The Union Cabinet chaired by Prime Minister Narendra Modi gave its approval to the AIIMS which will be established under the Pradhan Mantri Swasthya Suraksha Yojana (PMSSY) and have a capacity of 750 beds.
This will include emergency and trauma beds, AYUSH beds, private beds and ICU speciality and super speciality beds.
In addition, there will also be an administration block, AYUSH block, auditorium, night shelter, hostels and residential facilities.
"The institute will also conduct research on prevalent regional diseases and other health issues and provide for better control and cure of such diseases," an official statement said.
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The cost of the project will be Rs 925 crore. However, the above cost estimate does not include recurring costs (wages and salaries and operation and maintenance expenses).
The project will be completed in a period of 48 months from the date of the approval. It comprises a pre-construction phase of 15 months, a construction phase of 30 months and stabilisation and commissioning phase of three months.
"The population in Punjab and adjoining regions will be benefited by this AIIMS," the statement said.
Under PMSSY, AIIMS have been established in Bhubaneshwar, Jodhpur, Raipur, Rishikesh, Bhopal and Patna while work of AIIMS Rae Bareli is in progress.
Meanwhile, the Cabinet deferred its decision on the amendments to the Mental Health Bill which, sources said, was on the agenda.
Modi had recently laid the foundation of a new AIIMS in Gorakhpur after the Union Cabinet gave its nod for the establishment of the institution there.