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Don't subsidise IIMs: FICCI

February 12, 2004 08:56 IST

The Federation of Indian Chambers of Commerce and Industry has joined the debate over the government's proposal to reduce fees at the six Indian Institutes of Management by suggesting that the government should stop subsidising these institutions and permit time-tested and internationally-accepted alternatives to be offered to students, all at much lower cost to the taxpayer and marginal cost to students.

The government should consider the immediate creation of US FAFSA-type infrastructure that has been working in the US to support meritorious students, FICCI president Y K Modi said.

The alternatives suggested by FICCI would impose a much smaller burden on the exchequer than the burden it would have to bear to keep the IIMs running if student fees were slashed to Rs 30,000.

Besides, the subsidy component, if any was payable under the alternatives, would be spread over a number of years. In contrast, under the lowered fee structure, the government would have to pay more than a crore (Rs 10 million) per student at all the six IIMs immediately.

The FICCI position would strengthen the argument put forward by students of the six IIMs as well as IIM Ahmedabad board chairman and Infosys mentor, N R Narayana Murthy, against the reduction of fees.

The reduction of fees had been imposed on the IIMs by the central human resources ministry under minister Murli Manohar Joshi. The IIM Calcutta spokesman refused to comment on the matter.

FICCI pointed out that in the US, students gaining admissions into recognised colleges were entitled to education loans, up to a limit $18,000 with e repayment tenure of 30 years for undergraduate and post-graduate levels, at interest rates of about 3.5 per cent per annum.

Repayments started after the student had spent 6-8 months on the first job. Alternatively, students could avail of bank loans at 4 per cent interest or so, payable over 20 years for postgraduate scholars and 30 years for undergraduates.

The interest rate in India was higher. In view of this, the government would have to work out a package with the Indian Banks Association to provide any government subsidy that may be necessary in view of the long tenure of the loan and sub-PLR coupon rate.

The third alternative would be merit-based scholarships which however may be limited only to exceptionally brilliant students.

"When I was teaching in the US, all my colleagues between 30 and 50 years of age were repaying their FAFSA loans at typically $40-60 per month when they were earning $40,000-60,000 a year, FICCI director-general Amit Mitra pointed out. IIM students also earn in multiples of the fee they pay to the institution.

Student incomes are supplemented in the US from research projects and on-campus assignments and there is no reason to think that this would not happen here, Mitra added.

Last week, FICCI had released a paper titled 'Economic agenda for the next five years' which had stated, "Phased reduction in subsidies with concommitant increase in fee charged would improve the financial situation of institutions of higher learning", adding that the government should "evolve a framework that would enable all students to have the capacity to borrow on a long-term basis on soft terms".

Pradeep Gooptu in Kolkata