Home / Budget 2019 / News /  All eyes on markets to fill in funding gaps

The cash-strapped government on Saturday indicated that it will support the harnessing of market forces to raise funds and achieve targets in key sectors such as health, education and infrastructure. This comes from the realization that it cannot spend enough to boost these sectors.

Long-term funding strategies of the central government include asset monetization in road projects to public private partnership (PPP) in public health and the agri and food processing sector, as well as external commercial borrowings (ECBs) for education.

The budget has proposed an allocation of 99,300 crore for the education sector. However, the finance minister said: “It is felt that our education system needs greater inflow of finance to attract talented teachers, innovate and build better labs. Therefore, steps would be taken to enable sourcing external commercial borrowings and foreign direct investment (FDI) to deliver higher quality education."

Experts argued that opening up funding options will bring accountability in education and pave the way for making the sector, or parts of it, for-profit. “Opening up funding avenues would help in quality enhancement, be it for infrastructure, research and innovation, content, skilling of faculty, or digital delivery," said Akash Gupt, leader, regulatory service, PwC India. “Opening up of the sector would require a fundamental shift from not-for-profit activity, besides multiple legislative changes, including the Foreign Exchange Management Act and Foreign Contribution Regulation Act," he said.

The Indian education sector is one of the largest in the world with 1.4 million schools, 51,000 colleges and universities, and almost 300 million students. India spends 3.1% of its gross domestic product (GDP) on education against a demand of 6% from experts. FDI in education is allowed but regulatory hurdles have prevented adequate money flow to the sector. The minister’s pitch for ECB and FDI raises hope that regulatory bottlenecks will be eased to unlock value in the education space.

In health, the minister proposed “to set up viability gap funding (VGF) window for setting up hospitals in the PPP mode. In the first phase ... aspirational districts will be covered, where presently there are no Ayushman-empanelled hospitals". She said the “proceeds from taxes on medical devices would be used to support this vital health infrastructure". She further proposed “to attach a medical college to an existing district hospital in PPP mode".

Experts argued that private participation will help both unlock capacity and ensure effective delivery of care in rural areas. “The proposal to establish hospital infrastructure across select districts under the PPP model can help provide access to formal healthcare to millions of patients who today travel far to avail better treatment. The partnership-driven approach is a sure step for the entities to bring to these hospitals their inherent areas of strength, thus building a quality model of care," said Shravan Subramanyam, managing director, India, at Roche Diagnostics, a global pharma firm.

The minister said a “total of 12 lots of highway bundles will be monetized by 2024". Besides, four railway station re-development projects and operation of 150 passenger trains would be done through PPP mode, she said. The process of inviting private participation is underway.

The budget also proposed to provide VGF for setting up efficient warehouses at the block level in collaboration with states and private players . “To build a seamless national cold supply chain for perishables, inclusive of milk, meat and fish, Indian Railways will set up a Kisan Rail through PPP arrangements," the minister said.

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