Although the human resources development ministry may have drastically cut the fees for the Indian Institutes of Management by around 80 per cent, the self-sufficient four major IIMs are not likely to feel the pinch as the major revenue earning segments have remained untouched.
The IIMs are now of the opinion that this step has paved the way for the ministry to fund the shortage of around Rs 5 crore (Rs 50 million) per annum, though the total allocation for the six IIMs by the finance ministry and the HRD ministry has been showing a declining trend.
The question here is whether the Government will be ready to increase its funding from the next academic year, making changes in its interim Budget proposal.
IIM-Ahmedabad, which has 279 students in its first year Post-Graduate Programme (PGP) and 196 students in the second year PGP, will be losing little more than Rs 6 crore (Rs 60 million) of revenue per annum, which, according to a management expert, will be a heavy burden for IIM-A to bear.
The government has been reducing the annual Budget allocation for the IIMs and it has cut down the allocation by 40 per cent for the financial year 2004-05 to Rs 30 crore (Rs 300 million) from Rs 49.8 crore (Rs 498 million) for the current fiscal year.
This cut in PGP fees and in allocation will definitely take a toll on the balance sheet of the IIMs.
"However, there is a way out -- the IIMs have either to convince the government for increasing the funds to make up its losses from the fees or will need to initiate more and more professional programmes, like Management Development Programme, to meet the deficit," said a member of the Ahmedabad Management Association.
While IIM-A, which earns around Rs 30 crore (Rs billion) per annum, and 25 per cent of it comes from several professional courses like MDP and Executive Development Programme, the ministry has not ordered any slash in the fees for these courses.
The bigger IIMs like IIM-A, IIM-Calcutta and IIM-Bangalore on average earn 12-15 per cent of their annual revenue from PGP students.
This is in addition to addition 25 per cent revenue from the various professional courses. These IIMs also get the benefit of interest from their huge corpus, which account for another 25-30 per cent of their revenue.
IIM-A has a corpus of Rs 98 crore (Rs 980 million) while both IIM-B and IIM-C has a corpus of around Rs 90 crore (Rs 900 million) each while IIM-Lucknow, IIM-Kozikode and IIM-Indore has corpus of around Rs 70-80 crore (Rs 700-800 million).
IIM-L which has recently bought a new piece of land for expansion, invested a huge amount of money from its corpus.
"The ministry order asks for a slash in the fees for our PGP students, but it does not order us to reduce the fees for any other professional courses as most of these courses are not attended by the students but by professionals.
But still, with the new fees structure as ordered by the ministry, we will be facing a deficit in our budget and this deficit only can be made up by the government through its increased annual funding which, however, is their discretion," said Bakul Dholakia, Director of IIM-A.
Interestingly, only a month back, IIM-A announced of working out a project to become self-dependent as far as revenue is concerned but with the proposed new fee structure, its plan of becoming self-reliant has now faced a major blow.
It has been learnt that IIM-A also has been working for introducing a MDP for the executives with five years of work experience in next two years, which can help it to boost its revenue.
"But whether the IIMs will be facing music because of major deficit from earning from course fees, it is now more of a question of the rights and jurisdiction of the Ministry to cut fees as all the IIMs are run by autonomous body, comprising of industrialists and academicians, apart from its Dean, Director and senior faculty members.
May be IIMs have now grown too big for government control and hence, this intervention by the Ministry," added the AMA member.