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The business end of law school: NLSIU faces cash crunch as Gov tightens purse strings

NLSIU: Cash crunch
NLSIU: Cash crunch

In today’s edition of Mint: The National Law School of India University (NLSIU) Bangalore may face a funding gap of Rs. 2 crore this fiscal year after the Karnataka state government cut its grant by 50% from Rs. 4 crore last year. NLSIU was established in 1987 as the first of India’s flagship national law universities (NLUs).

“We’ll have to cut down on expenditure, the service will not be as good as it is today, and you have to reduce employees,” surmises NLSIU’s registrar V. Nagaraj about what would happen if the shortfall is not met. “And if the UGC (University Grants Commission) doesn’t give the money, then the maintenance of the buildings will be poor.”

Between 2011 and 2012, NLSIU’s total expenditure has risen 31%. Over a period of five years, costs have spiralled by 160% from Rs. 6.44 crore in 2007-08 to Rs. 16.9 crore in 2011-12, according to the college accounts, obtained under the Right to Information (RTI) Act.

The lion’s share went towards paying salaries, with costs on this account more than tripling to Rs. 8.66 crore last year from Rs. 2.66 crore four years ago. NLSIU is increasing its class sizes, which requires additional teaching capacity, and teacher salaries were increased under UGC’s Sixth Pay Commission report.

Attracting highly skilled lawyers to teaching remains a challenge, admitted Nagaraj. It isn’t just a question of salaries—senior professors with 20 to 25 years of experience are paid amounts comparable with starting salaries for fresh law school graduates at corporate law firms—but there also needs to be meaningful continuing skill development and training of professors.

While investment in teachers and college infrastructure is vital, some argue that many NLUs are now becoming too reliant on state government budgets, the availability of UGC cash and their own commercial activities.

Autonomy and fanfare

NLSIU’s founder N.R. Madhava Menon made a deliberate and strategic choice when starting the law school not to chase major government funding in order to safeguard autonomy, recounts Ranbir Singh, the founding vice-chancellor of National Law University (NLU) Delhi and former vice-chancellor of the National Academy of Legal Studies and Research (Nalsar) in Hyderabad. “Since it was the first (national) law school, probably it worked,” he said.

After former law minister H.R. Bhardwaj took over as governor of Karnataka in 2009, more funding started to flow from the state to NLSIU, he said.

In 2011-12, NLSIU was given a Rs. 2 crore grant by the Karnataka government for maintenance, while another Rs. 2 crore subsidized students from communities such as the scheduled castes and scheduled tribes. Both of those amounts will now be halved, Nagaraj said, which was confirmed by Siddaiah, principal secretary of Karnataka’s higher education department.

An NLSIU-type law school is a badge of prestige for a state.

“All national law schools are born with much fanfare,” says Faizan Mustafa, the founding vice-chancellor of National Law University of Orissa, which was set up in 2009. Last month, Mustafa moved to Andhra Pradesh to become vice-chancellor of Nalsar.

Since 2005, as many as 10 new national law schools have been set up in India. Funds to establish the campus, infrastructure and covering initial capital expenditure can be abundant at the start.

“Most of the law schools—they are going on the initial grant being given,” says Nagaraj. “If the government continues to support them, I think they’ll survive, otherwise it is difficult to support the institution.” Mustafa explains that some state governments argue that an NLU should fund itself through tuition fees and that UGC should be responsible for additional money because the schools are national institutions. UGC says that funding NLUs is a state government responsibility.

Singh and other vice-chancellors of law schools have lobbied the government for continued UGC funding.

Given straitened circumstances, many national law schools have been forced to work harder to make ends meet, partly by beginning to think more like businesses.

Easy bucks?

“It depends on the importance they give a law school in a particular state,” notes Singh, adding that the Delhi state government will grant another Rs. 15 crore to the five-year-old NLU Delhi in the coming year. “Delhi has been very comfortable.”

The state government has entirely paid for and constructed the campus in the Dwarka area, which Singh says is worth roughly Rs. 200 crore.

