What does the Healthcare Industry want from the Budget?

By Arunima Rajan

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After a turbulent 2020, the healthcare industry is looking forward to the union budget.


Finance Minister Nirmala Sitharaman will present the Union Budget for FY 21-22 on February 1. Will there be favourable announcements for the healthcare sector?

Government has to Play the Role of a Provider

Dr Vivek Desai, Founder and Managing Director of Hosmac India notes that the government had embraced the role of a 'payer' earlier, through schemes like Ayushman Bharat and enabled people to access healthcare from anywhere. "But considering the prevailing turbulent times, the government might have to change the role and play the role of a provider, particularly for areas which don't have access to public health infrastructure," he adds.

He also highlights the need for more medical colleges as there is a massive deficit of doctors, nurses, and paramedical staff. "Authorities might have to give incentives to the private sector to set up nursing and paramedical educational institutions. Madhya Pradesh government has an exceptional policy. The state gives free land for setting up medical colleges in tier II and tier III cities," says Dr Desai over the phone.

Dr Desai is also acutely aware that the private sector needs a structured financing scheme like the housing finance sector's softer interest regime. "Hospital loans are usually given a 5-10 year bandwidth, and that's not enough. Healthcare sector needs structured finance schemes and a more extended moratorium, as unlike sectors like IT, healthcare sector takes a more extended period to attain break-even. Some rebate on property tax and electricity tariff should also be given for hospitals, as they spend around 3 per cent of their income to pay these taxes," he explains.

Dr Azad Moopen, Founder Chairman and Managing Director, Aster DM Healthcare, seconds his views. He points out that 2020 with COVID-19 pandemic hit home the fact that robust healthcare infrastructure is essential to ensure a sustainable economy. "It is essential to at least double the healthcare budget from last year's meagre allocation. This would help to improve access to affordable care for the masses," says Moopen.

Budget should create capacities for Vaccination

According to Moopen, the budget should create capacities for vaccinating India's large population against Covid 19, which is critical to end the pandemic and revive the economy. "Allocation of sufficient funds to cover about 40% of the low-income population who fall under the Ayushman Bharat scheme through free vaccination will help address this issue. India must have an open sky policy allowing Indian and foreign airlines to operate freely, which will bring down the airfare between the countries and help NRIs," he says.

Expecting Surge in Allocation for India's Digital Health Infrastructure

Kunal Kishore Dhawan, CEO of Navia Life Care, has high expectations about the Budget, presented during unprecedented times. "It has the potential of being a game-changer for the Indian Healthcare Sector," he adds. "The pandemic has accelerated the adoption of digital solutions as a viable option to conventional care delivery systems. Be it efficient management of COVID-19 and vaccination or achieving Universal Health Coverage's goal, digital health would be great enablers with the right policy push," he adds.

Dhawan points out that the health sector expects more specific allotments in this year's budget to mitigate Covid. "We expect a surge in budget allocation this year, especially for India's digital health infrastructure. A shared digital infrastructure leveraging public and private enterprises to provide innovative solutions is the need of the hour. A policy push from the government's side is strongly recommended. The Budget 2020-21 needs to focus on expanding digital healthcare that has excellent potential to make healthcare more affordable and accessible by using technology to reach out the last mile," he concludes.

There is a need to create a shared digital infrastructure

Haruto Iwata, Managing Director, Fujifilm India seconds his views. "With the pandemic giving a wake-up call to the healthcare sector, it has given rise to new opportunities along with the urgency to prioritise welfare for healthcare professionals, offer best-in-class medical devices and solutions that will enable quality healthcare for the consumers. Keeping this in mind, at Fujifilm India, we expect the budget 2021 to create new horizons for the medical sector. We believe that India's government will bring in new policies that will provide a comprehensive and integrated healthcare ecosystem and support the patients in getting access to high-quality and cost-effective care. Given the unprecedented challenges we faced due to the public health crisis, there is a need to create a shared digital infrastructure to make innovative solutions in the healthcare sector. Investments in new medical care technologies are at the forefront of combatting COVID-19 and will also help us pave the way for future uncertainty. We at Fujifilm are working extensively towards promoting preventive healthcare amongst consumers and understand the importance of offering medical solutions to the community that best cater to their needs and demands," he adds.

