Loans from HEFA

There are media reports that the first set of loans have been approved by Higher Education Funding Agency (HEFA) for five old IITs and one NIT (Surathkal). It is an interesting model of funding, which no one seems to understand. On paper, it is very clear. You take a loan of some amount now and you pay back 10% of it every year from your internal accruals with zero interest (interest is paid by the government). So the total amount of loan you can take is 10 times your internal accruals.

From the language of it, it would appear that the expectation is that the loan will be invested in ways that will increase the internal accruals and thus the loan will be paid off from that additional income. Is that really the expectation. Shreya Roy Chowdhury finds out from a few IITs and writes her findings in this report in scroll.in. Nobody is really expecting to have larger internal accruals because of this investment. They may have a larger internal accruals because they may further increase fees, hostel charges and other user charges, which they could have done even without HEFA.

Does it make sense for an IIT to take loan. Well, if this was for a crucial infrastructure, which was already budgeted in the next 10 years, then essentially what you are doing is that spending that budget now, and not later, and what is great is that you don't pay any interest. So really fantastic for IITs. Whatever money was budgeted over the next several years will now not be spent, and in fact they will save money since a budget of 100 crores next year is based on a 5% inflation. You will only spend 95 crores this year. Hence you will only pay 95 crores next year and still save 5 crores in the next year's budget. So, fantastic scheme for IITs.

But does anyone plan for next 10 year. Do we really know what our priorities will be a few years from now. Is there a guarantee that Government will keep funding us at a certain rate. Would an interest free loan not encourage us to invest in lower priority infrastructure and then if our grants are not increased at the rate expected now, we will be in deep trouble.

But is there a real risk for IITs. Actually, no. In future, when IITs have to pay back, if Government gives us additional grants, well that is obviously great. If Government does not give us additional grant, we just increase user charges, and let Government deals with the hue and cry.

The only real risk is if the impact of all this is different on different IITs. If Government does not give us adequate budgets in future. If some IIT took smaller loan and don't have to raise user charges as drastically. Or if and some IIT is able to raise funds from additional sources like philanthropic funds, and do not have to raise user charges. In such a situation, an IIT which has no option but to raise user charges will be vilified. So the game is not exactly clear. And, therefore, for an IIT to take loans for high priority items is ok, but if they start taking loans of low priority items, they could be in some trouble.

So the basic question facing the IITs is: What if they take small loans, and government bails out IITs with big loans in future. You will appear stupid at that time. On the other hand, what if they take a lot of loan and government does not bail them out in future.

What is in the name?

Recently, a newspaper item caught my attention. While the headline talked about colleges having to mention all fees on website, something that will enhance transparency, reading the whole article made me aware of other guidelines issued by AICTE. They apparently have decided that no institute in the country can have a name whose initials will be IIT or NIT or IIM or IISc, etc. To learn about the exact guideline (I couldn't believe that AICTE could be doing this, but if they are doing this, what is the complete list of initials that are banned), I visited the AICTE website, and I couldn't find anything there, which is, of course, not very surprising.

What is the implication of this. Well, if I want to start a new engineering college, and want to name it as "Narnaul Institute of Technology" I can't do it, since the initials will become NIT, which is banned as per this order. I expect the first reaction of the readers to be, what is wrong in this. The private sector guys are all scums and trying to fool people into believing that they are not what they are. So such restrictions are ok.

But think about it. Is it being done because private sector guys are all scums, or is it being done because there is a genuine fear that some student/parent will get confused between Narnaul Institute of Technology and National Institute of Technology Kurukshetra. If it is the former, then the only possible public policy response is to close ALL private sector educational institutions. There is no point in allowing all scums to run educational institutions. So I will assume that AICTE is concerned about the confusion that such names can cause.

Is that a reasonable concern (and hence a reasonable restriction), or has AICTE gone overboard. If mere similarity of initials can cause confusion in the minds of students and parents, then should we have 23 IITs. Should we have 31 NITs (of course, some of them have slightly different initials). Is it reasonable to assume that a typical student and parent can distinguish between National Institute of Technology Raipur and National Institute of Technology Rourkela but they cannot distinguish between them and Narnaul Institute of Technology. In my opinion, if someone can distinguish between 31 institutes with not just same initials, but same names, they can certainly distinguish between institutes with completely different names.

And what if I change the name of the institute to "Narnaul Institute of Technology Narnaul" and now claim that the initials are not NIT but NITN, and then go ahead and advertise myself as NIT Narnaul. Would I be on the right side of AICTE.

Were there many complaints by students and parents that they got confused. Will AICTE tell us which institutes they confused with. Or is it a pre-emptive strike. Could it be that there is a specific institute which is being targeted by its competitors and AICTE has naively supported one side.

And if the goal was indeed to help students and parents, why help their confusion only with respect to some government institutes. If a student is getting confused between Birla Institute of Science and Technology and Barabanki Institute of Science and Technology, shouldn't AICTE help those students as well. BITS is a great brand today, even better than NIT brand (in my opinion), and hence if you want students to not get confused with some college initials being NIT, you must also want students to not get confused with some other college initials being BITS. And where does it stop. How do we decide which initials are being confused with, and which initials are not being confused with.

I am glad that they have not included IIIT in the initials (at least not mentioned in the newspaper reports). Otherwise, IIIT Hyderabad, which arguably has the best brand with that initial today, would have to change its name again.

Wouldn't it be better to first look at the instances of confusion and see if those confusions are because of misleading advertisement. If yes, book those institutes under various acts of law, instead of putting some arbitrary restrictions on names.

ADDED on 9th Dec:
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I am told that they have included IIIT also in the list of reserved initials. This is very interesting. IIIT Hyderabad came up with the unique initials. Government of India liked those initials and set up its own institutes with the same initials. Now it is telling IIIT Hyderabad that you can't have same initials as my institutes. Is this fair.