IITs: Indian Institutes in Trouble

Next week, about 20 faculty members of the Indian Institute of Technology, Bombay, will cut short their vacations and teaching assignments across the globe to congregate in San Francisco's Bay Area.

It is part of their annual road shows for networking with the old boys' club -- the US-based IIT Bombay Heritage Fund.

But this time, the 12-year-old IBHF, which has so far raised more than $20 million for IIT Bombay, will have a different agenda.

A charitable organisation which funds and promotes education and research among students, faculty and alumni at its alma mater, IBHF is not going to be in a charitable mood.

The reason? The recent formation of the Bharat Shiksha Kosh initiated by Murli Manohar Joshi, Union minister for human resources development.

With its registration in January this year, all funding to educational institutions by individuals or corporates will now have to be routed through the BSK.

What's more, the BSK is not too happy about the fact that alumni donors designate their endowments to causes of their choice, and wants a say in this.

"The ministry must be concerned about the objective orientation of the endowments," says a Mumbai-based bureaucrat.

The BSK's rules are applicable to all educational institutions, but the IITs could be the worst hit. "It is definitely not going to help us," says S C Lakkad, deputy director and professor, department of aerospace engineering at IIT Bombay.

Since 1994, the IITs -- Kharagpur, Bombay, Madras, Kanpur and Delhi (Guwahati and Rourkee are recent additions) -- have embarked on an aggressive resource mobilisation drive to tap the cream of Indian and US non-residential Indian business.

Over the years, this has seen alumni of all hues contributing to the IIT kitty. The benefactors include high-profile millionaires -- and billionaires -- like N R Narayana Murthy, chairman and chief mentor, Infosys (Rs 4 crore [approximately US $853,000]to IIT Kanpur), Kanwal Rekhi (Rs 8.5 crore [$1.81 million] to IIT Bombay), Nandan M Nilekani, CEO, president and managing director, Infosys (Rs 12 crore [$2.56 million] to IIT Bombay), Gururaj 'Desh' Deshpande, founder and chairman, Sycamore Networks ($250,000 to IIT Madras), and Vinod Gupta, founder InfoUSA, Inc ($3 million to IIT Kharagpur).

These have no doubt been prize catches for the IITs. So far, IIT Bombay has received Rs 37 crore ($7.89 million) from the Heritage Fund and Rs 32 crore ($6.28 million) from domestic alumni. The donations have changed the face of the campus -- literally.

For instance, Hostel 13, a Legoland-style creation, is an aerobridge-linked residence for 500 students designed by architect Hafeez Contractor. The Rs 10.7 crore ($2.28 million) for the building came from Nilekani.

In fact, for the IITs, the main revenue streams include endowments, consultancy (where faculty consult for industry) and executive development programmes.

At IIT Bombay, the endowment fund corpus has touched Rs 69 crore ($14.71 million), up from Rs 33 crore ($7.04 million) three years ago.

Says Dipan K Ghosh, dean, resource mobilisation, at IIT Bombay, "The government provides us with bread, but a little bit of butter comes from the endowments."

Similarly, IIT Kharagpur has an endowment corpus of around Rs 12.15 crore ($2.59 million) for the current year. At other institutes, it hovers between Rs 15 crore ($3.20 million) to Rs 35 crore ($7.46 million).

So why does the government want to kill an established revenue stream? The ministry's explanations on why the BSK was set up are opaque, to say the least: "There is need for achieving excellence and promotion of research and development activities... therefore, the quality of R&D has to be improved by providing support. For realising the full potential of our youth, the government is striving to provide access to educational facilities."

Murli Manohar Joshi was not available for comment. But academicians and bureaucrats offer different explanations why the BSK was set up. "The government could be insecure about the growing clout of endowments. Even though it is a small part of the IITs' earnings, there is an outside chance of somebody taking it over," says a bureaucrat in Maharashtra.

Some provide more far-fetched explanations and attribute it to the mushrooming of madarsas (Muslim religious schools) in India. "This is one way of verifying their source of funds. While this could be the main objective, the IITs could have got into it by default," says an academician of a research institute.

Till the early 1990s, like most government-promoted educational institutions, the IITs were heavily subsidised and heavily cash-strapped. With student fees as low as Rs 1,000 per annum for a four-year BTech programme (it is currently Rs 54,000), the IITs relied heavily on government grants.

Also, the government's budgetary systems are such that if money isn't spent in one year, the next year's budget is likely to be reduced by a corresponding amount. "So the incentive was not to earn money, but spend it," says an IIT director.

In a way, even today, the problem is simple. The expenditure outstrips budgetary sanctions. For example, IIT Kharagpur's total expenditure last year was Rs 160 crore ($34.12 million). Of this, the government's grant was only Rs 100 crore ($21.32 million). So it raised the balance Rs 60 crore ($12.79 million) from consultancy, executive development programmes, and endowments. In fact, the first two streams are up from Rs 10 crore ($2.13 million) a decade ago to Rs 30 crore ($6.40 million) today.

