THE TIMES OF INDIA, MUMBAI

WEDNESDAY, MARCH 2, 2011 BUDGET: THE DAY AFTER 19

Healthcare service levy On social sector allocation,

FM doesn’t walk the talk
may be rolled back
TIMES NEWS NETWORK
Sidhartha & Surojit Gupta | TNN

New Delhi: Pranab

New Delhi: Caught between
public outcry and Congress
reservations, the government
on Tuesday indicated that it
was willing to review the Bud-
get proposal to levy a service
charge on healthcare costs of
individuals. But those opting
for medical insurance might
have to remain under the am-
bit of the levy.
‘‘Whether the service tax
will be on 25-bed hospitals or
whether it will be on all tests
is something that can be dis-
cussed,’’ revenue secretary
Sunil Mitra said.
Finance minister Pranab
Mukherjee in his Budget pro-
posed to levy 5% service tax
on all services provided by
centrally air-conditioned clin-
ical establishments with 25
beds. In addition, tests at di-
agnostic clinics are proposed
to be brought under the levy.
Consultant doctors would be
part of the levy too. Against
the 10% service tax levy,
Mukherjee had proposed 50%
abatement, resulting in a to-
tal levy of 5%.
Congress sources indicat-
ed the party would urge
Mukherjee to withdraw the
unpopular proposal that can
make the ruling party vul-
nerable to the opposition’s
charge of being anti-poor.
Party leaders are sure 25-
bed hospitals would pass on the
additional burden to patients,
thus annoying voters when
Congress cannot afford to.
Amid protests from health-
INDIA
ON THE SICK BED
Public spending on health |
0.94% of GDP among lowest
in the world
In comparison, the figure
stands at 14% in the
Maldives, 29% in Bhutan,
53% in Sri Lanka, 31% in
Thailand and 61% in China
Indians have to pay 80%
of their medical expenses
from their pocket
74% of this expenditure
incurred for outpatient
treatment, not hospital care
care service providers and
those going to private hospi-
tals and diagnostic centres,
government officials sug-
gested that the levy would im-
pact only a handful of people
who use high-end medical
care facilities.
‘‘It is inhuman to put fur-
ther burden. It is the aam
admi who will have to bear the
burden. It’s cruelty,’’ Naresh
Trehan, cardiac surgeon and
chairman & managing direc-
tor of Medanta, said during a
post-Budget interaction with
the finance minister.
Apollo Hospital’s Shobana
Kamineni too sought a roll-
back of the ‘‘retrograde step’’
given that government spend-
Drugs accounted
for 72% of the
total private out-of-
pocket expenditure
39 mn Indians pushed into
poverty from ill health every yr
30% of rural Indians didn’t
go for treatment for financial
reasons in 2004, up from 15%
in 1995. In cities, the figure was
20%, up from 10% in 1995
ing on healthcare was low,
something that Pranab
Mukherjee acknowledged.
P N Arora, MD of Yasho-
da Hospital, argued that gov-
ernment should not make
healthcare costlier.
Later, Mitra told TOI that
the big impact of the propos-
al was in case of individuals
and hinted that the tax would
apply for those using a med-
ical cover whether purchased
in their individual capacity
or through a corporate tie-up.
Asked if healthcare should
be taxed given that several do
not have access to medical fa-
cilities, Mitra said the gov-
ernment was willing to dis-
cuss the issue with the stake-
Source: Lancet
47% of hospital admissions
in rural India and 31%
in urban India financed by
loans and the sale of assets
Between 1986 and 2004, avg
real expenditure per hospital
admission increased 3 times
holders. ‘‘If the view is that it
should not be taxed, we will
look at it,’’ he said, adding that
a negative list of services,
which will not be subjected to
a levy under the Goods & Ser-
vices Tax regime would be
prepared.
Congress is concerned
that service tax on diagnos-
tics and healthcare may sour
the otherwise pleasant post-
budget mood. Party leaders
feel the provision would di-
rectly hit the poor consumers
seeking healthcare and ar-
gued it would have been bet-
ter if the tax was levied on
