IIT Fees Hiked, But Still Too Many Exemptions. Why That's Bad.

The problem with the Human Resources Development Ministry's decision to raise the fees at IITs from Rs 90,000 to Rs 2 lakh per year is not that higher fees will deprive students of education at India's top institution: it makes sense to update the fees to reflect the actual costs of providing the education,  and two lakhs per year is anyway lower than the true economic costs. The actual problem lies in the sweeteners the government has felt necessary to include: full fee waivers for SC/ST, Dalit and physically challenged students and a 66% waiver for students whose family income is below one lakh.

Before you jump in righteous outrage, let me be clear that I am not arguing that needy students must not receive special assistance. I am arguing that the method used - full and partial fee waivers - are inefficient and inequitous.

Let me explain why raising fees is a good thing (and need not deprive any student of an opportunity to study at IIT), and why fee concessions for some are a bad idea.  

By some estimates, it costs an IIT around Rs 2.5 lakhs per year to educate a student. This is quite likely an underestimation. It is common practice for PSUs to account only for the financial costs (salaries, consumables, utilities, etc) and ignore the opportunity costs of the resources they have been endowed with. Taxpayers not only finance the annual budgets of the IITs, but also the land and other assets that they have been given. If the market value of these assets is added to the computation, we are likely to find that the true economic cost of producing an IIT graduate are considerably larger than the few lakhs that they pay as fees.

Again, before you jump, this is not an argument to take back real estate from the IITs. Rather, it is to put in perspective the fact that the fees charged are relatively small compared to the costs of providing the education. Whether or not it's worth incurring such costs is a function of whether the benefits are worth it. They probably are.

Charging fees based on true economic costs is hard and perhaps impractical. The second best solution, and a practical one at that, is to ensure that the fees cover the annual financial costs to the extent possible. Not only will this make the IITs financially more sustainable, but to the extent that they achieve sustainability, strengthen their autonomy as well. This is good for the IIT system, for the faculty, students and higher education system in general.

Yes, it means students will have to pay more. Those who cannot afford to pay the fees will have to take a student loan (which banks will readily offer to IIT students). They might have to choose jobs that will make it easier for them to repay the loans quickly. Heartless as it may sound, this is not an issue that the taxpayer should be concerned with. Higher education, not least at an IIT, is not an entitlement. Those who feel that IIT students need financial assistance can set up scholarships and bursaries, and foundations that do so can easily receive tax exemption from the Income Tax dept.

Why are exemptions for the underprivileged and needy students a bad idea? Because it is most efficient if the IITs produce good engineers regardless of their backgrounds, and not be encumbered by public policy goals like social justice. The latter is the task of government and civil society.

It would be far more efficient for a government ministry to administer a tuition fee grant for SC/ST, physically challenged and other students who need help to realise equal opportunities. Once admitted to an IIT, such a student can avail of the tuition grant to cover the fees. Civil society groups committed to social justice can administer their own schemes to provide scholarships and grants to students they consider needy (which can be different from the government's definition).

The Modi government announced an innovative idea in the form of a Higher Education Financing Agency (HEFA) that will provide low-cost financing for educational institutions. Similarly, it should consider an agency that would administer educational subsidies and scholarships and grants in a targeted, accountable manner. Fee waivers and concessions might enjoy favourable optics, but are a symbol of old, failed models of thinking about supporting the needy.

Finally, let's remember that the IITs are a minuscule part of India's overall higher education challenge. They attract disproportionate attention merely on account of their elite status. The real challenge lies in improving the quality, quantity and access to the hundreds of universities, colleges and institutes that create India's knowledge base.

There are only 23 IITs taking in 30,000 students a year. In comparison, there are 650 universities where 25% of the each generation of Indians study. It would be in the national interest if the focus of the government, media and the public shifted to where it really matters.

(Nitin Pai is director of the Takshashila Institution, a think tank and school of public policy. These are his personal views.)

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.