A U-Turn on Vaccine Procurement
India's central government will now procure all vaccines for those aged 18-44 and provide them to states for free.
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A U-Turn on Vaccine Procurement
Earlier today (June 7, 2021), at 5 p.m. India Time, Prime Minister Modi addressed the nation and made the announcement many were waiting for: After June 21, 2021, India’s central government would take over the procurement of vaccines for those aged 18-44 and supply those vaccines to the states free of cost.
The decision reverses the earlier policy, which was announced on April 19 and enacted merely month ago on May 1. Under that policy, the center was purchasing 50% of the total vaccines manufactured at any given time, and use those vaccines to only inoculate those over 45, health care workers and frontline workers. The remaining 50% was divided between India’s states and private entities, who would negotiate their procurement directly with the manufacturers, and would be responsible for vaccinating the 18-45 year old group of the population.
However, it was evident that this decentralized policy had some serious problems. As I wrote a few weeks ago:
What all of this has meant is a fractured, inequitable, and largely broken procurement system of vaccines for the large segment of India’s population that is aged 18-44.
By putting states in charge of vaccinating the population aged 18-44, India’s central government has added 36 additional entities (India’s 28 states and 8 Union Territories) to the market to procure vaccines, thereby allowing vaccine manufacturers to play states off against each other as they face to acquire vaccines, giving these manufacturers a a significant amount of leverage.
Moreover, the limited notice of 11 days before this policy went into place meant that most states had very little time to negotiate prices, much less build up their own stockpiles of vaccines. Some states publicly noted that they were told by vaccine manufacturers that acquiring doses would be difficult since the manufacturers were still fulfilling orders from the central government.
Finally, the central government’s decision to place orders for only a limited number of vaccine doses - between January and May 2021, the central government only purchased a total of 350 million doses of Covishield and Covaxin, not even enough to vaccinate 20% of the country's population - has meant that whatever small amount of doses the states were able to procure to vaccinate the population aged 18-44 had to be diverted to ensure that there were enough second doses for those who had already received one shot.
In recent days, the Supreme Court of India, as part of a suo moto case on the government’s COVID-19 vaccination policy, described the governemnt’s approach to vaccinated the population aged 18-44 as “prima facie, arbitrary and irrational” (see page 18 here).
In short, while what India needed was a centralized procurement of vaccine doses with a flexible and decentralized approach to distribution, what the original policy did was create a decentralized procurement policy with distribution rules - such as who could receive vaccines and by which entity - was centrally determined.
The new announcement today by Prime Minister Modi reverts India back to a model of centralized procurement, wherein the center will procure 75% of all vaccines manufactured to vaccinate the entire population above the age of 18 free of cost. The remaining 25% remains open to private entities, but they can charge only a fixed price of Rs. 150 ($2.06) per dose.
This decision is welcome. The new policy will benefit India’s broader vaccination campaign as India looks to tamp down a second wave of infections and prevent a future third wave. Moreover, as India looks to increase its supply of vaccine doses by importing vaccines and negotiating with foreign vaccine manufacturers, issues such as emergency use authorizations, pricing, and supply of doses will be centrally negotiated.
However, the policy leaves open a few important questions. Why did the government stop at centralizing procurement of only 75% vaccine doses? Why not go all the way to 100%? Why the need for two tracks to vaccination - one that is free of cost, and one that allows those with resources and money to pay Rs. 150 per dose and get the vaccine from private entities? Would such a dual approach not create inequities compared to an approach that ensures vaccines free of cost to all?
These questions do not take away from the fact that this course reversal is a positive step. The only regret is that it wasn’t the original policy from the get-go. Doing so could have prevented some of the logistical challenges India’s vaccination campaign has faced since May. However, the hope is that the new policy can stem the tide of the ongoing second wave of infections, and keep India on track to vaccinate as much of its population as it can as the government targets the ambitious goal of vaccinating all Indians by December 2021.
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News Roundup
Prime Minister Modi spoke on the phone with U.S. Vice President Kamala Harris on June 3, 2021. The call preceded the announcement by the U.S. government that it would begin distributing surplus vaccines to other countries. Per the announcement, the United States will begin distributing the first 25 million doses of vaccines of a total of 80 million doses, and will be allocated as follows:
“At least 75 percent of these doses—nearly 19 million—will be shared through COVAX, including approximately 6 million doses for Latin America and the Caribbean, approximately 7 million for South and Southeast Asia, and approximately 5 million for Africa, working in coordination with the African Union and the Africa Centres for Disease Control and Prevention.”