The Gujarat state government has supported the Gujarat National Law University (GNLU) in Gandhinagar. Net assets as of 31 March 2011 stood at Rs. 112 crore, compared with NLSIU’s Rs. 49 crore.

Vice-chancellor Bimal Patel says that between 2009 and 2013, Gujarat provided around Rs. 150 crore to set up the school, including its new 50 acre campus and other infrastructure.

“When GNLU was established in 2004, the government gave Rs. 10 crore as corpus because at that time GNLU was just beginning,” he said. “The funds are given for the capital expenditure. For projects/programmes/activities, too, GNLU gets financial assistance from the government and PSUs (public sector undertakings). However, there is no particular budget line which specifies, like in NLS Bangalore, that GNLU will get ‘x’ amount from the Gujarat government for recurrent expenditure.”

On the whole, Patel seems more than satisfied with the current fiscal condition of the college vis-à-vis the state government. “I would say that the (Gujarat government) support system has been overwhelming.”

Numbers that crunch

Nevertheless, costs are rising rapidly at GNLU, too. In 2010-11, total expenses stood at around Rs. 8.2 crore, having increased 40% from the 2009-10 expenses of Rs. 5.9 crore, according to its audited accounts for the year disclosed under an RTI.

A big share of that in 2010-11 —around Rs. 3.1 crore—was spent on staff salaries that increased 33% year-on-year.

GNLU benefits from having around 800 students—largest student body of any national law school, and recovered around Rs. 3.6 crore from residential student tuition fees in 2010-11. Together with other income from students or through additional diploma programmes, GNLU generated around Rs. 6.9 crore, almost covering its expenses.

In 2007-08 at NLSIU, residential student tuition fees used to make up nearly half of the college revenue; in 2011-12, such fees were projected to account for less than a quarter of revenue, after growing by only 38% to around Rs. 4.3 crore.

Learning from far, far from learning?

NLSIU has long bet heavily on distance education programmes to boost its finances. In 2005-06, distance education at NLSIU already made up 26% of the total income, generating a respectable Rs. 1.5 crore from five courses, with directly related expenses coming to only Rs. 23 lakh.

By 2011-12, the single largest part of NLSIU’s income was coming from six distance education programmes, which were projected to generate revenue of Rs. 6 crore at a direct cost to the college of less than Rs. 1 crore.

Indeed, for the college, the overheads of distance education are minimal, with teachers and facilities already available on tap. The majority of such courses are taught online and students, many of whom include non-lawyers working full-time jobs, only visit the Bangalore campus once a month.

The NLSIU brand name carries a lot of value on a diploma and the most popular course is the two-year Master’s programme in business law, which pulled in Rs. 4.3 crore in 2010-11. The runner-up is the intellectual property (IP) rights course, which earned Rs. 64 lakh.

NLSIU is to launch a diploma course on cyber law next year, but there will be difficulties in scaling up, says Nagaraj. “Distance education is going really well, but we have to further strengthen that, and there are so many other complications,” he says, noting that costs were rising and further investment was required to computerize and enhance the courses.

And, he adds, in all their offerings, national law schools have to meet the mandate of “creating legal awareness”.

In September 2011, a scathing judicial report criticized the state of the administration of Nalsar Hyderabad. The judges also homed in on “fund-generating distance education” that had spread “dissatisfaction among its students and faculty”, although they recognized that law colleges were under pressure to earn revenue.

Other creative approaches to raising funds are also being tried, including the sale of school-branded merchandise to students. Money is also being raised through donations from industry and lawyers to sponsor events and gold medals for students. The amount, though, is pale in comparison with endowments at US universities. At GNLU, Patel says, faculty members are given the option of contributing 10% of their salaries to an alumni fund.

NLUs are confronted by a conflict about their role—business or social utility?

“We want to reform legal education in the country and want to stabilize that, and we want to improve the facilities,” says Nagaraj. “The (national) law school philosophy is not making of profit.”

LI and Mint, together every fortnight
LI and Mint, together every fortnight
This article first appeared in Mint. Legally India has an exclusive content partnership with Mint, which will feature the latest legal news and analysis every fortnight on Fridays in its print and web editions.

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