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IIM Ahmedabad Fee Increase 2017 And Reflections From An Ex-Faculty

The fee decision has consequences as all other management schools emulate them in benchmarking their fee structures

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The news reported in Times of Imdia on March 26, 2017 about IIM Ahmedabad Board of Governors approving the increase in fees for two-year PGP Courses by 7.7 per cent for 2017-19 did not come with many surprises. But for some of us who have spent a long number of years at the Institute as faculty, the fee news brought back some memories.

It was in 2008 when the Board of Governors of IIM Ahmedabad had decided a first significant increase in two-year programme fees from Rs 4.5 lakh to 11.5 lakh a whopping 168 per cent increase in a single year. At that time it was the real surprise. Many of us learned about this increase through new papers. It was perhaps the first experience when we all felt that the long tradition of faculty governance, which had ensured faculty participation in critical decisions of the Institute, was renounced. Over the years, and for quite some time now, Board of Governors has assumed more power, and all policies and decisions that used to get discussed at faculty council and recommended to the Board for final approval started getting finalized at the Board/Director level. Many of these decisions were put on agenda to the Faculty Council for information only. This practice has been perpetuated in recent times. After this one significant increase in fee, the increase in later years has fortunately remained in the single digit as the current increase to Rs 21 lakhs shows the CAGR of about 7 per cent per annum since 2008.

After the 2008 increase and years after that, the academic debates in the Institute corridors on fee increase has been quite frequent. Every autonomous decision-making needs to be accountable - what teach in the class. In earlier days, faculty members, through their involvement, engagement, and participation in internal processes, ensured asking right questions and checking whether we will be able to justify what Director will be proposing to the Board. It provided some accountability to the decision. Some broad costing used to get discussed, though several attempts to detailed costing of PGP Programme did not yield results. However, I have to feel that the faculty discussion and inputs always strengthen the Board decisions as most of the members of the Board have a non-executive position and it used to an important source of information to them.

My former colleague Prof T Ram Mohan has been writing about it and rightly argues that the IIMs now lack necessary conditions for ensuring the effectiveness of the IIM board (The Hindu, No reason for IIMs to be Alarmed, 1 July 2015). This is more than true when faculty councils have been sidelined. I have also written about it stating that IIM boards are primarily a non-executive board. For effective decision-making they need information. Board members are dependent exclusively on the Director for all the information. At times it has been observed that information is provided in particular manner and, thus, constraining their effectiveness. Given the dynamics, the selection process of board members has become less transparent.

The discussion on whether the fee is cost based several times ended up doing the back of the envelope calculations. Many times to arrive at broad number we ended up doing direct variable costing of the programme accounting for all inputs and fitting in number in present context will yield the following picture:

Based on the assumptions above the programme operates at around 50 per cent contribution margin. This computation is after accounting for faculty cost at the rate of Rs 20,000 per session of one hour and fifteen minutes, classroom charges of Rs 10,000 per session and other costs of material, hostel, research staff and miscellaneous. It may be observed here that faculty cost of Rs 18 crore for 80 faculty members sufficiently accounts of 1/3rd of time they are expected to spend on teaching. The objective here is not to argue the decision but to generate a healthy debate on transparency in costs of a public institution. Especially the fee decision has consequences. All other management schools emulate them in benchmarking their fee structures. In the context of education in India, parental contribution forms a primary source of finance. In situations where parents have no financial means, and students receive no financial assistance from the government, they are compelled to rely on education loans from banks at 12-14 per cent rate of interest.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Ramesh Bhat .

The author is an alumnus of Harvard T.H. Chan School of Public Health and the University of Delhi. Researched and taught corporate finance and health finance for 37 years at IIM Ahmedabad, University of North Carolina at Chapel-Hill, IIM Udaipur, IMI New Delhi, NMIMS Mumbai, Institute of Chartered Accounts of India and Shri Ram College of Commerce.

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