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Friday, November 20, 2015

Fee Control on Engineering and Management Education

It has been said a million times that the quality of education that our institutions offer is rather poor. We keep hearing that 75 percent of our engineering graduates are not just unemployed, but unemployable. That is, the quality of their learning is so poor that even a finishing school or a company training for several months would not make them productive engineer. Lots of experts keep giving various reasons for this poor quality, lack of autonomy, lack of faculty, greed on part of private colleges, poor preparation in the school education, and so on. But I disagree.

The poor quality education is a result of our higher education policy. Our policy over the last 3-4 decades have considered cost, access, and equity as much more important parameters than quality. We have worked really hard over this period to ensure that the cost of higher education (primarily in engineering and management) remains among the lowest in the world. It has not mattered to policy makers that the result is a poor quality education. And higher education policy is one of the shining examples of policy success, and not an example of policy failure. We consciously decided that everyone should be able to get an engineering degree at low cost near his/her home, even if that degree will not get one a job, and we have succeeded in it beyond anyone's expectation. A low-cost low-quality degree is strongly preferred over higher-cost, higher-quality degree. Today, engineering education is a buyer's market. Anyone can get admission to an engineering course.

So it does not come as a surprise that yet another committee has decided to control tuition at levels which can only provide poor quality education. Here is the news item. If this report is accepted, the highest fee that any engineering institution can charge for BTech program is Rs. 1.58 lakhs per year if the institution is located in a Tier 1 city. If it is a high quality institution (as evidenced by an accreditation), then an extra 20% is allowed. And another 1% can be charged for miscellaneous services, a total of about Rs. 1.92 lakhs per annum for the best institutions in the country.

I did a quick search of tuition cost of private institutions who are trusted by society as provider of high quality education and believed to be not a profit making entity. Both BITS and IIIT Hyderabad had higher tuition in 2015 than the maximum allowed by this committee. And both will have to increase their tuition substantially to take care of not just annual inflation, but also the higher salary costs imposed by the 7th pay commission report. In fact, other popular, well-known private institutions, including Thapar, Manipal, LNMIIT, JIIT, and many more also had 2015 fee higher than the maximum allowed by this committee report.

There is another way to look at these numbers. What is the budget per student per year at IITs. The budget is about 3 times these numbers. This can only mean two things. One, IITs are a den of corruption and waste. That is why they are spending so much money, when good quality education can be provided for a fraction of the cost. Two, the costs of good quality education are indeed higher, and this committee has, in its wisdom, decided that private sector can not be allowed to provide quality education. I suspect that it is the latter. The committee is really saying that we must follow our national policy on higher education, which requires low-quality low-cost education to be dished out to our students, and we can not really allow private sector to violate that policy by attempting to provide higher quality education.

What is even more interesting is that the committee allows MCA programs to charge 10 percent more than BTech programs. This is absolutely ridiculous. What is the expense that MCA programs have that BTech students do not have. In fact, MCA students need only computer labs, while BTech students need many more labs, which are far more expensive to maintain. But in our socialistic mindset, the price is not related to cost. First degree students should pay less, and second degree students should pay more. This is the reason a large number of colleges continue to have MCA programs in the country - they have lower cost and higher price than under-graduate programs. Otherwise, there is no rationale for this program to exist in so many places.

And if one looks at MBA programs, even the government institutes charge more than the upper limit proposed by this committee.

The government policy for several decades is also ensuring that a large number of our students are going abroad for under-graduate studies. By focusing on quality at home, we could have kept these students within India, and also attracted foreign students to our campuses. We could teach the world and earn a lot of money through it.  While it would be impossible to close down poor quality institutions, and may be there is something positive about a poor farmer selling everything he has to see his son having a worthless engineering degree with no jobs, but the least we can attempt is to have high quality institutions to co-exist with poor quality institutions.


ladu said...

This is the country of 132 cores people.
Where poor get quality education if price will be this much high.
You can't assure job to everybody even if quality of education is higher.(which even surely not possible if it is lower)
Quality of education must be higher but not at cost of poor and government should ensure some financial aid etc.

