Amid second COVID wave, India’s vaccine drive stalls dangerously

India’s COVID vaccine bus is running dangerously low on fuel. While daily vaccination rates have plummeted since early April, vaccine stocks with states, and those in the pipeline, are likely to last just a few days. The much-hyped vaccine policy of the Narendra Modi Government — betting on deregulation — lies in tatters. A combination of shoddy planning, evidently arising from complacency, and aggravated by a policy that lays the basis for a vaccine divide, threatens to expose Indians even more to the pandemic.

By its own admission (Press Information Bureau release of the Ministry of Health and Family Welfare of May 3) the government stated that there are now only about 8.36 million vaccine doses available or in the pipeline. Of this 7.8 million was already with the States as of May 2, and an additional 5.6 million will reach them by May 6. This means that an already decelerating drive is on the verge of grinding to a halt very soon.

In fact, the peak daily vaccination rates were achieved in early April and had already started their decline when the celebrated three-day Vaccine Utsav was launched on April 11. Since then it has gone downhill. The current rates are about 2.5 million does per day, about one-third of the daily rates reached in early April. What this means is that the stocks with the states or in the pipeline can barely last four days. How did India, tom-tommed as the vaccine factory of the world, reach such a pass? And, has the recent deregulation of the vaccine programme aggravated or contributed to this?

By now the percentage of the Indian population that has received one dose is in the low double digits; the percentage of those who have received both doses is just over 2 per cent.

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Vaccine policy in tatters

There were four main elements of the Modi Government’s policy — enunciated ironically just when the second wave was taking off. The first was the three-tier procurement and distribution channel, through the Centre, the states and private health care and other facilities. The second feature was the Centre’s announcement that it would commandeer half of the vaccines produced by the two companies, while distributing the other half of the supplies to the states. The Centre also clarified that the states would be free to source supplies directly from the vaccine duopoly — Serum Institute of India (SII, the producer of Covishield), and Covaxin, produced by Bharat Biotech India Ltd (BBIL). The third, and the most controversial element, was the layered pricing regime, which in the name of “free” markets was touted as a move that would draw entrepreneurial zeal that would result in abundant vaccine supplies. The fourth was the extension of the drive to those aged 18-44 from May 1.

Every single element of the policy now is in shreds simply because COVID vaccine production has been far below the needs of the country. The country’s COVID vaccine production capacity was either kickstarted very late or because the Modi Government has placed orders very, very late. What the Press release cited above mentions about the two most recent batches of orders placed by the Union government are most revealing of the extent of complacency at the helm.

First, it admits that orders were placed in March for 120 million doses of the two vaccines — 100 million from SII and 20 million from BBIL. However, it notes that while SII has delivered 87 per cent of the order, BBIL has delivered only 44 per cent of its order. Thus, while SII still has 12.56 million doses pending from that order, BBIL has 11.12 million doses pending — a total of almost 24 million doses pending from the previous order.

Extreme complacency

But what really puts the Modi government to shame is its admission that the last significant bulk order — for 110 million doses of Covishield and 50 million doses of Covaxin — was placed a week ago, on April 28. Trolls on social media were quick to haul the government over the coals, pointing out that even bhel puris are not ordered in this fashion, expecting deliveries at such short notice. Knowing full well that global vaccine capacities and supplies are extremely tight, why did the government not place orders much earlier, they asked.

It is obvious that all four key elements of the government’s vaccine policy — named as the Liberalised Pricing & Accelerated National COVID-19 Vaccination Strategy — have been seriously undermined by the acute reality that production capacities are extremely short of needs. But even more grave is the fact that the “market” for vaccines is held in the vice-like grip of the two vaccine producers, most notably SII, which accounts for more than 90 per cent of all COVID vaccines delivered in India.

States bear the burden

The same press release also mentioned that the government had paid ₹ 1732.50 crore to SII and ₹ 787.50 crore to BBIL as “100 per cent advance” payment for the supply of the combined total of 160 million doses for the orders placed in late April. Essentially, this amounts to suppliers’ credit; in fact, normally, suppliers’ credit is not paid in full before deliveries are made, but that is a relatively small matter in this. But several ominous consequences arise from these admissions. First, the latest orders are for the 160 million doses spread over three months, starting May. Even if one ignores for the moment the very real possibility that deliveries are likely to be backloaded, this implies that an average of about 53 million doses per month will arrive till July. At current vaccination rates of about 2.5 million per day, that quantity would last just three weeks.

Second, the nature of the suppliers’ agreement gives the Centre enormous leverage vis-a-vis states in sourcing supplies from the vaccine duopoly. The 50:50 split of supplies from the two vaccine contractors between the Centre and the states is likely to fly out of the window because of the enormous strain in producing anywhere near the stated capacities of the two companies.

