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Loan guarantee scheme to boost medical infra, but simplified approvals need of the hour, says private providers

The Finance Minsiter Nirmala Sitharaman said the interest rate offered on the loan guarantee scheme is capped at 7.95 percent. Currently most private hospitals borrow at 12-14 percent interest rates. But executives of hospitals felt that the interest rates can be further cut by 200 basis points to make it more compelling to go beyond metro cities.

June 28, 2021 / 06:35 PM IST
Nureca, a healthcare and wellness products distributor company, IPO listing date was on February 25, 2021, it listed at 58.74 percent premium to Rs 634.95 of its issue price of Rs 400. As of March 15, the stock price closed at 577.60 which was still 44 percent above its issue price.  The company raised about Rs 100 crore via IPO. It was open for subscription between February 15 and February 17 was oversubscribed 39.93x times. The public issue subscribed 166.65x in the retail category, 3.10x in the QIB category, and 31.59x in the NII category.

Nureca, a healthcare and wellness products distributor company, IPO listing date was on February 25, 2021, it listed at 58.74 percent premium to Rs 634.95 of its issue price of Rs 400. As of March 15, the stock price closed at 577.60 which was still 44 percent above its issue price.  The company raised about Rs 100 crore via IPO. It was open for subscription between February 15 and February 17 was oversubscribed 39.93x times. The public issue subscribed 166.65x in the retail category, 3.10x in the QIB category, and 31.59x in the NII category.

The private hospitals on June 28 welcomed government's Rs 50,000 crore loan guarantee scheme to scale up medical infrastructure in non-metroes, but said that the government also needs to focus on simplifying approvals, provide cheap electricity and help solve the shortage of human resources problems to encourage private investment.

Finance Minister Nirmala Sitharaman said the interest rate offered on the loan guarantee scheme is capped at 7.95 percent. Currently most private hospitals borrow at 12-14 percent interest rates. But executives of hospitals felt that the interest rates can be further cut by 200 basis points to make it more compelling to go beyond metro cities.

"The government should give incentives such as cheap power, viable package rates under Ayushman Bharat, land at subsidised rates, and less redtape in approvals," said Dr Girdhar Gyani, Director General - Association of Healthcare Provider (AHPI), which represents smaller hospitals, nursing homes and clinics.

Gyani said it costs about Rs 30 lakh to Rs 40 lakh to set up a bed outside metro and tier-1 cities.

At the moment, it takes about 38 approvals to set up a hospital. The government can help us with single-window clearance, Gyani said.

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The loan guarantee scheme will cover expansion and new projects related to health and medical infrastructure in cities other than 8 metropolitan cities. Under the guarantee coverage scheme 50 percent loans would be provided for expansion, and 75 percent for new projects. For aspirational districts, guarantee cover of 75 percent for both new projects and expansion.,

The maximum loan offered will be Rs 100 crore and the duration of the scheme will be up to 3 years.

Dr Harsh Mahajan, President of NATHEALTH that represents large hospital chain said the increased outlay of 50,000 crores on scaling up medical infrastructure in the metropolitan cities, as well as other areas, would be useful in the short term, but has to be increased manifold to make up for neglect of the healthcare sector over the past several decades.

"Loans should be provided readily to the private sector for upgrading existing infrastructure and building new ones, at very low interest rates, preferably zero, as ROI in this sector is very slow and low," Mahajan said.

"There can be no better time than the present, to fulfill the long-pending demand of the healthcare sector to be accorded infrastructure status, in both letter and spirit, to enable the nation leapfrog to the next level of healthcare," Mahajan added.

Time bound fund utilisation, human resources availability 

Charu Sehgal, Partner at Deloitte India said last year has demonstrated the dire need for an upgrade in both our private and public healthcare infrastructure and systems.

"Shortage of infrastructure in tier 2 and 3 was a gap that was starkly visible during the last year. Allocation of funds for this as well as easing availability of cheap finance for private sector investment in it are welcome steps," Sehgal said.

"It is equally important however to ensure that these funds are in fact utilised and a clear time bound investment plan is laid out. Often we have seen that budgeted allocations are not used," Sehgal said.

"Sehgal added that another critical gap is the acute shortage of healthcare resources, infrastructure without staff and equipment is of limited use. It is good to see that there is a provision for some short term solutions to this issue as well," she added.

"The government focus has been on capex, but what private hospitals who want to go to small towns is some support on operational expenditure. Otherwise nothing much is going to happen," Dr Alok Roy, Chairman of Kolkata-based Medica Superspecialty Hospital.

Roy is also the chair of FICCI Health Services Committee.
Viswanath Pilla is a business journalist with 14 years of reporting experience. Based in Mumbai, Pilla covers pharma, healthcare and infrastructure sectors for Moneycontrol.
first published: Jun 28, 2021 06:20 pm
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