Economics of Employable Engineering Education
We are at the time of the year where the fee structure of engineering education is debated hotly by various stake holders. There is also proposal to have uniform fee structure across the country. Political parties particularly in the opposition demand reduction of fees and higher quota for government single window admission. However there is no talk about the quality of the education and standards across a broad spectrum of private and government colleges, most of them languishing without adequate infrastructure and teaching staff. None talks about the quality of the education and how that could be measured for the market to determine what is acceptable fees for the 4 years of engineering education. All branches were considered to be of equal and charged the about the same fees and it is well known that the so called circuit branches is in great demand in a cyclical curve.  

The country is currently facing an enormous talent crunch and this is greatly affecting the bottom line of every man power dependant company and I’d like to specifically mention the IT & ITES sector.
Several committees on the fee structure have come and gone but none have provided a long lasting solution for the burning issue. Why we mention the fee structure when we are talking about employability is because only with adequate fees can a college train its students to suite industry needs. But with a uniform fee structure throughout all colleges we are only punishing the good colleges for providing more employable professionals and protecting the bad colleges so they can continue their shoddy business minded activities. 

One solution to the fee structure is what we in the BPO sector call output/outcome based pricing. Currently the Justice N V Balasubramanian Committee is calculating the fees structure on input based factors such as the running cost of the college, expansion cost and the like. This is irrelevant since they are taking into consideration that all colleges are paying their staff uniform salaries and having the same quality of infrastructure thus having same running costs. Why then does the AICTE grade colleges based on their quality and performance? 

The output based structure is to allow every college to set their fees individually based on the performance of the outgoing batch. That is, if the average salary of the outgoing batch is Rs.4 lakhs per annum, then the college can charge a percentage of that as their fees. If students from backward sections of society are not able to pay the fees of say Rs80,000 per annum they can avail a student loan from banks which will have tie ups with the particular college. After finishing their graduation the bank will receive the student’s degree certificate and hold it as security till he repays the loan and providing a provisional certificate to the employer. 

If this method is employed, all colleges will be striving to place their students in better jobs and make every one of them employable against the current scenario of churning out students like a bakery does with bread. Colleges will invest in quality teachers and better infrastructure as the average salary of the outgoing batch will decide the fee of the incoming batch. If there are number of students that do not get placed an agreed percentage (in relation to the proportion of students not securing placements within the final year) of the average salary can be deducted when calculating the fees since the college could not make those student employable. Similarly give positive credit (higher fees) when students opt for higher studies within India or abroad. 

The problem of a student not being able to afford the fees charged by the private colleges and government intervention for the same can be avoided in a transparent way where the students (actually parents in most cases!!) get to choose the branch and the college based on employability potential. Companies determine entry level salaries for each year based on inflation, demand and supply. Thus correlating fees to the outcome (average salary) automatically takes care of inflation, standard of the education imparted and demand for various streams of engineering. As the outcome of good quality education is measured by the employability of the batch, we can possibly remove the great disparity among the colleges of various hues run with profit motive. Income tax rebate on student loans can be suitably modified to allow for more money in the student’s hands to enable them to pay back the loan to the banks.

The ‘one size fits all’ fee structure is neither helping good institutions aiming for academic excellence nor the poor students who are supposed to be protected by the uniform fee structure with no correlation to their future. The entire admission process would become less intense as a student can get to choose the branch and the college without any uncertainty of their employability.

This fee model would take care of the vast demand for certain courses, if student are attracted to a particular college and course and the fees for this is determined by the department’s output. This would enable the colleges to invest in better professors and expand infrastructure capability to allow more number of students for their particular branch. AICTE should allow different fee structure for different branches within the same college and allow them to expand the number of seats based on the set criteria. Thus colleges have to innovate and modify their teaching curriculum as per the demands from the corporate sector and close down irrelevant courses where demand from the industry is poor. 

This may sound capitalistic but it will be truly beneficial to the students. The buyer pays for the quality of education offered. This will force institutions with a profit motive which are currently protected by the recommended fee structure and single window system of admission to clean up their act and start producing quality engineers or else they face extinction. The student is guaranteed to get what he pays for without any considerable risk of finishing four years of engineering and being left without a job because his college did not deliver what was promised. So basically, supply will not only meet demand but demand will determine supply in terms of quality and quantity. Now isn’t that the ideal scenario ?
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