Soft loans, viability gap funding to push new hospitals

India Hospitals

Centre wants to roll out red carpet for new hospitals in public private partnership

Viability gap funding, soft loans and time bound clearances – the Centre wants to roll out the red carpet for private players to enter the health sector.

Union ministry of health has circulated an action plan for setting up new hospitals through public private partnership. The proposal includes viability gap funding of upto 40% of project cost, time bound clearances with clearances deemed given if not received within the stipulated time and industry status to enable “soft” loans.

The hospitals would have to mandatorily get empanelled with the Pradhan mantri Jan Arogya Yojana (PMJAY).

India has one hospital bed for 879 people. This is far below the world average of 30 hospital beds per 10,000 population

India has one hospital bed for 879 people. This is far below the world average of 30 hospital beds per 10,000 population. Currently the country has 14379 hospitals with 6.34 lakhs beds. The number of beds has increased in urban India, but at the country level remains in the range of 1.31 per 1000 population. With the launch of PMJAY and 500 million beneficiaries, there will a requirement of 0.64 million additional beds required over the next 10 years for a hospitalization rate of 5.5% average occupancy of 72% and average length of stay of 8 days, the health ministry estimates.

Health is a state subject so unless states are on board and willing to comply with the conditions, the plan cannot get through. It requires states to identify and earmark land, publicise its availability through a website and give it to private players at a subsidised rate for setting up hospitals. Land too is a state subject. The action plan also requires states to stop supplying electricity to hospitals at commercial rates. The viability gap funding is to ensure “financial viability and bankability of the project”. It will however will be provided only for hospitals in tier I and tier II cities.

The plan also lays down the condition that the incentives should be made available only if a doctor is a promoter or a majority stake holder in the company.