Amount of non-IITians running/starting industries far exceeds in number. And they don't get the same funding or training or any human resources help in return. Of course if you run institutions for decades eventually good people are going to come out of it. But by and large most IITs are largely places to train people, and send them to foreign countries. Why should the tax payers pay for them?

An argument could be made to spend this money to improve public schooling infrastructure in India. And people coming out of that obviously would contribute way more. The scenario is a net loss for Indian tax payers. This is way more in lost opportunity costs.

Most of these arguments sound very similar the arguments against privatization in 1980s India. You can talk of the benefits of using tax payers money to manufacture bulbs while you don't invest the same money else where, where some thing real can happen.

Please feel free to run IITs using fees or whatever endowments you can get. Also most of these people harp day and night about how awesome they are, makes sense to generate some IP, sell that and make some money to fund themselves.