super-speciality hospitals
which were owned by and
cater to the rich.
Mukherjee might have spent
an hour trying to emphasize
his government’s inclusive
agenda and focus on infra-
structure but it does not seem
to have translated into actu-
al allocation.
His social sector spending,
based on a comparison be-
tween the Budget estimates
for the next financial year and
revised estimates for this year,
translate into a 6.56% increase
in allocation for four min-
istries — health, education,
rural development and agri-
culture (see table). Within this,
the allocation for ministries
of agriculture and rural de-
velopment, which is respon-
sible for the NREGA, have de-
creased marginally.
There is a significant in-
crease in the allocation for ed-
ucation (16%) and health
(21.5%). In value terms, this
translates into Rs 8,815 crore
for the two departments of the
HRD ministry and Rs 5,401
crore for health ministry.
Of the Rs 8,815 crore that
Mukherjee has earmarked for
school and secondary educa-
tion, Rs 1,900 crore is the ad-
ditional mop up from the edu-
cation cess. Counting that out,
GDP gallops but spending on
public health schemes shrinks
Rema Nagarajan
TIMES INSIGHT GROUP
Little To
Cheer
Social sector
Agriculture
About, Health
Mr FM Education
Rural devpt
Subsidies
Fertilizer
Food
Oil
Infrastructure 56,509.25 60,145.00
Civil aviation
Power
Roads
Shipping
Railways
the actual increase in alloca-
tion works out to around 12%.
The story is similar in five
infrastructure ministries —
power, roads, shipping, rail-
ways, communications & IT
and civil aviation — with the
last two seeing a decrease in
allocation for 2011-12. Cumu-
latively, they have seen their
allocation increase by around
3.5% to around Rs 77,000 crore.
In his Budget speech,
Mukherjee had said that he
has raised the allocation for
infrastructure by 23.3% to Rs
2.14 lakh crore. It is not clear
Recipe for disaster?
2010-11
1,86,927
17,695
2011-12 % change
1,99,187
17,523
6.6
-1.0
As for the subsidy themselves,
in case of fertiliser, Mukher-
jee has budgeted for decrease
of 9% (nearly Rs 5,000 crore)
25,055 30,456 21.6 while accounting for a burden
54,548
89,629
1,61,795
63,363
87,845
1,35,567
16.2
-2.0
-16.2
of Rs 50,000 crore.
The finance minister told
industry captains on Tues-
day that he has actually pro-
55,215 50,245 -9.0 vided more than what has
68,021 61,606 -9.4 been done in the past few
38,559 23,716 -38.5 years. In any case, he said,
the government has made the
6.4 process more transparent by
2,656 2,394 -9.9 providing cash subsidy in-
8,552 9,507 11.2 stead of resorting to issuing
25,563 26,438 3.4 bonds, which were not ac-
counted for in the Budget.
1,605 1,806 12.5 Though the expectation is
18,133.25 20,000 10.3 that the government will have
Amounts in crore to allocate more money for
subsidies, Mukherjee said he
if the assistance given to rail- could not take a call now as
ways and India Infrastructure oil prices were highly volatile.
Finance Company Ltd from The government’s calcu-
the department of economic lations have come under crit-
affairs have been included. In icism from economists who
addition, the department expect that the projection of
housed in the finance min- 4.6% of GDP for 2011-12 will
istry is providing funds for be overshot.
strengthening the PPP and vi- “We believe the current
ability gap funding. government expenditure pro-
In case of the ministries jections can eventually throw
that administer the three large upside surprise and put
main subsidies — oil, food and upward pressure on the
fertilizer — it is not about an deficit numbers,” Barclays
increase in the allocation. It’s Capital economists Sid-
a story of lower availability dhartha Sanyal and Kumar
of funds, at least to begin with. Rachapudi said in a note.
has gone down.
Quite inexplicably, despite
the increase in the incidence

‘Misery tax prescription Most drug

prices likely
B
elying the celebration
in the Budget of a “re-
markable fiscal year”
and the return of the econo-
National health programmes