“The remaining doses, just over 6 million, will be shared directly with countries experiencing surges, those in crisis, and other partners and neighbors, including Canada, Mexico, India, and the Republic of Korea.”
The Government of India has signed an agreement with the Indian pharmaceutical company Biological E to purchase 300 million doses of its yet unnamed COVID-19 vaccine for an advance payment Rs. 1,500 crore ($205.8 million). The vaccine has not yet been approved for use by Indian authorities. However, in a statement announcing the agreement, India’s Ministry of Health and Family Welfare stated that “The COVID-19 vaccine of Biological-E is currently undergoing Phase-3 clinical trial after showing promising results in Phase 1 and 2 clinical trials.”
The Union Cabinet approved The Model Tenancy Act for circulation to all States and Union Territories in India so that they will adopt the model act in their jurisdictions by either enacting fresh legislation or amending existing rental housing laws to mirror the Model Act. A copy of the Model Tenancy Act is available here.
Prime Minister Modi decided in a review meeting with relevant stakeholders that the Class XII (Grade 12) Board Exams under the Central Board of Secondary Education (CBSE) will be cancelled in light of the second wave of COVID-19 infections in India, and tasked the CBSE with taking steps “to compile the results of class XII students as per a well-defined objective criteria in a time-bound manner.”
Prime Minister Modi will virtually participate in the G7 summit scheduled to be held next week from June 11-13. Prime Minister of the United Kingdom Boris Johnson, who is hosting this year’s G7 Summit, had earlier invited Prime Minister Modi as a Special Invitee. However, Prime Minister Modi decided not to attend the summit in person following the second wave of COVID-19 infections in India.
The Reserve Bank of India’s Monetary Policy Committee (MPC) announced on June 4, 2021, that it would keep the benchmark interest rate (the policy repo rate) unchanged at 4%.
This marked the sixth consecutive meeting that the RBI’s Monetary Policy Committee has kept the interest rate unchanged following an “off-cycle” rate cut in May 2020, when the MPC cut rates to historic lows to support India’s economic recovery following the COVID-19 pandemic.
The Governor of the RBI, Shaktikanta Das, stated during the announcement that the RBI will continue to maintain an “accommodative stance” for “as long as necessary to revive and sustain growth, while ensuring inflation remains within target.”
The Government of India has issued Operational Guidance for Production-Linked Incentive Schemes in two sectors: Pharmaceuticals and Telecom and Network Equipment
Companies interested in the PLI scheme for Pharmaceuticals can submit their applications between June 2, 2021 and July 31, 2021.
Companies interested in the PLI scheme for Telecom and Network Equipment can submit their applications between June 4, 2021, and July 3, 2021.
The Ministry of Defense has released a second “Positive Indigenisation List” or a list of defense-related products that the Government will not import in order to promote self-reliance and boost India’s defense exports. This list emphasizes “weapons/systems which are currently under development/trials and are likely to translate into firm orders in the future,” and includes 108 products such as “complex systems, sensors, simulator, weapons and ammunitions like Helicopters, Next Generation Corvettes, Air Borne Early Warning and Control (AEW&C) systems, Tank Engines, Medium Power Radar for Mountains, MRSAM Weapon Systems.” The complete Second Positive Indigenisation list is available here. This list will be implemented progressively with effect from December 2021 to December 2025.
The Ministry of Labour & Employment has established an expert group to make recommendations to the government on the fixation of Minimum Wages and National Floor Minimum Wages. The group will be tasked with understanding international best practices on the wages and creating scientific criteria and methodology for fixation of wages in India.
The Ministry of Personnel, Public Grievances, and Pensions announced on May 31, 2021, that “no Government servant, who, having worked in any Intelligence or Security-related organisation… shall, without prior clearance from the Head of the Organisation, make any publication after retirement.”
