Social infra: Viability gap funding boost may help create 45k hospital beds

In the fourth tranche of her stimulus announcements, Finance Minister Nirmala Sitharaman on Saturday announced an increase in viability gap funding (VGF) for development of social infrastructure to 30 per cent.

For the creation of social infrastructure projects supported by the central government, states or statutory bodies, the government made a provision of Rs 8,100 crore, which will be in the form of VGF.

For other sectors, existing support in terms of VGF of 20 per cent each from the government, state or statutory bodies shall continue, Sitharaman said.

Hospitals are a key part of social infrastructure now with the coronavirus pandemic raging across the country.

Kapil Banga, ICRA analyst said that back-of-the-envelope calculations show that at 30 per cent rate, Rs 8,100 crore corpus can fund investments worth Rs 27,000 crore. If we assume that the entire tranche goes towards creating hospital infrastructure and considering the cost per bed at Rs 85 lakh or so, this can potentially create 32,000 beds across the country.

If it is targeted at smaller centres, then assuming a cost of Rs 60 lakh per bed, this could create 45,000 beds. In metros, the cost per bed is higher at Rs 1 crore. The government is trying to create primary care centers, and the move may boost this.

Banga added that while this is a step in the right direction, it would take at least two to five years for this to fructify.

Industry insiders felt that while bigger hospitals can also use VGF to expand into the hinterland, the small clinics manned by doctors could make use of these funds to set up smaller primary health centers with 15-20 beds.

“Smaller nursing homes can expand through this or a group of doctors can set up small primary and secondary care hospitals. Together with Ayushman Bharat, they can also ensure a base occupancy for their set-ups,” said one industry insider. As such the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (AB-PMJAY) has on-boarded about 1,000 new hospitals in the last one month or so.

Banga said that once the eligibility criteria to qualify for VGF come out, things would be clear. The government said that projects for VGF to be proposed by central ministries/ state government or statutory entities. Care Ratings has said the initiative is good, but will work over a period of time.

Analysts felt there was no reason why corporate hospitals cannot take part in such projects, and all social infrastructure projects need not be public-private partnerships. The finer details, however, are not clear at the moment.

Even medical education as a social infrastructure project could find a push, feel experts. According to Federation of Indian Chambers of Commerce and Industry (FICCI) assistant secretary general and education consultant Shobha Ghosh, with PPP projects being talked about for setting up more medical colleges, which would require conversion of district hospitals, the hike in VGF could attract more private participation.

“We had asked for 20-40 per cent for building social infrastructure projects so a 30 per cent VGF is a welcome step. It will ease up the capex pressure for the private sector and bring in more hospital beds in tier-2 and tier-3 cities by way of medical education,” said Ghosh.

Experts are, however, wary of any benefit accruing to social infrastructure projects in secondary, higher or technical education. “As a country, we are yet to mature in the area of PPP mode in social infrastructure projects like higher or technical education such as ITIs. There have not been many successful cases in these areas. Hence, it is hard to say whether the announcement will benefit immediately,” said Narayanan Ramaswamy, partner and leader for education and skill development sector, KPMG India.