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Budget 2020: Cheer for medical device makers, viability gap funding for hospitals
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Finance minister Nirmala Sitharaman in her Budget proposed to impose a cess on the import of medical devices as India seeks to boost manufacturing and use the proceeds towards viability gap funding of hospitals beyond metros under insurance scheme Ayushman Bharat.

Also, the Budget allocated Rs 69,000 crore for the healthcare sector for the next financial year which includes Rs 6,400 crore for the Ayushman Bharat scheme. 

Reacting to the healthcare outlay, Raajiv Singhal, Group CEO of private equity-backed Care Hospitals, said that while the allocation has been increased, India still has a long way to cover to achieve at least 2.5% of the GDP on healthcare spend.

The 5% cess talked about above will be imposed on imports of medical devices except those exempt from the basic customs duty, said Sitharaman.

The money collected from the cess will support the proposed viability gap funding window to open hospitals in Tier-II and Tier-III regions of the country under the public-private partnership model. 

In the first phase, she said, these hospitals will be set up in the so-called “aspirational districts” where currently empanelled hospitals under the government’s flagship Ayushman Bharat insurance scheme do not exist. There are more than 20,000 empanelled hospitals under the scheme as of now.

Sameer Sah, partner at legal firm Khaitan, said that the viability gap funding suggestion will encourage private entrepreneurs and local doctors to set up hospitals in such areas and expand healthcare reach. However, he cautioned that the capital will not be easy to generate.

VP Rajan, associate director at investment bank Veda Corporate Advisors Pvt. Ltd, too, said that funding by way of cess on imported medical devices is a win-win for both local manufacturers and hospitals.

Ayushman Bharat scheme, which has seen an expansion in this Budget, had rolled out on 23 September 2018. The scheme, touted as the world's largest state-sponsored health insurance scheme, aimed to transform the country’s healthcare landscape by providing insurance cover to 10 crore of India’s poorest families, or 40% of the population.

While the scheme was largely lauded, the private sector was still cool towards the initiative as the players looked for higher reimbursements and a sunnier outlook despite some incentives introduced by the government last year.

The Budget also proposed two national-level science schemes to create a comprehensive database of mapping India’s genetic landscape, given its criticality for next-generation medicine, agriculture and bio-diversity management.

The government also proposed to expand its Jan Aushadhi Kendra Scheme to offer 2,000 medicines and 300 surgicals in all districts of the country by 2024. The Budget added the government is committed to end tuberculosis by 2025.

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