States brace for vaccine costs as coffers run dry3 min read . Updated: 19 Jan 2021, 06:36 AM IST
States may have to bear some proportion of the vaccination cost in later stages, and the Centre may also allow the sale of the vaccines in the private market, though no decision has been taken so far
Finances of states battered by the covid-19 pandemic are poised to worsen, with the Centre indicating that it would finance free vaccinations only for the priority group of 30 million people, leaving states to shoulder the maximum burden of the mass immunization drive.
India on Saturday kick-started the first phase of covid-19 inoculation drive for 30 million healthcare and frontline workers, to be completed by March. In the second phase, those above 50 and those below 50 with co-morbidities will be vaccinated by July. The Centre has agreed to bear the cost of vaccinating the first 30 million but has not officially clarified the funding pattern for the rest. However, Kerala, Tamil Nadu, Madhya Pradesh, West Bengal, and Assam have announced free vaccination of people.
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According to an official in the Union health ministry who did not want to be named, states may have to bear some proportion of the vaccination cost in later stages, and the Centre may also allow the sale of the vaccines in the private market, though no decision has been taken so far.
Kerala finance minister Thomas Isaac said the state is ready to spend ₹3,000-4,000 crore to provide free vaccinations and may fund it through a reduction in plan expenditure and higher market borrowing.
“We made the choice that in Kerala everybody should be vaccinated at the earliest so that the economy comes back to normal. The actual cost of vaccination will depend on the price at which the Centre will give it to us and the brand of vaccine, none of which is known to us at present," he said.
Kerala, like most other states that have announced free vaccination, will have assembly elections later this year.
Uttar Pradesh is preparing a plan to fund vaccination beyond the support from Centre if the need arises, a senior state government official said, seeking anonymity. “The pandemic has impacted revenues, but the government’s aim is to ensure health funding gets a major boost while leaving other sectors unaffected," he said.
States bearing the burden of inoculation will worsen their ability to fund infrastructure, which has a multiplier effect on growth, Pronab Sen, former chief statistician of India, said.
“It’s a little worrying because you’ve got a situation where because of an increase in current expenditure, every state has cut back on capital expenditure. This problem is going to continue next year, which means the pace of infra creation is going to be seriously impacted. That has all kinds of implications, such as private investment also getting impacted because there is a crowding-in effect of public investment. So, in a situation like this, the states have borrowed more this year, so their interest bills are going to be higher next year," he said. A lot will also depend on the recommendations of the 15th Finance Commission (FFC), whose report is likely to be tabled by the government on 1 February, along with the Union Budget for FY22. “We don’t know what the Finance Commission will do. But what we do know is N.K. Singh (chairman of FFC) said in interviews that he has included a full chapter on healthcare. So, let’s hope that he has given specific grants for healthcare," Sen said.
In an interview with Mint in September, Singh had said FFC has for the first time devoted an entire chapter on health and would endorse spending at the level of 2.5% of gross domestic product (GDP) as envisaged in the 2017 health policy.
State finances have deteriorated, especially after giving away most of their taxing powers under the goods and services tax law.