SII has the capacity to produce about 70 million doses per month, or about 2.33 million doses per day. BBIL has recently claimed that it now has a capacity to produce 700 million doses of Covaxin vaccines per year, which translates to about 1.91 million per day. Piecing together the claims of the two companies, this means they have the capacity to produce about 4.24 million doses per day. But that is not what is being apparently produced or delivered to the Indian government.

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The fact that BBIL has committed to supply 50 million doses over three months means that it is not producing anywhere its stated capacity; in daily terms, 50 million over three months implies a turnout of 0.56 million doses per day, less than 30 per cent of its stated capacity of 1.91 million doses per day. Similarly, SII’s turnout of Covidshield over three months can be projected to be an average of 1.22 million doses per day, as against 2.33 million doses at the lower bound of its claimed capacity of 70-100 million doses per month (2.33-3.33 million doses per day).

Severe supply constraints

This can only mean one of two things: either the companies are not producing at full tilt or that they are producing, but producing to meet demand in other “market segments”. The government’s decision to permit a “free” market in vaccines is perhaps allowing the duopoly to divert output to the section of the “market” that is “willing” to pay.

In other words, desperate people scrambling for vaccines in a severe shortage, is being held as an example of how “good” economics can be applied in bad times. Nothing can be farther from the truth. First, there cannot be a market in vaccines, simply because it is by universal consensus a public good. Just look around the world and you will not see a single other government that has promoted a sale of vaccines. Instead they have treated it as a major weapon that requires everybody to be enrolled in order to fight the pandemic. As a result most countries are trying to inoculate as many as possible in the quickest possible time.

Second, with vaccine prices already fixed and production limits well known, what kind of elementary micro economics would regard this as a “free” market? The logic of the orthodoxy in this field has always been that demand will respond to price “signals,” resulting in an “equilibrium” quantum which output will settle at. The Indian logic stands these theoretical propositions on their head. Here prices are fixed and output is already determined. So, why do we need the market?

Vaccine allocation to states

The problem of the dangerously low availability of vaccines is compounded by the fact that vaccine distribution to states has had no normative standard or logic. Neither the proportion of health workers in total population (the key target of the first round), nor the proportion of the population in the 60+ age group (in the second round), nor in fact, the proportion of people in the 45+ age group have been used to legitimize the actual allocations of vaccines to the states till now.

The Health Ministry’s assertion that states are free to source supplies from its 50 per cent share is cynically wicked for at least three reasons. First, Centre itself has very little capacity to distribute on its own; it depends heavily on the states to actually implement the drive.

Second, given the severe capacity constraints at the two companies producing vaccines, and given that the Centre has already placed orders for the next three months, it is obvious states are going to not be in a position to access supplies.

Third, the nature of the agreement between the Centre and the only two Indian suppliers gives it enormous leverage when compared to the states in accessing supplies. States may place indents with the two companies, but the Centre has already secured the output from the two companies’ facilities. All this means that vaccine allocations has emerged as an additional frontier in the ongoing battle between the Centre and the states.

The statement by Adar Poonawala, SII CO, on May 3 is instructive. He has said the next batch of 110 million doses would be for the states and for the private channels, but only after the Centre’s existing order is fulfilled. This means that states are completely reliant on the Centre for vaccine supplies at least during the next few months. The reports of a trickle of vaccines through a few large corporate hospitals are perplexing. One wonders where they are getting their supplies from when everyone else is desperately scrounging for a shot.

The recent news that SII is investing in vaccine capacities in the UK is indicative of where things could head in the medium term. But now, based on what we know about SII’s capacities, it seems unlikely that the company would be able to fulfill its commitment of supplying the Centre with about 130 million (110 million as fresh commitment and about 20 million from the backlog) by July 2021.

At its maximum capacity of 70 million doses per month, it can produce 210 million doses in that time. But it has binding commitments from before it signed its deals with the Modi Government, those with the Global Vaccine Alliance (Gavi) and AstraZeneca, its principal, which cannot be avoided. Thus, producing even at full tilt, SII is unlikely to be able to supply the quantities it has committed in the next three months.

Court steps in

For the Modi government an unexpected challenge has come from the courts. On May 3 a Supreme Court Bench comprising Justices D.Y. Chandrachud, L. Nageswara Rao and S. Ravindra Bhat pointedly asked for details of the grants advanced by the Centre to the companies. They sought to know whether such “aid” was factored into the prices of vaccines supplied to the Centre. Moreover, it asked why states, which are delivering the bulk of the services, should be denied the benefit of factoring this into prices being charged from them.

The court expressed prima facie “reservations” about the 50:50 split of vaccines procurement, especially because “the available stock of vaccines is not adequate”. “Prima facie, there are several aspects of the vaccine pricing policy adopted by the Central government which require that policy be revisited,” it observed in its order, while also expressing concern for marginalised sections of the citizenry.

Tellingly, it observed that the only “rational method” that is consistent with Article 21 which includes the right to health would be one by which the “Central Government procure(s) all vaccines and negotiate(s) the price with vaccine manufacturers.”