The disastrous start of this fiscal year should concentrate minds
Needed: Free vaccinations for all, with a priced option for willing buyers once supplies ease, and a central subsidy for states
The tragedy of oxygen unavailability could have been considerably mitigated if, right at the start of the new wave of covid infections, we had turned to the only institution in the country with embedded skills in arranging transport of food and materials in an emergency: the Indian Army. That capability was a positive institutional legacy from the colonial period. We should have set up a war room commanded by the logistics wing of the Army. In a delayed realisation, the Delhi High Court has very recently directed the Delhi government to seek assistance from the armed forces.
Why the delay? Perhaps the fear of the military breaching its barracks, but civilian administrations are just not geared to handle emergencies where time is of the essence and life is at stake. The Army is now being asked to set up field hospitals, but that is not where its real strength lies.
Captive oxygen plants of the kind donated by France are a routine feature of hospital infrastructure in the West, because piped oxygen supply is more efficient than cylinders, which are heavy and expensive. We continue to be plagued by process delays, even in the case of those donated plants, which will only be received and functional by late May. Oxygen tankers donated by Thailand are yet to take off. A budgetary provision for equipping 500 district hospitals with oxygen plants lies largely unused because of tender rules and delays.
The best fiscal news in recent weeks in the midst of this unfolding disaster was the resumption of free foodgrain, on the same pattern as in the last fiscal year, for May and June of 2021—an additional 5kg of wheat or rice and a kilogram of gram free per person per month. Yes, ration cards leave out many of the deserving, but even so, they cover 800 million individuals in roughly 150 million households, not all of whom are fraudulent claimants. The Food Corporation of India (FCI) had 77 million tonnes of foodgrain stock on 1 April, against a prudential requirement of 21 million tonnes. The rabi harvest is complete, and procurement is under way. There is clearly room for extending the free foodgrain to at least six months.
There are collateral fiscal benefits too. After the cash outflow at procurement time, FCI incurs monthly costs of storing the foodgrain until it gets distributed. In the last few years, procurement has outpaced distribution, leading to the present bulging stocks and holding costs. What better opportunity than this to rationalize stocks while providing a food safety net at a time of job and life uncertainty like no other? If the one nation one ration card (ONORC) system is actually up and running, it will free individual members of ration-card households to travel in search of jobs without losing their foodgrain entitlements.
The Centre has offered to fully bear the costs associated with the distribution of additional foodgrain allocation, estimated at ₹26,000 crore. However, new Centre-state issues have arisen over the three-tier pricing of vaccines for liberalized availability starting May. Serum Institute of India (SII) and Bharat Biotech (BB) charge the Centre ₹150 per dose, but even after a recent downward revision, will charge state governments ₹300 and ₹400 respectively; their prices for private buyers still stand at ₹600 (SII) and ₹1,200 (BB).
The vaccine price privilege for the Centre makes no sense at all. Perhaps it was thought states could charge a fee since they will cover the working age group, but around 20 states have (rightly) announced free vaccination. The Union budget provision for covid vaccination was ₹35,000 crore. In a Bloomberg Quint interview, Expenditure Secretary T.V. Somanathan explained the arithmetic as ₹700 per person for 500 million. At two shots per person, the budget cost estimate was ₹350 per shot. In the event, the Centre got the vaccine much cheaper, at ₹150 per shot.
The Centre can equate the purchase cost for itself and states going forward at ₹150, offering a subsidy to states of ₹150 on every dose they buy (the differential between SII and Biotech will remain post-subsidy). It is a good idea for states to be proactive in determining their requirements and procure vaccines on their own, with controls to prevent hoarding by fiscally stronger states. But these controls must have the flexibility to accommodate surges in particular states at particular times.
A higher price tier for private entities is perhaps justified, since in any case they are looking to much costlier imports to get over the current supply scarcity. Vaccination of employees and their families makes commercial sense for a private company, so the considerations are very different, although even there, regulatory protection is required to prevent hoarding in a desperate situation.
In April, the volume of cargo traffic as measured by e-way bills stood at 48.9 million, just a touch above the 48.3 million reached in July 2020. In March 2021, it had risen to 71.2 million. The heavy lifting needed to get us back there can be done by the vaccination drive, provided we design the pricing and pathways well.
Indira Rajaraman is an economist
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