Amid repeated pleas by state governments and increasing probing by India's apex court, the central government, on Monday, announced that it will provide free vaccinations to everyone over the age of 18, reversing a vaccination policy that currently delegates procurement and distribution to states and private hospitals for those within the 18 to 44 age bracket.
The new policy, Prime Minister Narendra Modi confirmed, will now see the Centre procure 75 per cent of doses from vaccine manufacturers (including the 25 per cent state quota) and will come into effect on June 21. Private hospitals, he said, will still be able to procure 25 per cent of doses but a service charge cap of Rs 150 per dose above and beyond the fixed price of the vaccine will also take effect.
The move has significant implications, particularly for the government exchequer. India has, so far, administered roughly 23.61 crore doses as it embarks on what is the world's largest vaccination drive. However, constant revisions to the vaccine policy and supply shortages have meant that just 3.4 per cent of the population have been fully inoculated. By some estimates, at the current pace of vaccination, India could take over two years to fully achieve vaccine coverage.
This stark reality is, presumably, one of the key factors in the Centre's reversal over its vaccination strategy. But what does this mean for its balance sheet? According to the economists at UBS Securities, if an average price of Rs 150 per dose was assumed, with a similar figure incurred as a result of logistics and storage costs, the estimated total fiscal outlay could lie between Rs 40,000 to Rs 45,000 crore or roughly 0.2 per cent of the country's GDP.
It is worth noting though, that the Centre had already earmarked Rs 35,000 crore for the vaccine drive in its latest budget. This, effectively, means that, notwithstanding the cost incurred on the food ration scheme also announced by PM Modi, the change in the Centre's vaccination strategy will amount to an additional expenditure of around Rs 10,000 crore.
The second wave of COVID-19 has taken the wind out of the proverbial sails of an economy that, based on the economic data for the first quarter of the fiscal, appeared to be limping toward a slow recovery.
But the relentless rise in excise duties on petrol and diesel that began as far back as March 2020 and has continued to date, has meant the central government raked in around Rs 1.8 lakh crore in additional public revenue in 2020-21. What's more, the Rs 99,120 crore dividend the government has received from the Reserve Bank of India, and expected future inflows from asset sales also means that it is unlikely the Centre will look to tap the bond market for funds.
Moreover, unless the rate of vaccination drastically improves – a scenario that is unlikely given the time required for vaccine manufacturers to set up or ramp up production – the drive will continue into the next fiscal year meaning part of the fiscal outlay reserved for vaccinations can be reserved for the next financial budget.
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