Kolkata, May 21 (Mayank Nigam) Second wave of COVID-19 has been stabilising with declining 7D Moving Average of daily new cases for the past few days, indicating the peak of the second wave is behind us. Furthermore, daily recovered cases are now higher than daily new cases and the gap between the two is much higher than what was observed during the first wave peak. However, the share of rural districts in new cases has increased from 45.5% in end-Apr’21 to 52.9% as per the latest data. This is slightly lower than the peak of 53.7% during the first wave. However, when compared to Sep’20 the situation is marginally better in certain states like Andhra Pradesh, Bihar, Karnataka, Tamil Nadu, Uttarakhand and West Bengal where rural penetration was even higher at the time of first peak than what has been observed so far in May.
A point of worry is, however, the high test-positivity along with much lower number of tests witnessed in certain states like Goa, Karnataka, West Bengal, Himachal Pradesh, Rajasthan, Odisha among others. The extended lockdowns/ restrictions are having huge negative impact on economic activity, particularly in May. SBI Business activity index has dipped to 62.6 for the week ended 17 May’21, the lowest since 25 May’20, according to Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India. “We believe that the Government should focus on vaccinating people of the worst affected districts first so that the spread can be controlled. As per UNICEF data, globally, the reported production capacity (per dose) stands at 22.2 billion in 2021. Out of the reported production capacity of 22.2 billion, 13.74 billion doses’ agreements is already formalized and out of this, 9.34 billion doses are secured and India has secured 0.28 billion as per the dashboard data in UNICEF. India is also exploring other options and the Government has committed at a 2.14 billion pipeline between August and December,” Mr Ghosh said.
“Additionally, if we look at the various stages of development, there are 15 vaccines approved for emergency use and 15 potential candidates in phase II/III or phase III stage of development and 4 others in the regulatory review stage. Against this backdrop, states in India are floating global tenders for procurement of vaccines. Central government is also in talks with global manufacturers with RNA technology viz. Pfizer and Moderna, as well as, Jannsen Pharmaceuticals to supply coronavirus vaccines in the country. As per UNICEF data, of the 3.9 billion vaccine doses with RNA technology 2.69 billion have been secured by other nations,” he said. Thus, Indian states are in a fix as currently they are facing an inelastic supply curve at least in the near two months. If we look at the UNICEF website, the vaccine’s reported price is in the range of $2-$40.
If we construct simple scenarios with different price ranges, i.e., at $5, $10, $20, $30 and $40, with the Rupee dollar exchange rate of 73, and assume that Centre gives 50% of the vaccines for the states’ population, the vaccine expenditure for the rest 50% for various Indian states would be in the range of Rs 0.2 billion for Sikkim (if the vaccine is procured at $5 per dose) and Rs 671 billion for Uttar Pradesh (if the vaccine is procured at $40 per dose, Mr Ghosh said. “However, these represent extreme scenarios and the cost for each state will lie somewhere in between. If we map this scenario analysis with the budgeted FY22 total expenditure of 20 major states, at the highest price point, the vaccine procurement is 16% of the total expenditure for Bihar, 12% for states like Uttar Pradesh and Jharkhand. However, we reemphasize that this cost is an absolute must as even at highest vaccine price, the total vaccination cost at Rs 3.7 lakh crore is much lower than revenue loss at Rs 5.5 lakh crore assuming lockdown for states end mostly by June. Interestingly for some states, like UP & Bihar, the revenue loss is less than increase in expenditure at the highest price point,” he said. Also, the budgeted capital expenditure of Rs 8.8 lakh crore could see a significant rollback to balance revenue loss, further exacerbating GDP loss. Additionally, the payment though will be made in domestic rupee resources, it would possibly imply equivalent dollars from our reserves to make the payment!
However, such payments could potentially trigger a renewed interest of capital flows into India as investors will look through the huge benefits of such mass vaccination, Mr Ghosh said. “We recommend that States and Centre must chalk out a cold chain infrastructure system quickly while simultaneously targeting international vaccine manufacturers through advance purchase agreements. Meanwhile improving the local supply of Covaxin and using other vaccine producing units for dedicated COVID-19 vaccine manufacturing is a sine qua non. With states entering directly into contracts with global vaccine developers, it leads to increased competition among states. Poorer states with high population would not be able to vaccinate themselves quickly. Meanwhile richer states may have to pay a much steeper price given the global oligopolistic market. Our best hope remains that the vaccines in regulatory trials and phase II/III and III are successful and are authorized for emergency use and can be the best target for procurement by states (Refer annexure),” he said. “We also recommend that, Centre in coordination with states, should enter into deals with these companies so that we vaccinate a sizeable population. India should ideally follow the EU template in global vaccine procurement. Globally, the EU Commission jointly with a Joint Negotiation Team carries out the negotiations with vaccine suppliers.
The members of the Joint Negotiation Team – representing seven Member States – are appointed by a Steering Committee. The Steering Committee discusses and reviews all aspects of the Advanced Purchase Agreement (APA) contracts before signature. All EU Member States are represented in this Committee. All Member States have endorsed this approach, which is at the heart of the EU Vaccines Strategy,” Mr Ghosh said. “India has so far given 187 million doses but total vaccination/100 population is still at 13.8. However, if we consider the fact that EU had already entered into contracts for vaccine procurement well in advance, European countries have been able to vaccinate less than 50% of their population, it seems that vaccination drive might pick up pace once the supply becomes streamlined from July and India needs to move quickly if it wants to vaccinate its adult population by the end of this year,” he added.