To Hike or Not To Hike

Samir K Barua


As all of you are aware, IIMA has been in the news regarding the fee it has proposed to charge for PGP from the academic year beginning June 2008. This is to clear the several misconceptions about the issue that arise due to often incorrect and incomplete information conveyed by the media. Let me do so through a series of questions and answers:

Why has the fee been raised?

The fee for the PGP has always been a fraction of the cost incurred by the Institute for the programme. The programme is subsidized by the surplus the Institute generates essentially through executive education and consulting. The extent of subsidy would become quite large on implementation of the sixth pay commission’s recommendations. The Board of Governors of IIMA therefore decided that the fee needed to be raised so as to reduce the subsidy and to use the surplus from other activities for the much needed expansion of infrastructure – classrooms, seminar rooms, dormitories, etc. to deal with the voluntary and involuntary expansion of the long duration teaching programmes of the Institute. The corpus that the Institute had built over a decade from 1992 to 2002 has depleted significantly since it has been spent on creation of additional academic infrastructure (the new campus) over the last few years. The Institute has received no grants from the government over the last several years. The Institute believes that as a responsible and established institution in the education sector, it must remain financially independent of government support so that the funds available with the government can be used for more needy institutions and programmes.

What is the proposed fee?

The media has been highlighting just the maximum fee of Rs. 5.5 lakh that is proposed to be charged for the first year to the batch joining in June 2008. In fact, the fee to be charged is income dependent – it varies from NIL (for students with annual family income of up to Rs. 1 lakh) to Rs. 5.5 lakh (for students with annual family income of Rs. 6 lakh and more). Based on the declared family incomes by students who have been offered admission at IIMA for the programme starting in June 2008, the average fee the students would have to pay would be about Rs. 3.80 lakh. This would amount to fee waiver (or subsidy) of over Rs. 4.50 crore for the year. The average fee collected would decline and the quantum of fee waiver would rise with implementation of reservation for non-creamy OBC applicants (as the proportion of relatively lower income candidates would rise).

What would be the average subsidy to PGP?

The maximum fee is based on the assessed cost of the PGP. The average fee charged would still imply a subsidy of a little over 30% of the full cost of the programme.
How many students would receive education at zero cost?

The proposed fee structure along with the need-based scholarship programme being offered by the Institute would make IIMA the first Institute in the world to award an MBA at zero cost to candidates who come from low income families. Based on the income data for the incoming batch, about 22 students (with annual family income of up to Rs. 1 lakh) would be educated at IIMA at zero cost to the students.

How does the proposal compare with fee proposed by other IIMs?

The income criterion used to identify non-creamy category is annual family income of Rs. 2.5 lakh. The minimum and the maximum fee to be charged from students who belong to families with annual family income of over Rs. 1 lakh and up to Rs. 2.5 lakh would be Rs. 1.0 lakh and Rs. 2.6 lakh respectively. This is significantly less than the flat fee of Rs. 3 – 4 lakh being charged from ALL such students by other IIMs. These students would also be eligible to apply for scholarship being provided by the Institute. Over 20% of the students who have been offered admissions are expected to benefit from the lower fee being charged and the need based scholarship being provided by IIMA to students from these income levels.

Are banks willing to provide funds to students?

The Institute has received full funding proposals from five banks. The terms on which funding is being made available is generous and within the reach of all students who have been offered admission. Therefore, funding would not be an issue. Besides, the BOG of IIMA has taken a decision that it would ensure that no student who has received an offer of admission is unable to go through the programme because of non-availability of funds.


Is the fee affordable?

Based on the average compensation packages offered for placement within the country, the pay back period at a fee level of Rs. 5.5 lakh would be about 4 months. By any yardstick, therefore, the education at IIMA is financially affordable.


The above proposal meets the following objectives: a) providing relief to students who come from relatively lower income families, b) continuing to significantly subsidize the PGP from the surplus generated from other activities of the Institute, c) ensuring that the Institute is able to set aside resources for adding to infrastructure for growth as well improving the quality of infrastructure.

(Courtesy: Prof Varun Arya, Director, Aravali Institute of Management and alumni, IIM-A)

Samir Barua is the director, IIM-A. The views expressed above are the author’s own.

(Offline, Volume-5, No- 3, May 2008)