As the second wave of COVID-19 sweeps the country with alarming speed and severity, the union government has announced a liberalised and accelerated Phase 3 strategy of COVID-19 vaccination. Under this scheme, all persons above 18 years of age will be eligible to get COVID-19 vaccine doses from 1 May 2021. This means that the total size of the population that will now be eligible for vaccination would be 841.95 million out of the total population of 1,332.69 million. India Ratings and Research’s (Ind-Ra) calculation shows that this may cost INR671.93 billion, of which the union government will incur INR208.70 billion and state governments together will incur INR463.23 billion.

The union government has said that under this scheme, the pricing, procurement, eligibility and administration of coronavirus vaccines will be made flexible. While the vaccination drive will continue as before, providing free vaccination to priority populations such as healthcare workers, frontline workers and population above 45 years of age, states and union territories have been allowed to procure additional COVID-19 vaccine doses directly from the manufacturers and open-up vaccination to people above the age of 18 years. As a result, Indian vaccine manufacturers would now be supplying 50% of their production to the Indian government and the balance 50% would available for procurement by the state governments and the open market.

Figure 1
Cost Already Incurred by Union Government for Vaccine Procurement

Item

(INR billion)

Price of central governments initial purchase of 110 million COVISHIELD doses @INR236/dose (incl. GST)

25.96

Second central governments order of 100 million COVISHIELD doses @INR236/dose (incl. GST)

23.60

Price of central governments initial purchase of 5.5 million COVAXIN doses @INR243.67/dose (incl. GST)

1.34

Total for 214 million

50.90

Source: Press Information Bureau, Ind-Ra

 

Figure 2
Assuming Two Doses of Vaccines @ INR400/dose for New Vaccine Procurement & 5% Wastage

Item

(INR billion)

Cost to central government @ INR400/dose of two doses to population aged 45 years and above (size of population: 238.43 million) and aged 18-44 years in union territories ((size of population: 5.58 million)

208.70

Cost to states of two doses to population aged 18-44 years @ INR400/dose (size of population aged 18-44 years: 463.23million)

463.23

Total

671.93

Source: Serum Institute of India, Ind-Ra


 Figure 3

 

Of the total requirement of vaccines, a sum of INR50.90 billion has already been spent for procuring 214 million doses; thus, the remaining amount required to be spent for procuring 1,554 million doses would be INR621.03 billion. This is not a big amount as INR671.93 billion works out to be just 0.36% of GDP. If we split it between the union government and state governments, then the fiscal impact on the union budget would be 0.12% of GDP and on the state budgets would 0.24% of GDP. The maximum impact is likely to be on Bihar (0.60% of GSDP), followed by Uttar Pradesh (0.47%), Jharkhand (0.37%), Manipur (0.36%), Assam (0.35%), Madhya Pradesh (0.30%) and Odisha (0.30%). 

Since the antibodies generated by these vaccines are likely to last for 12-18 months, this expenditure would be a recurring expenditure on union and state budgets. However, many states such as Kerala, Chhattisgarh, Bihar and Madhya Pradesh have already announced that the government will bear the cost of vaccination. Vaccinations by large corporate groups will reduce pressure on state/central budget. 

Ind-Ra believes given the magnitude of the problem and the economic cost the second wave of COVID-19 pandemic is likely to inflict on the economy, it is too small an amount. However, more than the money spent, the critical factor would be how soon the desired level of vaccination can be achieved. Therefore, the decision to allow the restricted emergency use of Russian vaccine Sputnik-V and other vaccines approved by the US, EU and WHO is another step in the right direction. This will only accelerate the vaccination effort in the country.
The first batch of Sputnik V is expected to be delivered to India by April-end.    

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Analyst Names

  • Dr. Sunil Kumar Sinha

    Principal Economist and Director Public Finance
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    Dr Devendra Pant

    Chief Economist and Head Public Finance
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    Amit Jain

    Analyst
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