fee hike in unregulated IIMs and lack of it in regulated institutions — elucidate a grave concern. Did the autonomy play a significant role in incentivising the IIMs to hike fee?

Fee hike in premier management institutions inches the hump of a hurdle for eligible aspirants to acquire managerial skills. The issue has aggravated further due to the coinciding period of fee hike and economic recession caused by the novel coronavirus disease (COVID-19) pandemic. He pandemic has taken a toll on life, livelihood and people’s income; a fee hike has pushed aspirants’ dream afar.

Higher demand, higher fee

The present scenario compromises a very fundamental objective of education in the country that aims to provide accesibility and affordability to the prospective and existing workforce.

Looking from the benefit point of view, the premier management institutions are well-known to provide heavy weight offer letters from corporate giants. These high-placement packages and white-collar job profiles are the primary catalyst for competition among the management aspirants and even professionals to get into premier IIMs.

Higher the money offered, higher the demand. Does high demand translate into a higher fee following the fundamentals principle of economics? In other words, it is worth investigating the relationship between placement package and fees at IIMs.

To this end, we collated average package and fees of all 20 IIMs for 2020 and performed a linear regression analysis.

A significant cyclical relationship between IIMs’ fees and package offered was seen. This implies that an IIM offering a higher salary with lucrative job opportunity is likely to charge more than other IIMs.

In the empirical analysis, top IIMs (according to National Institutional Ranking Framework, NIRF), IIM-Ahmedabad, IIM-Bangalore and IIM Calcutta turned out to be the outliers.

They offer extremely high package (average Rs 26.8 lakh per annum) and hence charge inordinately high fee (average Rs 23 lakh) as compared to other IIMs. In contrast, the new IIMs manage to offer relatively less placement package and cost less.

This exercise construes that salary offered by IIMs is the major driver of fee structure — even more than the cost structures. This resembles typical pricing structure of a market commodity wherein supply-demand dynamics in market decides the product price. Education is not a market commodity meant to meet individual’s demand and, therefore, cannot be left unregulated especially in terms of pricing or fees structure.

Education serves a larger purpose of social upliftment and nation-building through generating trained human capital.

Burden of education loans

An inflated fee in premier management institutions leaves most middle-class eligible aspirants with the only option of an education loan to fund their dreams. Increasing fees of IIMs balloons loan requirement significantly.

Education loan poses a demonic challenge of repayment on stipulated period. Some of the unpaid loans on time also result in bad debts and spoil the balance sheet of financial institutions. The trained brains coming out with the burden of liabilities experience constrained freedom and lack of creative thinking; they hence thwart productivity and overall value addition to the economy.

This is a high time for policymakers to critically observe the amendment in the fee structure of India’s premier management institutions of national interest. An ordinate hike in fee of professional courses will thwart aspirants’ dreams of acquiring managerial skills and the prestigious professional position.

In the long run, this will pose an issue of lack of a skilled pool of managerial workforce and decline of productivity in the economy. Education loans may not be the solution for students to cushion the jolt of fee hike.

Policymakers must take steps forward to reign such an unregulated fee hike in premier institutions, keeping in mind the following question: How does the objective of strengthening human capital with managerial skills and its affordability marry each other?

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