National Programme for Prevention

2009-10
(Actual)
in Cr
2011-12 Difference in
(Budget)
in Cr
allocation
2009-11 (%)
and the geographical spread
of vector borne diseases such
as malaria, dengue, chikun-
gunya and Japanese en-

will have domino effect’ to go up

my to “its pre-crisis growth
trajectory”, some of the most
crucial public health pro-
grammes have suffered
& Control of Diabetes,
Cardiovascular Disease and Stroke
National Vector Borne Disease
Control Programme
7.36

568.08 437.28
20 172

Malathy Iyer &
Kounteya Sinha | TNN
New Delhi/ Mumbai: Car-
diac surgeon Dr Devi Shetty
calls it the “misery tax” and
pathologist Dr Navin Dang
says it is completely “unac-
ceptable.”
Pranab Mukherjee’s pro-
posal to impose a service tax
on health checkups and treat-
ment in all hospitals with
more than 25 beds and diag-
nostic tests in AC diagnostic
centres has the healthcare sec-
tor up in arms. A close look at
the finance minister’s pre-
scription for the healthcare
sector shows patients may end
up paying more than just 5%
extra to healthcare providers.
In fact, the patient will have
to pay 5% extra at every level
— to the private hospital con-
sultant, to the laboratory con-
ducting his tests and to the
hospital, even if he needs to
stay overnight. “This is going
to have a domino effect on the
patient’s purse,’’ doctor-ad-
ministrator of a Mumbai hos-
pital said.
Then, there is the sales tax
that individual doctors will
have to pay. “It can snowball
into a big problem for the pa-
tient. It is said that if lawyers
are brought under the purview
of sales tax why not doctors?
But doctors perform an emer-
gency and life-saving job,’’ Dr
Arun Bal of Acash (Associa-
tion for Consumers’ Action on
Safety & Health) said.
There is another hidden
cost. “If hospitals, labs and
doctors have to pay sales tax,
they will have to hire people
who can do it for them. More
hiring means more salary. The
only way of recovering it is by
asking patients to pay more,’’
a private hospital adminis-
trator said.
The government spends
roughly 1% of the GDP on
health, lower than sub-Saha-
The patient will have to
pay 5% extra at every
level — to the private
hospital consultant, to
the laboratory
conducting his tests
and to the hospital,
even if he needs to
stay overnight
ran Africa that spends around a patient’s fundamental right.
2.5% of its GDP. Over 80% of The government has decided
Indians foot their health bills to tax this very right.’’ Con-
from their pocket. sidering that a checkup could
“The government spends cost between Rs 3,000 and Rs
nothing on healthcare and will 10,000 depending on the tests,
now tax patients who already patients will have to shell out
pay from their pocket. This is Rs 150 to Rs 500 extra. They
a misery tax,” Shetty told TOI. will also have to pay extra for
In a letter, he is sending the fi- the doctor overseeing the
nance minister, the surgeon checkup.
writes: “India needs at least 25 Shetty added that the idea
lakh heart surgeries annual- of service tax on AC hospitals
ly. Unfortunately, less than was based on wrong assump-
90,000 people undergo heart tions. “You cannot legally per-
surgery, most of them using form any major surgeries in
their lives’ savings. Today, less
than 5% of our population can
an operation theatre without
AC. You cannot have an ICU
afford to undergo treatment without an AC, CT scans MRIs
for heart, brain and kidney ail- and cathlabs do not work with-
ments and cancer. Unless the out AC. Blood banks don’t get
government supports the
health sector by offering tax
licences unless they are air
conditioned. Only the general
benefits, more than 90% of our wards and the toilets are not
population cannot afford it. Is air conditioned in most hospi-
the 5% service tax fair?” tals. In short you cannot have
Dang said patients with tertiary hospital without AC.”
chronic illnesses like cancer The cardiac surgeon writes
and diabetes need constant in his letter to Mukherjee:
blood tests. They will be bur- “…Poor people on the whole
dened with extra costs every fall sick more often than the
time they get a test done, some- rich, they need major inter-
times thrice a day. vention most of the time be-
“The worst affected will be cause they come late nearly at
preventive health check ups. the end stage for treatment.
At present, the numbers are Any extra cost is only going to
low because people think get- hurt them more.”
ting a preventive check up is Pervez Ahmed, CEO Max
futile. Now, they won’t come Healthcare said the decision
forward even more because of was unfortunate. “We will pass
the additional service tax,” this tax on to the patients. The
Dang said. government needs to re-ex-
Bal of Acash added: “A pre- amine the notion of a service,”
ventive health checkup is like he said.
Rupali Mukherjee | TNN
Mumbai: You will have to pay
more for that flu shot, or to ease
pain during surgery. Prices of
vaccines, anaesthetics and in-
