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Solving vaccine crisis: Will Government of India lift price cap on private distributors?

By Rit Nanda* 

The second wave of Covid-19 that is battering India at the moment has focussed on two main threads: the responsibility of the government and authorities, and the responsibility of the common person. With respect to the people, undoubtedly, they have become lax in enforcing social distancing and wearing masks. The government did not help with pronouncements proclaiming a premature victory.
More importantly, though, has been the behaviour, or the lack thereof, of those in-charge and their mismanagement of the situation. The election rallies in poll-bound states have been shameful, with incumbents and non-incumbents showing scant regard for people’s lives. Such public behaviour also pours cold water on any messaging that asks people elsewhere to socially distance, when the leaders themselves flout their own dictum.
Allowing Kumbh Mela to proceed is a decision that looks worse in hindsight every day. The centre has belatedly asked devotees not to proceed for other remaining ‘snans’; however, the horse has already bolted because more than open air dips, it is the congregation to one place that spreads the virus. Furthermore, the inaction of central and state governments to prepare for the second wave despite global trends, by improving the dilapidated condition of medical infrastructure, has been shameful.
However, perpetual instructions to stay boxed-in to stay safe, and socially distance whenever one goes out, are bound to anyhow fail in the long-term. Hence, vaccines are the most important tool for any country to fight the virus. 
India is running short of vaccines during this critical stage already. At this perilous juncture, the central government must not fail its citizens. That proposition does not look to bright, though, because the centre is already giving in to demand to stop export of vaccines as the panacea that will help solve this crisis.
The vaccine shortage in India exists because of overall low production, and not low allocation of existing stock. The Serum Institute is struggling now to keep its commitments to international customers. This is an embarrassment for India on a global scale. India is the world’s largest producer of vaccines and many countries were depending on it. From a purely diplomatic perspective, this is a golden opportunity gone begging for India.
China has committed tremendous capital in developing regions to bring them under their ambit and India does not have realistic capital to compete on the same footing. However, China had suffered significant harm to their reputation due to them not being transparent in reporting the spread of the pandemic and India could have stepped into that void by becoming the vaccinator of the world, and especially those developing countries, where both nations are competing for sway. India had the capability to pull this off and they badly mishandled it; now even allowing China to steal a march on vaccine exports.
The central government was initially correct to export Indian produced vaccines to other countries. They should not reverse course and must keep to their assurances so that India is seen as a serious country in global matters. The solution is addressing the local shortfall by ramping up production, instead of hoarding supplies meant for other countries. There are two main areas where the government needs to correct course immediately.
The first is to remove private market intervention. The government, naturally and rightly, wants more people to voluntarily take up vaccination. Hence, they have decided to keep the price artificially low. Since, vaccines are essential and ideally people would want them irrespective of the price, there is a possibility of price gouging and therefore caps have rightly been put in place.
The Serum Institute is struggling now to keep its commitments to international customers. This is an embarrassment for India
However, for private hospitals it has been set at 250 INR, which is extremely low. Contrast this to the initial 4500 INR cap for Civud-19 test, that the Supreme Court allowed to stand for those who can afford it. Those people, who were willing to do tests privately at this price, would also presumably buy a vaccine at this cost. Hence, the cap should be increased to at least that level for private players.
This would allow the producers to earn more from selling their product, which they can re-invest into increasing production. If the cap is set too high, market forces will automatically bring the price down, since free government alternatives exist. The drop in production has been because of reduced capital and this step will help significantly. Poor people will have continued free access from government centres.
The second is spending money to increase production. If despite increasing prices, there is a shortfall in ramping up production, the private players need to be subsidised for that amount. Without burdening the taxpayers, this needs to come from the PM-Cares Fund, which has an express purpose to “encourage research”. Transparency in this fund is therefore vital, because to solicit more contributions, corporations and people need to have a fair idea where the money they had already given so far has been spent and why more money could be required.
There is another prong to this approach. During times of crisis, governments are responsible for marshalling resources. Now is the time for the government to also move away from a monopolistic vaccine production where a single private player is involved to a more open market with a public option as well, for the long-term. With the funds available at the government’s disposal for this pandemic, it must use them efficiently.
Hence, to address the vaccine crisis the government must lift price caps on private distributors of vaccine. It must invest money from the PM-Cares fund to create a surge in production, by allocating more to increase capacity of existing players and to bring newer private and public options into this endeavour. This will enable larger reach of the vaccine to the willing population of India, while simultaneously burnishing its credentials with the wider world, especially the developing population, as a nation that stands by them in the time of need.
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*M.Sc. Energy, Trade & Finance, City University, London; Procurement, Logistics and Human Resource Officer at Indic RMC Pvt Ltd

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