Similarly, IIT Bombay has an annual budget of Rs 100 crore ($21.32 million). Of this, the government grant is around Rs 70 crore ($14.93 million). Its utilities and wage bills alone come to about Rs 45 crore ($9.59 million).

The sizes of the grants at the other IITs are around the same, while Guwahati and Rourkee get Rs 74 crore ($15.78 million) and Rs 50 crore ($10.66 million), respectively.

At the other IITs, a third of their total budget is generated through sponsored research and consultancy activities.

They all dream of a time when they can bring down the dependence on government grants to a third of expenditure.

So, for most IIT administrations, the future was clear. If they were to evolve and sustain their teaching standards, they would have to look for funding outside the bureaucratic maze.

Says IIT Kharagpur Director S K Dube, "Outside funding is very important for us if we have to transform ourselves into a world-class institute. IITs should not expect that the HRD ministry will continue to support them all the time. This is true for many world-class institutions."

Most leading American universities like Stanford, Harvard and the Massachusetts Institute of Technology have been doing exactly this. IIT directors say the US universities raise as much as 25 per cent to 30 per cent of their operating expenses through endowments. MIT alone raises more than $30 million annually from its old students.

In India, however, the endowments are being used to maintain deteriorating infrastructure, attract faculty and upgrade curricula. As part of an evolving process, the IITs have also diversified to meet contemporary needs.

At IIT Madras, for instance, the focus is on design and experimental engineering, information technology, and communications engineering. Apart from IIT Bombay's Sailesh Mehta School of Management set up in 1995, Arjun Malhotra, ex-HCL, donated Rs 3 crore ($640,000) for the G S Sanyal School of Telecommunications two years later.

One of the first to realise the power of ex-alumni was IIT Kharagpur. About 12 years ago, Kharagpur kicked off its efforts to build an endowment fund. In 1991, Omaha-based Vinod Gupta, founder and chairman of database company InfoUSA, Inc, gave a $2.5 million endowment to his alma mater to set up the eponymous business school.

That's when the other IITs decided to woo their ex-alumni, who've been climbing the corporate ladder in places like Silicon Valley.

Such paybacks, which began filtering in from the mid-1990s, have now become crucial for the IITs as expenditure is spiralling.

The institutions are free to use only the interest from the endowment funds for recurring expenditure. Donations, on the other hand, are used for upgrading infrastructure, etc.

Alternative revenue streams came into play only in 1991. With liberalisation, the HRD ministry, which oversees educational institutions, teed off its own reform process.

First, as part of a revamped funding pattern, since 1993, the government changed the budgeting systems for the IITs. Apart from the grant, it also offered to match the earnings from consultancy and executive development programmes, excluding the corporate and individual endowments.

Subsequently, the government also moved from offering block grants to offering performance-linked grants. The IITs say that despite their aggressive marketing efforts, so far they have received a matching grant just once or twice. IIT Bombay received Rs 3.4 crore ($725,000) and IIT Delhi is believed to have got Rs 3.7 crore ($789,000) against the money put in the corpus. Nevertheless, the government grant still accounts for 60 to 70 per cent of the money in the kitty for the IITs.

But it would be silly to ignore the growing clout of the IIT old boys. There are 30,000 alumni in the US alone. Many of these head global corporations or are entrepreneurs. But getting them to loosen their purse strings isn't an easy task. So how is the BSK affecting both the global and domestic donors?

"It is the most asinine thing I ever heard in my life," says US-based tech entrepreneur-turned-venture capitalist Kanwal Rekhi. "Donors are making voluntary gifts because of emotional attachment or commitment to the institutes. They will not hand out money to a nameless bureaucrat or a feckless politician. They should use public funds to do what they think needs to be done."

Would he consider giving donations in future? "Absolutely not!" he retorts. "You can kiss the donations goodbye if the BSK happens. This will kill the golden goose."

Other reactions are similar. "We'd rather donate to the American universities we post-graduated from," says yet another US entrepreneur, who studied at IIT Kanpur.

As it is, the boards of various IITs keep the ministry informed about the endowments. So setting up the BSK is only going to complicate matters. "With the BSK, the funds could go into a common pool," says IIT Bombay's Lakkad.

Kharagpur head Dube is more diplomatic. "I don't see any significant impact," he says. "There is some apprehension in the minds of alumni, but this is basically due to the wrong information about BSK. Once we talk to them and give them the details, I am sure it will be business as usual."

But that is better said than done. Also, the BSK talks of promoting research careers. This at a time when only 10 per cent of IIT alumni return for research and even these numbers are dwindling. Professors cite lack of opportunities as the main reason.

Despite their diplomacy, the IITs know that future endowments are going to be a rough haul. A month ago, the IIT directors met the education secretary to thrash out the BSK issue. They were asked to discuss the matter at the IIT Council level.

"The IIT Council is the body where the issue shall be discussed and an appropriate decision will be arrived at. Until such a point, we shall wait," says Sanjay G Dhande, director, IIT Kanpur.

Whatever the outcome, the head of the information technology department at an IIT says, "An institution of higher learning cannot be a status quo unit. We need to evolve."

That can only happen if government interference is minimal.