travenous fluids (IV fluids) are
expected to rise with the im-
position of an excise levy.
Not just that. Ayurvedic,
unani, siddha and homeo-
pathic drugs will also cost
more with them being brought
under the excise net for the
first time, with a 1% levy.
The Budget has hiked the
excise levy on medicines by
1% from the existing 4%, mak-
ing all medicines (allopathic)
dearer. On vaccines, a 5% ex-
cise duty is being levied, with
a concessional duty of 1%
without Cenvat credit facility.
A top official of major vaccine
manufacturer Serum India
told TOI: “We will pass on the
excise burden to consumers,
and accordingly, there will be
around 1% increase in prices
of vaccines.”
Others like Sanofi and
Panacea Biotech are also plan-
ning to increase prices. Prices
may go up in the range of 1-1.5%
for most vaccines, excluding
those under the National Im-
munization Programme.
Also, prices of most home-
opathic, unani, siddha and
ayurvedic concoctions and
pills are expected to go up with
the 1% excise levy. So, compa-
nies like Dabur, Baidyanath,
Himalaya Drug Company, Dr
Batra’s and Baksons Home-
opathy will be impacted.
The domestic pharma
industry will be adversely
impacted because of the im-
position of minimum alter-
nate tax of 18.5% on special
economic zones. Cipla direc-
tor S Radhakrishnan said:
“The removal of tax benefit
on SEZs is not good news.
We have made a huge invest-
ment of over Rs 700 crore
at Indore SEZ”.
slashed budgets. In a few cas-
es, the allocation has been in-
creased but by a laughably
small amount compared to
the much-lauded increase in
GDP and in the enhanced al-
location to the health min-
istry. The aam admi seems to
have been shortchanged in
healthcare.
The country’s GDP is
estimated to increase by
37% from 2009-10 to 2011-12
and the allocation for the
health ministry has in-
creased by 33% in the same
period. Yet, the allocation
for the various national dis-
ease control programmes has
gone down by 14% over these
two years from Rs 1,933 crore
to Rs 1,664 crore.
Despite the latest Nation-
al Family Health Survey re-
vealing that the coverage of
the universal immunization
programme is a mere 43.5%,
way below even half the tar-
LIKE THAT ONLY
National TB Control Programme
National Trachoma & Blindness
Control Programme
National Integrated Disease
Surveillance Programme
Routine Immunization
Total Allocation
The actual expenditure is available for 2009-10 and not for
2010-11. Hence the comparison is being made between the
2009-10 and 2011-12 data
get population, even the budg-
et for routine immunization
has gone down from Rs 618
crore in 2009-10 to Rs 511 crore
in the current Budget.
This is when over 26 mil-
lion children are born in the
country every year who need
to be covered by the routine
immunization programme
which protects them against
six diseases. India accounts
for over 21% of under-five
-23
cephalitis, the budget of the
National Vector Borne Dis-
ease Control Programme has
been reduced from Rs 568
crore to Rs 437 crore. Even the
426.72 380 -11 TB control programme’s
funds have been cut down,
272.21 261 -4 even as a large number of pa-
tients are struggling to get ex-
pensive second line treatment
40.01 55 37
for drug resistant TB.
The only public health
618.91 511 -17 programme that has been en-
1933.29 1664.28 -14 hanced significantly is the
National Programme for Pre-
vention and Control of Dia-
betes, Cardiovascular Disease
and Stroke. The funding for
this programme has been
deaths in the world. more than doubled. But con-
Paradoxically, the Na- sidering the amount involved
tional Integrated Disease Sur- is just Rs 20 crore, that’s not
veillance Programme, which saying much.
is meant to track incidence With such poor alloca-
of diseases, detect disease tions, there is great concern
trends and risk factors and among public health experts
also help to devise public about the ability of these al-
health strategies to tackle ready underfunded public
them, has seen an increase in health programmes to effec-
its allocation. But the money tively address the needs of
to tackle the diseases being the poorest who are the most
tracked by this programme susceptible to ill health.
JUG SURAIYA & AJIT NINAN
Budget session
may end early
in view of polls
New Delhi: There is a move to
curtail the three-week recess
and end the Budget session of
Parliament early next month
to enable MPs to campaign in
five states for assembly elec-
tions starting on April 4. The
move to reschedule the Budget
session gained momentum af-
ter some MPs from these states
petitioned the parliamentary
affairs ministry for an early
end to the session in view of
elections. West Bengal, Assam,
Tamil Nadu, Pondicherry and
Kerala are going to elections.
Government managers
think that by shortening the
mid-session recess by a few
days, Parliament can be ad-
journed sine die around the date
for the first phase of polling.
Parliamentary affairs minister

