India's 8 poorest states may spend 30% health budget on Covid vaccination

India's most socioeconomically backward states may have to spend as much as 30% of their health budgets to procure COVID-19 vaccines for their populations, an IndiaSpend analysis of population and state budget data has found.

These eight states--Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Uttarakhand and Uttar Pradesh--are among 20 that have announced COVID-19 vaccination free of cost for persons aged 18 to 44 years. They would have to shell out as much as 23% if they were to procure only Serum Institute of India's (SII) Covishield, and up to 30% for Bharat Biotech's Covaxin, our analysis shows. Covishield and Covaxin are the two COVID-19 vaccines already being administered, among three approved for use in India. While the Centre had clarified that it would procure vaccines at Rs 150 per dose from vaccine manufacturers, Covishield is being supplied to state governments at Rs 300 per dose and Covaxin at Rs 400 per dose.

Until April 30, India had been vaccinating only registered healthcare workers, frontline workers and those above the age of 45. Then the central government expanded vaccine eligibility to all adults. The Centre would continue to procure 50% of manufacturers' vaccine stocks for vaccinating the former groups, and manufacturers could sell the remaining 50% of their vaccine stock to state governments and to private hospitals, per the new policy.

The burden of procuring and administering vaccines for those aged 18 to 44 was thus shifted to the state governments, and to those individual households that can afford private vaccination.

The additional financial burden comes as all eight states, except Odisha, have reported a revenue deficit in their revised budget estimates for 2020-21, according to a PRS Legislative Research brief. States are facing shrinking revenues and increased expenditure on social safety nets due to the COVID-19 pandemic, IndiaSpend reported in April 2021.

Moreover, the central government has used only 8.5% of the Rs 35,000 crore budgetary allocation for COVID-19 vaccination for the financial year 2021-22. The remaining Rs 32,000 crore is more than enough to procure vaccine doses for India's entire adult population, our analysis found.

Few Indians can afford the cost of vaccination in private hospitals, especially with the COVID-19 pandemic-induced recession pushing millions into poverty. But manufacturers have been incentivised to provide more vaccines to private hospitals, experts point out, with the central government's new policy permitting them to charge higher rates to private healthcare facilities. Covishield is being supplied to private hospitals at double the rate for state governments, and Covaxin thrice the state government rate, currently.

"Under the new policy, the ability of a state to procure vaccine doses and the ability of individuals within a state to afford it would largely determine the ability of each state to vaccinate its population," Rijo John, a health economist and adjunct professor at Rajagiri College of Social Sciences, Kochi, told IndiaSpend. "This would inevitably create an unequal distribution of vaccines," he added.

Revenue-deficit states saddled with additional COVID-19 vaccination burden

Governments of the eight socio-economically backward states will have to spend between 9% and 30% of their health budgets just on procuring COVID-19 vaccine doses, depending on which vaccines they acquire, our analysis shows.

To vaccinate its nearly 100 million population of 18- to 44-year-olds with Covishield, India's most populous state of Uttar Pradesh will have to spend nearly Rs 5,715 crore ($775 million)--18% of its health budget for 2021-22. If it were to procure only Covaxin, the cost would increase by nearly Rs 2,000 crore to Rs 7,620 crore ($1 billion)--23% of its health budget.

Bihar would have to spend the largest proportion of its health budget to vaccinate its 49 million eligible population--24% for Covishield doses and up to 30% for Covaxin.

Uttarakhand may spend the least--9% of its health budget for Covishield and 12% for Covaxin.

These amounts are just for procuring the doses. The supply chain, training, transportation and follow-up process will further add to the costs, Amir Ullah Khan, health economist and adjunct professor at the Telangana government's Marri Channa Reddy Human Resource Development Institute in Hyderabad, told IndiaSpend. "There is no way these states will be able to buy vaccines unless they withdraw expenditure from all other areas," said Khan, "For example, Uttar Pradesh will need upwards of Rs 15,000 crore to vaccinate its population. And its total provision for healthcare infrastructure, medical colleges, Ayushman Bharat and National Rural Health Mission is exactly the same. We will therefore see the state shift spending away from tuberculosis, malaria, maternal and child health and other focus areas."

This additional expenditure comes at a time when most states are reporting a revenue deficit for financial year 2020-21, a period matching the first year of the pandemic in India, and an attendant economic recession. All the analysed states, except Odisha, reported a revenue deficit in their revised estimates for 2020-21. Bihar reported a revenue deficit of Rs 5,187 crore (0.8% of state GDP). Rajasthan and Chhattisgarh reported the highest revenue deficit, in proportion to their respective state GDPs.