Ankur Kulkarni said...

We are a country full of charlatans. The court somehow thinks it knows economics. This committee thinks it knows how a complex commodity like education can be priced and comes up with such ludicrous numerical values. Shouldn't the actual price be a function of inputs? How can one have a price independent of input variables.

At some level people themselves are to blame. In India people care more about the degree than about education or even jobs -- the entire policy is gear to give cheap degrees. Society is caught in a race for visibility and prestige, for which the only markers are degree certificates, not actual jobs. I don't know how people can be knocked out of this neurosis.

People who talk about the state of affairs seem to get their mileage only by speaking for the poor, as if the poor are the only ones who matter in the system. If one can do some inexpensive tokenism for the poor, it is considered far better than doing substantive good at a higher cost for the non-poor. It is hard to find someone who speaks for rationality and logic (Rajan is a superb exception). Everyone speaks for piety, painting themselves as saints for having cared for the poor, rather than for the market.

A few decades ago, many countries found themselves in this sort of quicksand and rescued themselves because someone of stature stood for giving a logical basis for price formation rather than finding tricks for price control. I don't see that kind of person on the horizon in India.

gautam barua said...

There is no way decent education can be given (let alone "quality") with these fees for engg institutes. On what basis has the Supreme Court decided that higher education should not be "for profit" even if private parties are allowed to run such institutions? Is there a law passed by parliament? If so, we should ask the ruling party to change the law. If there is no law, how can the SC take such decisions? Someone should challenge this basic premise. If there is going to be a Market economy, the market must be allowed to decide prices. If the Govt. wants to help poor folks, it must give scholarships generously and make it much easier than it is now to avail these scholarships. It may levy heavy taxes on profits on education if it wants to. But you cannot have a system which encourages (nay, forces) private institutions to cheat. There are no shortages of seats in engg now. So this is the right time to let go!

Further, why this hypocrisy when it comes to school education? Where sab chalta hai? Is it because the ruling elite cannot send their school children abroad (rather, do not want to), but when it comes to college education there are the IITs and institutions abroad? Beta IIT mein parhega ya Australia/ England/ US jayega!

ladu said...

@Ankur Kulkarni

Agree with gautam barun, "If the Govt. wants to help poor folks, it must give scholarships generously and make it much easier than it is now to avail these scholarships. It may levy heavy taxes on profits on education if it wants to. But you cannot have a system which encourages (nay, forces) private institutions to cheat."
I just want to emphasise that poor or middle class should not be avoided and some mechanism must be maintained to ensure that these people will also get education.
Either in some form of scholarship or other. Think of the scenario where only rich kids will be able to get education and poor still remain poor because he can't afford the education even if he is bright. Rich become richer and poor will remain poor.

I also raise one question which I think somewhat related to this post as well.
How one can manage less resources(like food,land etc.) among this huge population?
The discuss ultimately boils down to classical overpopulation problem.
Don't we need to manage this aspect as a long term solution?

Vikram said...

@ ladu

"This is a country of 132 crore people."

First off, in the specific context of higher education, only one out five Indian children who enter primary school pass the 12th grade and become eligible for higher education. Therefore, the actual effective population to compare to is around 250 million, the population of the US (where almost every child passes 12th grade) and which does a superb job providing higher education to its youth.

"You can't assure job to everybody even if quality of education is higher."

There is not a finite number of jobs out there that everyone has to compete for. Most jobs in industrialized economies are in the service sector, and they scale with population. The important parameters are to give the workforce adequate skills so that they can offer a wide spectrum of services to each other, and create an enabling environment for the creation and destruction of businesses.

Again, the US is an example. 40% of US GDP is government spending, 20% is medical services, 10% is transportation services, 3-4% entertainment/creative services, 6% educational services. There will be some overlap between government spending and the other sectors, but almost 80% of the dollars Americans spend in a year are in economic activities whose labor demands scale with population.

So in short, you indeed can ensure that most people have jobs by raising the quality of education.

Vikram said...

Dr. Sanghi, although fee control on educational services is a ludicrous idea (and one that should not stand the test of court challenges), I wonder if the reasons for the suggestions are as diabolical as being suggested.