The Office of the U.S. Trade Representative announced that, following the conclusion of the one-year investigation of India’s Digital Service Taxes under Section 301 of the U.S. Trade of Act of 1974, “the final determination in those investigations is to impose additional tariffs” while at the same time “suspending the tariffs for up to 180 days to provide additional time to complete the ongoing multilateral negotiations on international taxation at the OECD and in the G20 process.”
The Defense Acquisition Council, headed by Defense Minister Rajnath Singh, announced that it had approved the Request for Proposals (RFP) for the indigenous construction of six conventional submarines equipped with the state-of-the-art Air Independent Propulsion system at an estimated cost of Rs 43,000 crore ($5.90 billion) under Project P 75 (I) of the Strategic Partnership (SP) Model. The announcement came as separate reports stated that “India’s lone nuclear powered attack submarine, the INS Chakra is heading back to Russia with the lease agreement drawing to an end and its successor is expected to take at least five years to be ready for induction into the Indian Navy.”
Five to Read
From cogent analysis to potentially big news that you should keep an eye on, here are a few commentaries and other pieces of writing not about COVID-19 and India’s second wave:
Dr. Rudra Chaudhuri, Director of Carnegie India, argues: “The period that was broadly described as engagement” with China, argued Kurt Campbell, the coordinator for Indo-Pacific affairs in the US National Security Council “has come to an end.”... It is too early to determine what the general approach, outlined above, and the more specific task of competing with China actually means for India. For now, three quick conclusions might be merited. All of these are in practice, at some level, currently. First, as India deepens its relations with the Biden administration, it ought to continue to actively, and even urgently, further develop economic ties with the EU and the UK. Second, continue to focus on the Quad and invest greater capabilities in it. At the same time, do more with plurilateral groupings in the Indo-Pacific, such as the India-France-Australia trilateral. Lastly, in time – and when and only if the de-escalation on the border with China commences in earnest – discover India’s way to what will surely be a more competitive relationship with China.”
Rukmini S., a Chennai-based journalist, writes: “A worrying gender gap is opening up in India’s vaccination programme, a Mint analysis of official data shows. In all but three states, substantially more men than women have been vaccinated... The reasons for India’s gender gap are as yet unclear. Some government officials have reported greater difficulty in contacting women and greater vaccine hesitancy among women.”
Shankkar Aiyar, a Senior Visiting Fellow at IDFC Institute, argues: “Currently, the process of disinvestment is overseen by a Core Group of Secretaries. This template falls between necessary and sufficient conditions —systemic oversight without political push. Thomas Sowell, the noted economist observed, “it is hard to imagine a more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.” It is no secret that the one brief period when the government succeeded in privatisation was under Atal Bihari Vajpayee when the process was led by an empowered minister, namely Arun Shourie. For intent to progress beyond mention, the government needs to empower and install a minister committed to championing the cause.”
Dr. Aparna Pande and Amb. Hussain Haqqani, both from the Hudson Institute in Washington, D.C., write: “As they plan their post-Covid recovery, South Asia’s militarily powerful countries, like India and Pakistan, as well as their smaller neighbours, might want to pay greater attention to the needs of their people. Ignoring public health while pursuing power and pre-eminence results in the type of crisis that the subcontinent is currently going through. And then, during an emergency, a cash-flush malign power like China gets an opportunity to expand its influence.”
Dr. Avinash Paliwal, Senior Lecturer in International Relations at SOAS, University of London, argues: “For the first time since the late 1980s, India is facing acute, simultaneous, instability on both its eastern and western fronts. In Myanmar, the February 1 coup structurally dislocated nascent constitutional reforms and electoral politics. The move has intensified fighting by ethnic armed organisations (EAOs), and sparked decentralised urban warfare against the military. In Afghanistan, the beginning of the departure of the United States (US) in May has emboldened the Taliban. Intent on creating an Islamic Emirate, the Taliban is seeking to exploit fissures within the Kabul government, intensify military pressure against Afghan security forces, and create panic among the civil elite through targeted assassinations. Caught off-guard with a deadly second wave of the Covid-19 pandemic, weak economic performance, domestic political polarisation, and China’s territorial ingress in Ladakh, India faces intense stress.”
Thanks for reading this latest edition of Indialogue. Please let me know if you have any thoughts or feedback by emailing me at aman@amanthakker.com.