Free vaccination announcements by states are vacuous without timelines and procurement plans, say experts. "It is easy to make such a claim but the state governments have not provided a timeline for it. Are they going to vaccinate everyone this year or by 2025 or 2030?" said John, adding, "These kinds of statements really don't mean anything unless and until you can commit a timeframe and without any substantiating evidence showing that you have placed orders for procurement."

IndiaSpend has asked the health departments of all eight states how they plan to finance the free vaccination effort, and will update the article if they respond.

Enough money with the central government to buy vaccines for all adults

The central government allocated Rs 35,000 crore ($4.7 billion) for vaccination in the 2021-22 budget, which was expected to cover 500 million people, about 37% of the population. As of May 3, 8.5% (Rs 2,993 crore or $405 million) has been spent, per data released by the government.

The government had spent Rs 350 crore ($47 million) to procure 16.5 million doses of Covishield (11 million) and the indigenious Covaxin (5.5 million) and released Rs 123 crore ($16.7 million) to states and union territories for the vaccination programme, IndiaSpend reported on February 16, 2021.

In addition, the government spent Rs 1,732.50 ($235 million) crore for 110 million doses of Covishield and Rs 787.50 crore ($107 million) for 50 million doses of Covaxin on April 28, 2021. This is expected to last until July.

Thus, the central government still has nearly Rs 32,000 crore ($4.3 billion) left for this year, per this calculation. At the rate of Rs 150 per dose that the central government is paying, this amount can buy nearly 2.1 billion doses, whereas India's over-18 population is 940 million in 2021, requiring 1.88 billion doses. The central government would need to use only 80% of the remaining funds to buy two vaccine doses for vaccinating the entire adult population, our analysis shows.

Cost of getting vaccinated in private facilities beyond the reach of most Indians

Besides state governments, the central government's expanded COVID-19 vaccination procurement policy also allows private hospitals to purchase doses directly from manufacturers, and to set prices for consumers. Currently, both SII and Bharat Biotech are providing doses to private hospitals at higher rates than to state governments. SII set the rate of Covishield for private hospitals at Rs 600 per dose and Bharat Biotech set the rate at Rs 1,200. Given this policy, manufacturers have a financial incentive to divert more stocks towards private hospitals, said John.

The entire course of two doses for people getting vaccinated in private facilities is a minimum Rs 1,200-2,400, just for the doses. Private hospitals also add charges for administering the vaccines. For instance, in Mumbai, Reliance hospital charges Rs 700 per Covishield dose and Nanavati hospital Rs 900. In Gurugram, Max hospital charges Rs 900 per dose of Covishield. For one dose of Covaxin, Manipal hospital in North Goa charges Rs 1,000 and Fortis hospitals in Jaipur and Gurugram Rs 1,250 per dose.

These rates are unaffordable for a large section of the Indian population. The monthly per capita income of an average four-member household was Rs 4,979 in October 2020, seven months after the COVID-19 nationwide lockdown was imposed--a 17% decrease from the level of Rs 5,989 in January 2020, per Azim Premji University's State of Working Report India 2021 (SWI 2021), published this month. The number of individuals who earn less than the national minimum wage threshold (Rs 375 per day) increased by 230 million during the pandemic, said the SWI 2021 report.

The COVID-19 pandemic-induced recession has seen the estimated number of Indian poor (with income of $2/Rs 150 or less a day) increase by 75 million--more than the population of the UK--according to a Pew Research Center analysis from March 2021. Parallely, the middle class shrank by a third, going from 99 million pre-pandemic to 66 million a year into the pandemic.

With less than a third of health expenditure covered by the government, the major burden of India's health costs falls on individual households, per the National Health Account Estimates for 2016-17, the last year for which data are publicly available. Household out-of-pocket expenditure on health made up for 58.7% of the total health expenditure and 63.2% of current health expenditure. One in five Indians fall below the poverty line and more are pushed into poverty every year due to health expenses, according to World Bank data.

India's poorest live in states that are worst affected by the second COVID-19 wave--UP, Bihar, Chhattisgarh, Jharkhand and Assam, added Khan. "These states have crumbling health systems, abysmal numbers of healthcare staff and a supply chain for drugs and vaccines that simply does not work."