Transparency and rules

Who should regulate business schools?

Should institutions that teach business management (B-schools) be supervised and controlled by the University Grants Commission (UGC), which is an agency of the government? The government and the UGC think they should, so that gullible and anxious students are not cheated by unscrupulous operators; B-schools do not agree. They think the UGC doesn't have the competence to regulate and supervise them; they are pointing to the mess that the UGC has made of the universities. The UGC says if it is going to take over technical education generally, B-schools cannot be an exception. It has been following the Supreme Court's ruling to draft guidelines for the approval of new courses, setting up of new technical institutions and the closure of the old ones, not to mention other regulatory steps.

The need for this arose after the unsupervised growth of B-schools led, inevitably, to the proliferation of fraudulent institutions. During the high-growth years of 2003-10, such was the demand for MBAs that all that was needed to set up a management institute was the "benevolence" of the All-India Council for Technical Education (AICTE). When the economy began to slow, the demand for MBAs shrank. By July last year, almost 100 of them had asked to be shut down, as indeed had several engineering colleges. But a few months before that, in April, came the Supreme Court order, which effectively allowed private colleges to conduct masters of business administration and masters of computer applications programmes without the permission of the AICTE. This also meant that the UGC took over technical education, while the AICTE was expected to play only an advisory role and prescribe uniform standards of education for affiliated members of a university. The UGC, thus, issued guidelines whose original intention was to prevent fraud. But there are other regulations that have led B-schools to fear that their autonomy could be destroyed. This has happened because of over-reach by the UGC. So around 100 of them, including some well-known ones, have decided to approach the Supreme Court to hear their case and get a stay order. The matter has acquired some urgency because this is the admissions season.

One typically Indian problem is that if a B-school is affiliated to a university, it can grant a degree; if it is autonomous, it can offer "only" a diploma. The irony is that in 99 per cent of the cases, the diploma has a higher market value than the degree because the university system has many problems. If the diploma courses have to become part of the university system, as is feared, admissions on merit will suffer, and consequently placements. It is not clear whether all autonomous institutions will have to come under the UGC's yoke and what the advisory powers of the AICTE would mean for them. The final decision will have to be taken by the ministry of human resources development. The problem is not all that hard to solve, but it does require the government to know which problems it can solve and which ones are best left to the market. The soluble problem is of infrastructure. These rules can be devised in such a way that tricksters cannot enter the market because of the high capital requirements. Once enough capital is invested, investors will see to it that frauds do not occur. Placements, which depend on the institution's reputation, can then be left to the market.