Replicate the LPG give-it-up model for COVID-19 vaccination

Source: Reuters

The Narendra Modi government has repeatedly promised to inoculate all Indians against COVID-19. The Prime Minister has termed it a ‘national commitment.’

That’s an honourable undertaking but easier said than done. At Rs 250 a dose – the price being talked about for Serum Institute of India’s Covishield vaccine -- the cost of the vaccine for India’s 1.35 billion population would be Rs 33,750 crore. But that’s a conservative estimate.

Covishield is the vaccine developed by the University of Oxford and AstraZeneca. In the UK, the Medicines and Healthcare products Regulatory Agency (MHRA) approved this vaccine a day earlier and has authorised two full doses with the second jab to be given four to 12 weeks after the first.

Therefore, for two doses, the government must earmark at least Rs 67,500 crore. That is a lot of money.  And this is just the cost of procurement from Serum Institute.  Add to this the logistics costs led by cost of ice-boxes and hospital expenses. The final figure could be truly mind-boggling.

This is an additional expense for the government at a time when it is struggling to raise revenues thanks to the COVID-induced economic slowdown. The International Monetary Fund has projected that the combined fiscal deficit of the Centre and states could touch as much as 13.1 percent this financial year and remain above 10 percent for the next two years.

What’s the way out?

One solution could be to get the rich and affluent to cross-subsidise the poor. An Oxfam report says that   one percent of Indians control 40 percent of the nation’s resources. They definitely do not need the government’s indulgence.  And there would be a lot more who would in their anxiety to beat the dreaded virus be ready to jump the queue.

Remember that the priority for vaccine shots is going to be in the following pecking order: health workers, senior citizens especially those with co-morbidity, infants etc followed by the working population constrained to work in cloistered conditions indoors. This could well push the others to getting the vaccine much later in the day.

It is well possible that some of these people may want to jump the queue.  From these people, the government can jolly well charge say Rs 5000 per shot.  Lest the creamy layer elbows out the indigent, a minuscule portion of the stockpile alone should be thrown open to the rich and the restless.

Currently, Serum Institute has said that it is has a stockpile of 40 million vials.  Out of this, say, one million can be offered at the higher price to those wanting to jump the queue. How does the math work? To get 40 million doses at Rs 250, the government must pay Rs 1000 crore. But by selling 1 million doses at Rs 5000, it gets Rs 500 crore, thus reducing the burden on the exchequer by half.

This is discriminatory pricing that is of a piece with the existing distribution regime. Many states have reserved access to their highly subsidized Public Distribution System (PDS) of food grains, sugar and pulses only to the BPL (below poverty line) segment.

In any case, these cross-subsidy models exist in other areas. Millions of householders have forgone cooking gas subsidy through the Give-It-Up campaign. We have seen large-heartedness and concern for the nation’s parlous finances underpin senior citizens’ gesture in giving up their 25 percent concession offered by the Indian Railways.

Yes, these are altruistic measures. As far as the COVID vaccine is concerned, the higher price is actually a price for jumping the queue. But the principle stands - it will reduce the burden on the national exchequer.

The cross subsidy model must be extended to the imported brands as well. In the US, Pfizer has priced its vaccine at $19.5 (Rs 1,440) per dose.  The landed cost in India of its vaccine would be much more. While pharma companies have taken pains to assure the Indian government of their altruistic concerns, at the end of the day no drug maker should be expected to bear a loss, because that will disincentivise innovation, and research and development. The loss if at all has to be borne by the government or should be passed on to the rich and the restless.