A classic error that judicial courts are prone to is one where the paranoia over not allowing criminals to be let off the hook results in a lot of innocent people being put to trial. Statisticians call this unintentionally increasing ‘type 1’ errors (false positives) in the pursuit of reducing ‘type 2’ errors (false negatives).

Something similar is playing out in the ongoing conflict between the Government of India regulator All India Council for Technical Education (AICTE) and the nearly 2,000 Indian business schools that it monitors. Without any consultation with representatives of these schools, the AICTE put out a sweeping notice binding these schools to surrender their admission process and fee structure to their respective state governments. It ambiguously dictates that the schools only admit using common entrance exams ‘such as CAT/MAT’, raising doubts about the acceptability of other popular tests such as the XAT and GMAT. The notice also asks these schools to teach a ‘model curriculum’ devised by the AICTE. It also proposes to regulate the one-year PGDM (Executive) programs started by these schools, which is bizarre because the AICTE does not even recognize one-year MBA programs.

Among the many far reaching effects of the notice is that it practically puts the schools out of reach for Indians staying abroad, who apply to some of these schools using the GMAT exam. It’s a setback for the Graduate Management Admission Council (GMAC, which owns the GMAT exam) itself, which has very recently set up an office in India and is on an expansion drive in the country, but now finds the rug pulled from underneath its feet. The notice sends negative signals to foreign business schools and universities hoping to start up in India. It paints the picture of a fickle regulatory system where years of institution building can be set back without so much as a discussion.

It’s not that the prescriptions of the notice are entirely baseless. In India, there are business schools and then there are businesses that are schools. Of the 2,000 odd b-schools affiliated to the AICTE, perhaps 90% need some serious head rapping for the shams they’ve created in the name of education. But in the paranoia over making the 90% get their act together, the notification forces the 10% better management schools too to abandon their individual growth paths for the one-size-fits-all model devised by the AICTE. For ease of argument, I will refer to the two types of b-schools as the ‘better b-schools’ and the ‘low-rung b-schools’.

The AICTE notice is a hodge-podge of two types of decrees. The first kind are prescriptions for minimum standards (such as a model curriculum formulated by AICTE) which the better b-schools already surpass and the rest should upgrade to. The second kind are blanket diktats that are fundamentally impractical. I’m analysing the second kind below.

1. “Admission to PGDM programs shall be conducted by the respective state governments through their competent authority designated for such a purpose.”

Admission processes to b-schools suffer from a variety of problems — from the phenomenon of capitation fees and back door ‘consultants’, the lack of transparency and the arbitrary nature of the parameters used for selection even in the reputed b-schools on one hand to a large number of colleges not even receiving enough applications to make the existence of the college viable on the other.

But none of these problems can really be solved by placing the hot potato of conducting group discussion and admission interviews in the state governments’ hands. For one, state governments lack the intellectual competency to understand the talent that companies in Mumbai, Bangalore and New Delhi want (let’s not even get to what companies in Singapore or Hong Kong want) and formulate a process to monitor it. For another, even the existing well-equipped state governments don’t want the extra headache of babysitting more management schools.

Before the economic recession of 2008, capitation fees and back door entry to some of the upcoming private b-schools was becoming too prevalent a folklore to dismiss as myth. But post-recession, low-rung b-schools have had trouble getting even the minimum number of applications required to select a full capacity batch. If at all, it has resulted in an advantage for applicants as more number of low-rung b-schools are dishing out fee discounts and relaxed admission criteria to attract applicants.

Ironically, if you put your ear to the ground today, it’s the b-schools run by deemed universities that consultants offer backdoor admissions to, and not AICTE-approved schools.

Above all, a common admissions process takes away the freedom of the better b-schools to formulate classes calibrated to their philosophies. For example, how can two AICTE-approved schools such as Mudra Institute of Communications, Ahmedabad and Institute of Rural Management, Anand select their batches through a process conducted by the Gujarat government and simultaneously designed for the lower-rung b-schools of Gujarat?

So it’s hard to see what problem granting admission powers to state governments is really solving.

2. “The fees to be charged for the PGDM, PGDM (Executive) and PGCM programs shall be approved by the fee fixation committees of respective state governments.”

Rising fees of PGDM programs has been a matter of concern in recent years. The Indian Institutes of Management (IIMs) set the anchor price by increasing their fees from Rs 3 lakhs to Rs 13 lakhs gradually in the last five years and other b-schools followed suit, choosing a price bracket relative to their standing compared to the IIMs. But as a result, a lot of really questionable b-schools charge around the price point of Rs 5-7 lakhs.

This increase in price would be justified, if the benefit was being passed on to the faculty, or being used for hiring high quality faculty, or building better infrastructure. While some of the better b-schools have undergone infrastructure revamps post the fee-hikes, faculty salary grades have more or less been following the same three-yearly revisions as before, with the government’s pay commission grades for IIM professors setting the anchor. Worse, many b-schools have gone on an expansion-spree after hiking their fees to hefty levels, building new campuses in India and abroad using the fee money without a rise in quality of education for the students who are paying it.

Which makes the AICTE bid to control fees sound like a reasonable decision.

But as with the classic ‘type 1’ versus ‘type 2’ error conflict, a fee regulation to reign in the bottom 1,900 b-schools hurts the well-intentioned interests of the 100 better schools. By charging Rs 2 lakh for fees (a figure quoted by AICTE Western Region head Dr Prabhat Kumar Sahoo), there is no way the better b-schools will be able to think of hiring and retaining better faculty or competing with the impending foreign b-schools.

Naturally, the better bunch of b-schools are enraged with the AICTE notice and have threatened to knock the doors of the Apex Court if the AICTE does not put paid to their concerns. But many other b-schools have already altered the admission process on their website to comply with AICTE’s notice. The resultant picture is a confusing one and at a wrong time at that, with admissions already underway.

At the cost of concentrating on the wrong problems, the AICTE is losing sight of what it should really be doing, which is,

1. Let go of the license-raj era ‘approval-based’ approach. Educational institutions in India now span across several tiers of quality. The better quality institutions are beyond base regulation and need incentives and drivers to excel and emerge as dominant forces in the local region, that is Asia. The low-rung institutions need regulation. Those in between these extremes need a mix of both regulation and incentives to improve. AICTE should work on making this distinction (perhaps with the help of the National Board of Accreditation) and then formulate policy accordingly.

2. Put AICTE-approved educational institutions directly under the ‘Right To Information’ Act. Let activists, students and parents enforce accountability directly on institutions by forcing them to disclose how they used the increased fees, faculty salary grades, funds spent on new campuses, admission creteria and so on.

3. Make it a criminal offence for AICTE-approved institutions to use their resources to run additional programs. Several b-schools manage to get AICTE-approval for a small batch of 60 students but use the same campus and faculty to run additional ‘autonomous’ programs affiliated to distance learning MBA degrees of the myriad state universities. This possibility has made a lot of questionable promoters to start management institutions with the pure aim of profit. By forcing b-schools to do one thing (run an AICTE-approved program) and do it well, AICTE will repel a lot of purely profit-minded entities from getting into the education business in the first place.

4. Legitimize one-year MBA. The part-time MBA has become as irrelevant as the distance-learning MBA. The one-year MBA has emerged as a great choice for working professionals to upgrade their career without wasting too much time away from work. It’s time the AICTE makes it a legitimate degree in the eyes of the government as employer and for further studies in government universities. Worldwide, it’s the executive MBAs that are cash cows for b-schools and it makes certain sense for b-schools to make their 2-year programs affordable for fresh graduates while charging higher for one-year executive MBAs, as they are taken by working professionals in a better financial position.