Deep Dive

What will be the Covid vaccination bill for Centre & States?

NARAYANAN V Lokeshwarri SK Chennai | Updated on April 26, 2021

The total cost of vaccinating the adult population will be ₹58,282 crore.

The second wave of Covid-19 is wreaking devastation through the country with daily cases crossing 3.4 lakh and death tally above 2,500. With healthcare infrastructure gasping to cater to increasing needs, vaccination is the only way out to bring the infection under control.

While the vaccination project rolled out briskly, with around 11.5 crore people having received the first dose and over 2 crore receiving the second dose, the pace of vaccination is not good enough; only 1.4 per cent of the population has received both the doses.

Amidst complaints of vaccine and vaccine input shortages, the Centre has now rolled out phase 3 of Covid vaccination where everyone above the age of 18 is eligible for getting vaccinated. But the cost of vaccinating the 18 to 45 age group should either be borne by States or people can pay out of their own pockets to get vaccinated in private hospitals.

Vaccine availability is going to be a challenge, at least until July. While many States have announced free vaccines for all adults from May 1, others are complaining about the additional burden on their finances.

However, BusinessLine analysis shows that the cost of vaccinating the 18 to 45 age cohort, when distributed across States, does not put too much burden on any State. The total cost of vaccinating the adult population will be ₹58,282 crore. Of this, the Centre may have to bear ₹10,234 crore if it vaccinates all the willing population above 45 and healthcare and frontline workers. The cost to be borne by States for vaccinating all those between 18 to 45 years, would be approximately ₹48,048 crore. States have to vaccinate a larger proportion of population and also have to pay a higher price for their vaccine procurement.

Experts also think that cost is not an impediment in vaccination, it’s planning and execution that may cause hiccups.

Cost to the Centre, States

The total adult population in the country, above the age of 18 is around 81 crore and if every eligible person has to be inoculated then 162 crore doses would be required. But, approximately 10 per cent of the population may prefer to pay a higher price and get vaccinated at private hospitals. Vaccine hesitancy and lack of awareness, especially in the BPL segment may reduce the number to be vaccinated by another 10 per cent. Therefore, the total number of doses to be administered may by around 129.6 crore.

The Centre has promised to continue inoculating those above 45 years and healthcare and frontline workers by purchasing 50 per cent of the domestically procured vaccines. If the States let the Centre administer Covid vaccines to this cohort, then the total doses to be administered by the Centre will be around 49.5 crore.

According to media reports, the Centre has contracted to buy around 21 crore doses from Serum Institute (10 crore doses at ₹150 per dose and 11 crore doses at ₹180 per dose). If the doses supplied by Bharat Biotech, so far, are accounted for, then the Centre needs another 26.3 crore doses to complete vaccination of the above 45 and other critical categories. If the additional vaccines are procured at ₹150, as the Centre has clarified, then the total cost of vaccination to the Centre amounts to around ₹10,234 crore.

The States are likely to restrict themselves to providing free vaccination to 18 to 45 age cohort and use the supplies of the Centre to vaccinate those above 45. If the weighted cost is assumed at ₹600 (cost of vaccine plus additional cost of administering), then States have to bear ₹48,048 crore for Covid vaccination.

Shouldn’t Centre bear the entire cost?

The question that begs an answer is — shouldn’t the Centre bear the cost of vaccinating the entire population, as it had originally intended. One, the Union Budget had set aside ₹35,000 crore towards Covid vaccination for FY22. The FM had promised that the allocation can be increased, should the need arise. Only a third of this allocation is likely to be used for vaccinating those aged above 45.

Two, the States have to set aside funds for medical infrastructure, testing, quarantining, etc. Asking them to incur additional cost seems a trifle unfair. Three, “prevention of the extension from one State to another of infectious or contagious diseases or pests affecting men, animals or plants” fall under concurrent list of the constitution and is not the responsibility of States.

Do States have the funds?

While it does not seem equitable to ask States to bear the cost of vaccination, numbers however show that they will not have too much difficulty in funding this expense.

The distribution of the vaccination cost of ₹48,048 crore across States would depend on the population of the State. Therefore, the largest burden will be on States such as Uttar Pradesh (₹7,107 crore), Maharashtra (₹4,760 crore) and West Bengal (₹3,848 crore). This cost amounts to less than a third of the healthcare budget in the more populous States.

“Compared to the social and economic cost of the pandemic, the financial resources that state governments have to spend on vaccination are minuscule,” says Vidya Mahambare, Professor of Economics, Great Lakes Institute of Management. “Estimates available suggests that the average cost for the state governments is likely to be a mere one-quarter of one per cent of GDP. Even if the resources have to be diverted from other schemes or the departments, it should be done to ensure that vaccines reached the majority of the adult population.”

Madan Sabnavis, chief economist at CARE Ratings too thinks that since the state budgets are huge, they can definitely bear the cost. “The cost of vaccination will be few thousand crores which any state will be able to accommodate easily.”

Sabnavis points out that while fiscal deficit up to four per cent is allowed, a number of states have targeted a fiscal deficit less than that for FY22, which means they still have the scope to decide whether to subsidise or cut down on some expenditure.

Planning, execution

Finding the funds to finance the vaccination, either by Centre or States, is not likely to be too difficult. If corporates, NGOs and so on chip-in, the burden can reduce further.

A look at the vaccine supply numbers shows that along with Sputnik vaccines, around 15 crore doses will be available per month from July onwards and around 109 crore doses will be domestically available between May and December 2021. This means that bulk of the vaccination can be completed by the end of the year.

“In short, the lack of financial resources is unlikely to be the key factor in our ability to vaccinate a large percentage of the population. It is the supply of vaccines and the governments’ ability to distribute them efficiently,” says Mahambre. The ability of the Centre and States to work together is the key in helping the world’s largest vaccination drive forward.

 

Published on April 25, 2021

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