By Himanshu Sikka
The last two years have tested the resilience of our health sector. We have seen it crumble during the second wave and emerge like a Phoenix, reborn from its ashes, implementing the world’s largest vaccination program. Now, as we brave the third wave and prepare for many more to come, it’s time to incentivize healthcare like once we did for the automobile sector. After all, healthy people are the true engines that push the economy. No government in the past has been as well-positioned as the current one to do so. The economy is recovering (barring some jitters); the global focus is there expecting India as a mass provider of healthcare paraphernalia; plus given that five of the States are in election mode and 2-3 more coming up in the year, it also allows being populist and doing some good at the same time.
If we look at the last few budgets, while there have been big announcements (Ayushman Bharat – PMJAY, Health Infrastructure Mission, National Digital Health Mission, Emergency Covid Response Plan, etc.), the on-the-ground implementation has not been up to expectations. Post budget attempts by the Reserve Bank of India byways of INR 50,000 crore Term Liquidity Facility to Ease Access to Emergency Health Services have also seen limited uptake due to lethargic public sector bank capacities and systems.
All this has meant that the promise the health sector holds, the light one can see at the end of the tunnel, remains a torch where we need many floodlights. So, with this budget, can the government help the health sector out of this tunnel?? The answer is YES if concentrated efforts are made.
Affordable Capital: One of the big need areas is affordable capital for our healthcare enterprises to grow. For start-ups and innovators, capital availability for expansion and scale-up has been lacking. They do not fit the bill for PSU/Private banks and can’t afford the 15+% that NBFCs demand. Even for large players, the expansion comes at a price many cannot afford unless they just focus on the ones who can pay. This leaves a large part of the country without access to affordable healthcare. In the budget, the government needs to enable mechanisms where CSR and Philanthropic funds can invest in such businesses. Blended finance has huge potential for enabling social outcomes, but that needs regulatory reforms that allow traditional grant funding to support sustainable businesses. USAID supported SAMRIDH Healthcare Blended Finance Facility in technical partnership with National Health Authority, NITI Aayog, Atal Innovation Mission, Principal Scientific Advisor’s office along with financial institutions like IndusInd Bank, Axis Bank and Caspian Debt is working to create a model in this space, which needs replication and expansion.
Tax Relief: Another area that the government needs to look at seriously to encourage funding is tax relief. This can be in three ways: 1) Tax holiday for new health care set-ups in rural areas/tier 2&3 towns as well as for setting-up new manufacturing capacity; 2) Reduced levels of Long-term Capital Gain taxation for Alternate Investment Funds investing in healthcare and other priority areas like education; and 3) Making any expenditure done on skilling/health education deductible for taxable income.
Skilling and Capacity Enhancement: The allied health workforce in the country remains an area of grave concern with a deficit of over 6 million skilled professionals in both preventive and curative space. The budget needs to incentivize the sector and open new avenues of funding to bridge the gap. Tax relief for this space, as mentioned above, is one way. The other big reform that the government needs to enable is to provide these professionals a special status and bring them under the purview of a National Healthcare Provider Insurance Programme, which should cover all healthcare allied professionals and doctors. Government should make a premium payment for the first 3-5 years from the exchequer. Concentrated effort should also be made to bring wage reforms that make these areas an attractive career path
Research and Development/Export Incentives: To encourage enhancement of domestic research and manufacturing capacity, the government should look at 7providing special tax breaks and incentives for any expenditure towards R&D in healthcare space and export-oriented units. These incentives should be over and above what currently exists in some areas. The government should consider fixed period zero-tax slabs for new drug/product discovery and lifesaving drugs/products.
Encourage Tele Health: The pandemic has already seen an upspring of telehealth solutions. To ensure continued interest and investment in this space, the government, through the budget, should consider bringing telehealth under a zero-tax slab and reduce LTCG for investment in telehealth businesses.
(The author is Practice Lead – Health, Nutrition and WASH I Chief Strategy and Diversification Officer I IPE Global Limited. Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)