There is a shocking revelation hidden in the government of India’s affidavit to the Supreme Court in the suo moto writ petition in the matter of “Re: Distribution of Essential Supplies and Services During Pandemic”. Contrary to the widely held belief, state governments can directly purchase only 25% of the total vaccine production after May 1. The Centre’s public stance till now has deliberately been misleading.
Until April 19, the Centre had been procuring all vaccines and allotting them to states. In all official statements after April 19, government spokespersons held that the new “Liberalised Pricing and Accelerated National Covid-19 Vaccination Strategy” sought to divide the available monthly doses into two parts. The first 50% would go to the Centre but the second 50% would be directly purchased by the state governments and private hospitals. The prices were differently fixed for the Centre, the state governments and private hospitals.
The impression given was that while the second 50% of the doses would be shared across state governments and private hospitals, state governments would receive priority. There was a clear reason for policy to do so. Prices in state government vaccine centres were lower than in private hospitals, and many states were providing vaccines free of cost.
Hence, it would be to this channel to which poorer households would flock. It was then natural to reason that more vaccines would flow to state government centres than to private hospitals, which essentially cater to the rich.
The affidavit tells us that this will not be the case. State governments will have no priority or advantage over private hospitals. The actual sharing ratio would be 50:25:25 between the Centre, state governments and private hospitals. In other words, for every 100 doses released by the Central Drugs Laboratory each month, only 25 doses can be directly purchased by state governments while another 25 doses are specifically set apart for private hospitals. The affidavit states that:
“Out of the 50% quota allotted to each state, the division is made on 50%/50% basis. In other words, from out of the 50% allotted to the state, 50% will go to the State…and the balance 50% will go to the private sector based upon the contracts between private sector and vaccine manufacturers.”
In fact, this latest twist in vaccine distribution is in alignment with the demands of the two monopolistic vaccine producers. After April 19, the Serum Institute of India had publicly expressed the view that it would prefer selling Covishield to private hospitals at higher prices (Rs 600 per dose) than to state governments at lower prices (Rs 400 per dose, later reduced to Rs 300 per dose). SII’s Adar Poonawalla had said in an interview to CNBC-TV18 that:
“I don’t know why there is such a hullabaloo over every state complaining about this price, because it is their option and not their compulsion…In effect, the states don’t really need to buy anything if they don’t want to…There are enough private hospitals to take care of each state... no state really needs to spend any of their money.”
The new affidavit shows that the Centre has, once again, succumbed to the demands of private vaccine companies to earn super-profits. Private hospitals have been placed on an equal pedestal as state governments and provided with an assured quota of 25%.
A suspicion that state governments would be sidelined was first raised in an article I had co-authored in the Indian Express on May 6. Our argument was the following. On May 3, in an official statement, the Centre had released a set of figures related to the availability of vaccine doses and projected inflows of vaccine doses over the three months of May, June and July 2021.
In Table 1, I have put together and summarised the numbers.
This table tells us that Centre would have an entitlement of 21.4 lakh doses per day over May, June and July. The total production capacity of vaccines in India does not exceed 28 lakh doses per day. Thus, of the 28 lakh doses per day, the government would buy about 76.4%. Only 23.6% would be left for state governments and private hospitals.
Seen in this perspective, after setting aside a part of the production for exports and private hospitals, the share of doses left for the state governments was likely to be less than 23.6% of overall production.
Our hunch has now been confirmed by the affidavit in a different way. The claim of the state governments has now been statutorily confined to 25%. Such an allotment flies in the face of the affidavit’s claim that the new vaccine policy is “just” and “equitable”. It is neither.
In the affidavit, the Centre has also stated why it deregulated vaccine prices on April 19. It says that the new policy,
“…aims at liberalised vaccine pricing and scaling up of vaccine coverage to incentivise vaccine manufacturers to rapidly scale up their production and to attract new vaccine manufacturers… Herein, differential pricing is based on the concept of creating an incentivised demand for the private vaccine manufacturers in order to instil a competitive market resulting in higher production of vaccines and market-driven affordable prices for the same.”
Thus, the Centre is inducing vaccine producers to raise supply through differential and market-driven prices. Yet, the same affidavit claims rather audaciously that “it is ensured that the two vaccine manufacturers are not unduly enriched from out of public money”. This too appears to be wrong.
A recent report in Quartz argued that the estimated production cost of a Covid vaccine in India ranges between Rs 30 and Rs 80 per dose. If this is correct, the regulated price of Rs 150 per dose already provided a profit of 188% to 500% per dose. At the same time, Covishield’s liberalised price of Rs 600 per dose for private hospitals provides the Serum Institute a profit of 750% to 2000%. Covaxin’s liberalised price of Rs 1,200 per dose for private hospitals provides Bharat Biotech a profit of 1500% to 4000% per dose. Not “unduly enriched”? Pray, how?
There is also a clear case of discrimination in the new vaccine policy, given that the burden of deregulation is disproportionately borne by state governments. Even for the latest purchase order placed with the Serum Institute and Bharat Biotech in April, the price payable for the Centre is about Rs 158 per dose for both Covishield and Covaxin. The affidavit admits as much. It says:
“…100% advance of Rs. 1732.50 crore was released to Serum Institute of India (SII) for 11 crore doses of Covishield vaccine for the months of May, June and July. Additionally, 100% advance of Rs. 787.50 crore was released to Bharat Biotech India Ltd (BBIL) for 05 crore Covaxin doses for the months of May, June and July.”
If the Centre pays Rs 158 per dose, state governments pay Rs 300 per dose for Covishield and Rs 400 per dose for Covaxin. There is no reason offered for why states must pay a higher price except that the Centre has placed “large purchase orders”. Yet, the affidavit claims that its policy is “equitable” and “non-discriminatory”. Equality and non-discrimination should not be limited to the prices payable across States. It must be equally applicable for prices payable across Centre and States.
Instead, if the Centre was the single procurer of vaccines on behalf of the states, the advantages of bulk purchase would have become available for everyone in the form of lower prices. The liberalised price policy did away with that possibility by fragmenting vaccine markets and ended up placing undue financial burdens on State governments.
In sum, the new liberalised vaccine policy of the Centre is unjust, inequitable, and discriminatory. One hopes that the Supreme Court takes note of these egregious distortions when it considers the writ petition on May 13.
R Ramakumar is Professor, Tata Institute of Social Sciences, Mumbai.