India’s National Vaccine Policy has been through various ebbs & flows over the course of the past few months. The procurement policy witnessed several iterations itself – from centralised to decentralised to again being centralised. While issues like market fragmentation and supply constraint have been resolved to an extent, new issues have arisen in the form of urban-rural divide, gender divide and variation across states in vaccine coverage.
Instead of free-riding on the approval & trials of vaccines approved in OECD countries, India opted for self-reliance. This meant that the burden of supply for an adult population of about 950 million was placed on just two companies – Serum Institute & Bharat Biotech. While the procurement process was initially centralised, the Centre gave in to the demands for decentralisation of procurement in April, after coming under heat for its unpreparedness during the disastrous second wave. The liberalised pricing policy pitted states against each other & fragmented the market. States had to purchase vaccines at higher prices, a move derided by most states. In addition, many states decided to provide free vaccines for political gains. Some effectively earmarked 30% of their health expenditures, redirecting money from other development schemes. Many states floated global tenders, but the entire decentralised process turned out to be a dead-end because of financial constraints, price caps, & overall shortage in the global market. Fortunately, the Union Govt. reverted to the erstwhile centralised policy on June 21st.
Was State Intervention Needed?
While competition and prices are important for efficient functioning of the market, vaccine self-reliance demanded state intervention. The state became indispensable for ensuring large scale procurement and last-mile delivery.
With the adoption of a self-reliant policy, free market procurement became infeasible due to simple economics: the supply of vaccines is inelastic. This means, an increase in prices will not lead to a proportionate increase in supply in the short run due to production constraints. The unintended consequences of reliance on indigenous vaccine makers created a duopoly of SII & Bharat Biotech that amplified supply issues.
During the short-lived liberalisation of vaccine policy, one could argue that India would have become the world’s largest producer of vaccines, but the case of Covid-19 vaccines is completely different because of the uncertainty and urgency of the situation.
Lastly, vaccine markets are susceptible to market failure because the marginal social benefit is more than private benefits. This creates a positive externality and state intervention to finance the positive externality is the suggested policy.
Where did State Intervention Go Wrong?
The initial restriction on private procurement and distribution by the state led to unfortunate consequences. This goes to show that even when state intervention is needed, the state has to be controlled, coordinated, and limited in its area of interference. The push for domestic vaccines and the inability to successfully negotiate (to this date) with foreign players like Pfizer & Moderna hasn’t helped the case.
In addition, there was a demand by private buyers and willingness on the part of private sellers to sell at a competitive price; the spontaneous order that would have resulted from this would have ensured better coverage especially in the urban agglomerations. Given India’s limited state capacity, this would have helped the government in catering to the vulnerable sections of the population more effectively.
This was evident when the restriction was removed in May. Private hospitals, residential societies were quick to organise vaccination camps at competitive prices. For example, in Bengaluru, nearly half the doses were given in private hospitals. While most big cities have covered a substantial amount of their population, a considerable amount of people, especially those belonging to low-income groups, remain unvaccinated. For instance, in Dharavi in Mumbai, only 11% are inoculated. Policymakers have tried to address the issue by making vaccination mandatory for entry into public transport, malls, etc. The measure is bound to fail because the bigger problem within low-income groups isn’t vaccine hesitancy but the shortage of free vaccination slots in large cities. The rising load of pending second doses has only added to the stress on the government vaccination centres.
Daily administration of doses has also been scaled up in rural India. While vaccine hesitancy is not as bad as once predicted, the issue remains. The reasons vary from village to village, with religion, misinformation and an absent sense of urgency having a role to play. Local governments have to be proactive in ensuring that the right incentives are provided to nudge people to get vaccinated, wherever needed. In Maharashtra’s remote village of Janefal, through bottom-up approach and confidence-building measures, 100% of the eligible population has been vaccinated. A major role in this was played by the ASHAs and local leaders. This clearly indicates that the national policy would be successful when localised policies are successful. This is particularly true for rural India, where quality of healthcare services and infrastructure remains well behind its urban counterparts. It is paramount for policymakers to address the structural issues in the rural health sector, and the socio-cultural & economic constraints that are deep-rooted. The problems lie in the system, and not the people.
Seven months since India’s vaccination programme took off, more than 60 crore doses have been administered in the country. While it’s a commendable number, even more so given India’s limited state capacity – the pace (current average of 58.46 lakh daily for the month of August) is nowhere close to that required (average of 1 crore daily) to fully vaccinate the target adult population by December 2021.
The challenge that remains to be seen is whether the current pace can be sustained and improved upon, quick enough to dampen the effects of an impending third wave. The majority of the government’s year end projections are based on vaccines that are yet to arrive in the market. The emergency approval, pricing, as well as supply constraints of these vaccines is yet to be seen. Another challenge to be tackled is the inequitable distribution of vaccines be it on gendered lines or economic lines. This can only be effectively addressed through local governments, by capitalizing on human resources (volunteers, local leaders, ASHAs, etc.) and by ramping up the supply chain infrastructure. With a substantial distance covered (50% of adults jabbed with 1st dose), and an even longer path yet to traverse, it remains to be seen what swerves the vaccine policy will take.
The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.