New Delhi: The Union government has prescribed a five-year tax holiday, starting 1 April, for hospitals set up in non-urban areas, aiming the incentive at investors and businessmen who want to set up health care facilities in India, a country that has just 1.5 hospital beds per 1,000 of its people—equivalent to about one-third of the world average.
Private hospital chains have announced some Rs15,000 crore of investments by 2010. Hospitals will have to begin operations before 31 March 2013 to be eligible for the tax holiday, finance minister P. Chidambaram said in his Budget speech on Friday.
For hospital chains eyeing India’s smaller cities and towns, the incentive announced in the 2008 Budget is a very timely, one businessman in the sector said. The government has taken “cognizance of the private health care system, the need for investments in it and actually gave incentives for the same,” said Fortis Healthcare Ltd’s managing director Shivinder M. Singh.
One expert said the five-year tenure of the tax holiday was too short. Rana Mehta, vice-president of health care at management consultancy Technopak Advisors Pvt. Ltd said a new hospital would take roughly five years to be fully operational and break even. In the first five years “they don’t make money anyway,” Mehta said, adding that a 10-year benefit would have been ideal.
Chidambaram allocated Rs16,534 crore for health care spending in 2008-09, up 15% from the previous fiscal year and announced two new schemes to provide health insurance cover and also access to medicines for the poor and the old. The government’s flagship health programme, National Rural Health Mission, has received an increased outlay of Rs12,050 crore while the National AIDS Control Programme will get Rs993 crore. A polio eradication programme, focused on high-risk districts in Uttar Pradesh and Bihar, has been given Rs1,042 crore.
Chidambaram has allocated Rs205 crore as the Centre’s share in the Rashtriya Swasthya Bima Yojna that will take off in Delhi, Haryana and Rajasthan from 1 April and provide a health cover of Rs30,000 each to families classified as “below the poverty line”. The government says that, on average, those who earn less than Rs356 per month in rural areas and Rs538 a month in cities fall in this group, but the actual line varies from state to state.
The National Programme for the Elderly, for which Rs400 crore has been set aside, will establish two National Institutes of Ageing, eight regional centres, and a geriatric medical care department in every state by 2012.