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The government has made yet another tweak to the vaccination programme. In the ongoing third phase, the Union government was to procure 50 percent of all doses produced and supply them to states for free vaccination to those aged 45 years and above. The remaining 50 percent was opened up for state governments to vaccinate those in the 18-44 age group and to private healthcare providers to supply to any age group.
This will change from June 21. The Union government will procure an additional 25 percent, taking its allocation to 75 percent that is supplied free to state governments. What’s not clear is the price to be paid to the companies by the Union government. State governments were buying Covaxin at Rs 400 a dose and Covishield at Rs300 a dose, compared to the Rs 150 a dose that the Union government had negotiated for itself. If the price reverts to Rs 150 then vaccine companies’ revenue will get hit to that extent.
What will this move achieve? State governments were having to pay for these dose and also compete with each other to get allocations and they faced difficulty in getting their required quantities. Since state governments decided to vaccinate for free, it also posed a financial burden on them. Even their efforts (directly or through local bodies) to float global tenders to procure vaccines have not been successful so far.
Private providers meanwhile were willing to pay in advance even if their purchasing price was higher than that of the states and those with national distribution could buy large quantities too. In turn, they tied up with various companies who wanted to vaccinate their employees or contractual staff so that business can continue. With demand assured, they were on firm ground.
While the grumblings of the state governments grew louder, the Supreme Court was also critical, terming the current policy as “arbitrary and irrational” and had asked the government to come back with a roadmap for vaccination. The changed procurement from June 21 does mean that state governments don’t have to procure vaccines themselves or pay more for them.
But this is still not a rollback to phase-two. There, the government was the sole buyer, allocating doses to the state government for free and to private providers at Rs 150 a dose (and allowing them to charge a service fee of Rs100 a dose). Instead, private providers now have a 25 percent share in procurement although with a cap on service fee at Rs 150 a dose. This may dull their enthusiasm a bit but larger numbers should still make it attractive.
But there is one policy change for the private sector. The centre has said that for the private sector, the state government will aggregate their requirements and then distribute it equitably among large and small hospitals. This will mean that even the smaller hospitals that were unable to compete with the larger hospital chains at present will get vaccine supplies more easily. The state governments will now have greater control over the vaccination process in the private sector too.
Will this hasten the pace of vaccination? The main hurdle there has been the supply of vaccines has fallen short of demand and the design of the procurement process only added to the problem. The supply shortage is expected to ease July onwards due to higher supplies of existing vaccines and as new vaccines enter the market. Till then, citizens may find that getting their shots may prove to be a difficult task. But some improvement can be expected, as state governments have greater control over how the 25 percent allocated to the private sector can be utilised.
But there’s another problem that could resurface. As the second wave winds down, the urgency to get vaccinate may also fade away. This hesitancy was visible after the first wave had subsided and could become a challenge going ahead. After all, vaccination of the eligible adult population is the only sure shot way of preventing another wave from taking lives and lockdowns that hurt the economy. By the way, our recently-launched herd immunity tracker helps you keep track of the progress we are making on the vaccination front. If you have not seen it yet, click here.
Investing insights from our research team:
Why M&M Finance offers decent upside?
IndiGo: Optimistic of navigating through tough times
Can the surge in PNB Housing fuel a stock rally in other HFCs?
MTAR Technologies: Structural story intact; continues to deliver good growth
What else are we reading today?
Economic Recovery Tracker | As lockdowns ease, the recovery picks up pace
Global tax deal — India must focus on fine print
Needed, a foolproof formula to hold examinations post COVID
Copper boom: How clean energy is driving a commodities supercycle (republished from the FT)
Technical picks: Vedanta, PowerGrid, GAIL and Rallis (These are published every trading day before markets open and can be read on the app)
Ravi Ananthanarayanan
Moneycontrol Pro
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