Increase Budget Allocation to the Healthcare Sector by up to 5% of GDP

Dr Harish Pillai, CEO Aster India, Aster DM Healthcare, says that for India to become a superpower, we need to increase budget allocation to the healthcare sector by up to 5% of GDP, spread across three years. "This will reinforce the roadmap laid by National Health Policy on up-grading the Indian healthcare ecosystem, especially infrastructure and human resources. The 5% allocation, should focus on public health issues, mainly preventive health, improving wellness centres announced as part of Ayushmaan Bharat, Universal Immunisation Program, infrastructure and other health aspects like Swacch Bharat Abhiyan, Open Defecation Free Country, improving access to potable drinking water and Ujjwala scheme (LPG Scheme)," he adds.

He also adds that declaring healthcare as a strategic sector like agriculture will give the sector access to credit at lower interest rates. "One of the most significant heart burns for hospitals is that the cost of debt financing is exceptionally high, which creates other operational issues and challenges. If the debt is as low as what is given in the agriculture sector, it will improve the viability, and more investments will flow to create infrastructure. Income tax incentives for investment in electronic health records or HIS of various hospitals should be implemented under the National Digital Health Program, at a proposed 250% deduction on the investment made," he adds.

Deloitte India recommends incentives to promote R&D in India. Deloitte prescribes reintroducing weighted deduction for R&D expenditures, bringing R&D players within the fold of the reduced tax regime, or preferably, extending incentives such as Gift City or erstwhile SEZ for R&D in India. Deloitte suggests improving the patent box regime to offer reduced tax-rate benefits to assignees/transferees of the patent (and not restrict it to only the true and first inventor of the invention).

What would be the implications? These measures should help attract industry players to invest in more R&D activities in India. It should also incentivise investments in contract R&D to develop and utilise India's human capital resource. These initiatives would also lead to overall technological progress.

What sort of measures are required for critical focus areas? According to Deloitte, reintroducing tax holidays for rural hospitals, and the flexibility to select beneficial years is vital. Similarly, the government's viability gap funding is crucial for investors setting up hospitals in smaller cities to increase Ayushman Bharat's provider base.

Deloitte also recommends "zero-rating" of GST for health care services and sanctioning the accumulated input tax refund to the service provider. Although health care services are currently exempted, tax on inputs continues to add to costs as there are no input tax refunds.

Relaxations, vis-à-vis Tax Credit, on Expired Goods

The leading global financial advisory provider also prescribes the time limit prescribed by law (i.e., September of the next financial year in which the supply was made) to adjust the tax liability of credit notes should be relaxed for expired medicines returned to the manufacturer/wholesaler. Alternatively, it is recommended to clarify that reversal of input tax credit will not be required for products consumed by the health care industry.

Budget to focus on Quick Recovery from Pandemic

Sanjiv Navangul, CEO of Bharat Serums and Vaccines Ltd maintains the budget is likely to focus on a quick 'recovery' from pandemic lessons. He says, "The need of the hour for our industry is the availability and affordability of life-saving drugs for our billion-plus populace. The government's vision for Atmanirbharta is based largely on the good work that authorities such as the DPCO will take up. The Union budget should address long-standing special incentives and subsidies to encourage indigenous drugs and API production in line with Atmanirbharta. There should be tax cuts on life-saving drugs to make them affordable. We must also provide full medical cover to proactively help indisposed and senior citizens. Grants to Indian companies that make novel drugs should be made available to speed up patents and inventions. Flexible pricing policies that can encourage up to 7% MRP increase year on year and giving a 300 per cent deduction for R&D expenses will be beneficial for the industry," he concludes.