Like Ankur Kulkarni suggests, Indians do not really understand economics. This is understandable since for most of our history economic activity has primarily been farming, and then post-independence some state driven industrialization. The Indian economy has never been very complex and our education system hasnt really emphasized any kind of understanding of markets at school level. One indicator of this is the number of Indians who demand a China-style one-child policy be imposed, despite the terrible consequences of such a policy.

Even our 'minimum government' PM goes around the world wooing non-voters with inefficient flight connections to India. It might be a good idea to make some kind of economics course mandatory (or highly encouraged/ more accessible) to students in engineering institutions.

Dheeraj Sanghi said...

@Vikram, The language of the blog is harsh. Having accepted that, I do believe that the choice between quality and cost is a deliberate one. You and Ankur are right that by and large Indians don't understand economics. But that does not mean that none of the persons sitting in Lutyen's Delhi or state capitals understand economics. They do. A poor in the hinterland may not understand economics, and may prefer cheaper useless degrees over lack of access to higher education.

But people in the leadership positions need to lead and not follow. They need to understand that useless degrees are poor investments, something that a poor nation can not afford. We are wasting billions of rupees every year in buying totally useless degrees.

There is also this issue of our leadership (and I include not just the politicians, but bureaucrats as well as academic leaders, those who are involved in making the policy) believing that the choice is not just between cheap useless degrees and no degrees, that the third option of useful and yet affordable degrees must be explored. And affordability may come from a higher investment by the government from taxes, some help through philanthropic funds (both individual and CSR), designing better student loan schemes, and increasingly by better deployment of technology.

Sanket said...

Dear Sir,

Thanks for the views. I think there are many colleges who provide education within the stipulated fees and whose students manage to get jobs. Hence, my questions are:

1- There might not be a strong relationship between quality of education, for which fees can be a proxy, and employment potential. The reverse of this view suggests that even if the quality of education improves many engineers will be unemployed.What are your views on this question?

2- Given that the law mandates education to be a non-profit activity, how can the government ensure education remains non-commercialized without putting fee caps?

3- Markets are efficient when price discovery mechanisms work well. In this case, there is a fear that if there are no fee caps, educational institutes can use the information asymmetry between providers and consumers to set fees that are far higher than their costs. Do you think this is a legitimate fear?

Vikram said...

Dr. Sanghi, "We are wasting billions of rupees every year in buying totally useless degrees."

I agree with what you say, and I feel that this specific point you have made has not been made clearly and forcefully by our thinkers so far.

I feel that a fairly widespread mode of thought in our society is 'so what if its useless, a degree is after all a degree'. For the government, this gives the data points to show the public and the world that its system is working, and for the parents and students the level of maturity where they can truly assess the point and value of a great education hasnt been really reached. The only people who probably truly understand this are the employers.

It would be great if the public understands that per unit of their tax money spent a much better outcome is attainable.

Dheeraj Sanghi said...


1. I agree that it is theoretically possible to have so many good quality educational institutions that many graduates of such quality institutions remain unemployed. I would not expect to see such a situation in my life time. But I hope it does happen one day.
2. Fee caps only ensure that a majority of people who enter education sector are those who know how to "manage" education within those fee caps. Unfortunately, this is the same set of people who also know how to cook books to show loss while some other entities providing services to the institute make hefty profits.
3. Many states do not have fee control over so-called universities. In these states, the fee has not gone through the roof.

You seem to worry too much about profit making in education. I only hope that you are equally concerned about poor persons saddled with useless degrees that they bought after selling every asset that they had in this world.

Sanket said...

Dear Sir,

Thanks for the answer. I agree with you that fee caps are leading to the entry of the wrong sort of people to the education sector. But as education is a non-profit activity by law and we are a low-trust society, I see no alternative unless the law is changed.

Coming to the question of useless degrees, abolition of fee caps would not have any impact on the number of institutions issuing useless degrees.What the government can do is to formulate realistic guidelines to ensure quality in educational institutions and implement those guidelines. This looks like a tall order to me.