Fees and fears

IN an order seen widely as vindicating Minister for Human Resource Development (HRD) Murli Manohar Joshi's decision to slash the fees charged by the Indian Institutes of Management (IIMs) from Rs.1,50,000 to Rs.30,000, the Supreme Court disposed of a writ petition challenging the decision. This, after the government told the court that it would provide appropriate funds to the institutions and that it would not interfere in their affairs. Earlier, Harish Salve, counsel for the petitioners, said that he had no objection to the fee cut but was concerned about its impact on the autonomy of the institutions. The petitioners' decision not to challenge the fee cut, the main issue in the writ, came after the court, in the first hearing, questioned the petitioners on a number of issues ranging from their credentials to file the public interest litigation (PIL) to the rationale of the current fee structure.

In 1992, the Congress(I) government had set up the Kurien committee to study how the IIMs could reduce their dependence on government support without affecting their academic standards. The committee recommended that the cost of management education and training should be borne by the direct and indirect beneficiaries of the system. Among its other recommendations are the upward revision of the fee structure, a recruitment fee from client organisations for campus interviews and adequate steps to augment the institutes' research and consultancy revenue. The committee also suggested that each institute set up a corpus fund within five years. The aim was to use the interest from the fund "to finance the gap between the internal resources and the annual maintenance expenditure of each institute" so that they need not depend on government grants from the sixth year onwards.

The government accepted all these recommendations and the fees of the institutes were increased gradually from a nominal amount to Rs.1,50,000. The IIMs at Ahmedabad, Bangalore and Kolkota began building up large corpuses using the money raised from the fees for executive education for senior managers and consultancy charges from business. In early 2003, the HRD Ministry asked the IIMs to sign a Memorandum of Understanding (MoU) that would have reduced their corpus funds to Rs.25 crores. The IIMs at Ahmedabad, Bangalore and Kolkota did not sign the MoU fearing that their autonomy would be affected. This resulted in the freezing of their funds and reduction of budgetary allocation by almost 25 per cent less than the revised estimates for 2003-04 and by 40 per cent less than the budget estimates.

In November 2003, the question paper to the Common Admission Test (CAT) for the IIMs was leaked, leading to rescheduling of the exams. Joshi criticised the managements for the fiasco. The government on February 5, 2004, issued an order asking the Directors of the IIMs to reduce the fee. The order mentions two reasons for the decision: The Supreme Court observation in the T.M.A. Pai case that an educational institution cannot charge such a fee as it is not required for the purpose of furthering the `object'; and the U.R. Rao Committee's recommendation that, in order to make technical education affordable, fees should be pegged to 30 per cent of India's per capita income or Rs.6,000 a year.

A careful reading of the T.M.A. Pai case makes it clear that the Supreme Court made the observation to explain why it was reaffirming the ban it had imposed on private professional colleges charging a capitation fee. The court actually says that a reasonable revenue surplus could be generated by the educational institution for the purpose of the development of education and expansion of the institution. Also, it is clear from the U.R. Rao Committee report that the focus was on All India Council for Technical Eductaion (AICTE) institutes. According to P.V. Indiresan, a member of the Rao committee, the fee structure recommended by the committee was meant for engineering education as it was not fair to ask an engineering student to pay high fees, while the same reasoning will not apply to a management student. Students at IIMs are able to get loans easily to pay their fees. A recent poll conducted at IIM (Kolkota) showed that 58 per cent of the students took loans. Since the credit-worthiness of students is high and the salaries of post-graduate students is in the range of Rs.6 lakhs to Rs.25 lakhs a year, most banks will not hesitate to give loans.

Opponents of the fee cut - such as N.R. Narayanamurthy, chairman of Infosys and Chairman of the Board of Governors of IIM (Ahmedabad); M.S. Banga, chief of Hindustan Lever Ltd., and K.V. Kamath ICICI Chief Executive Officer, both members of the Board of Governors - have argued that the IIMs were not consulted on the changes and that the fee structures should be decided by the Boards of the institution. Article 5 of the Articles of Association of IIM (Ahmedabad) states that the Central government can appoint a committee to review the progress of the institutes and recommend changes in consultation with the State governments. Going by this, a fee reduction could be mandated only under an order passed by the Articles of Association, which requires consultation with the State governments too.

THE IIM (Kolkata) poll does indicate that there are few students who could not pursue their course because of financial constraints. The government's argument has been that the IIMs are beginning to cater to the elite and that management education should be made accessible to more people. The proceedings in the Supreme Court show that as long as the government does not interfere with the autonomy of the IIMs, the court is in agreement with the reasons behind the fee cut. The crucial question now is what autonomy means. According to Bakul Dholaka, Director of IIM (Ahmedabad), the IIMs have to understand the full implications of the court's decision.

Sandeep Parekh, one of the petitioners, says that though the government agreed to meet the shortfall in fees, it was unclear what non-interference in autonomy meant. "Though financial autonomy of the institutes will be affected, the government has ceded functional autonomy," he said. According to sources in the HRD Ministry, Joshi has been contemplating increasing the number of seats and abolishing the Group Discussion part of the selection process, which he feels discriminates against students from non-elite backgrounds. If the government decides to go ahead with these changes, it is debatable if they will be viewed by the court as affecting the autonomy of the institutions. The Supreme Court has said that the IIMs are free to pursue whatever remedies possible.