NAC slams ‘unimaginative’ Budget Vayalar to take travel tax woes to Pranab
Subodh Ghildiyal & Nitin Sethi | TNN
New Delhi: Key members of the
Sonia Gandhi-led National Advi-
sory Council (NAC) criticized the
UPA budget for doing little on the
social sector front and ‘lacking
imagination’. “It is more a state-
ment of intent and not resources,”
said Harsh Mander, member of the
NAC and Supreme Court commis-
sioner on food and poverty case.
While welcoming the addi-
tional allocations for health and
education, he said, “social inclu-
sion and equity remained small
ticket add-ons in the budget where
the poor are left out.”
Another member Aruna Roy,
too, criticized the budget for low
allocations to MNREGA. “The ref-
erence point for allocations should
be revised estimates. Why should
it be the budgetary allocations of
last year?” she asked.
Indicating that the allocations
were low, she pointed out that MN-
Aruna Roy was critical of the low
allocation for MNREGA
REGA wages had just been hiked
after being linked to the consumer
price index and shouldn’t have
been frozen at Rs 40,000 crore —
around last year’s outgo on the mas-
sive social scheme. “Though one
can argue that it is a demand driv-
en programme and borne by the
Centre, the fact of matter is that
budgetary allocation does show an
estimation on that programme’s
expenditure,” she told TOI.
Both the members were harsh-
er in their criticism of the deci-
sion to replace supply of sub-
sidised fertilizer and kerosene
with cash transfers. “They are liv-
ing in a fool’s paradise, if cash
transfer is a way to eradicate cor-
ruption or leakage,” Roy said.
She explained, “giving a per-
son money to buy kerosene from
open market at whatever prices is
not good. Supporting him through
public distribution system is much
more straight forward.”
Mandar echoed Roy. “It is wor-
rying. Especially in the case of fer-
tilizers, there are large number of
sharecroppers and tenants and for-
est-dwellers who will not be able
to present their land papers to
claim the cash. This will turn into
cash transfers to absentee land-
lords instead,” he said.
The duo pointed out that there
was no proof that cash transfers
eradicated corruption. Mander cit-
ed the case of old age pension
schemes, claiming evidence sug-
gested a higher level of corruption
prevailed there than in PDS.
Saurabh Sinha | TNN
New Delhi: Upcoming assembly
elections in Kerala may be a
ray of hope for budget interna-
tional travellers resenting the
steep hike in service tax that has
been raised in Monday’s budget
from Rs 500 to Rs 750. Since Ker-
ala sees huge travel between the
state and Gulf, this hike may not
go down well with people.
According to highly placed
sources, aviation minister Vayalar
Ravi is likely to raise the issue
of hiked tax with finance minis-
ter Pranab Mukherjee and point
out that even the tax of Rs 500
is steep enough and should not be
further hiked.
The travel industry is worried
about the service tax hike for do-
mestic travellers in business class,
which is proposed to be raised
from Rs 100 to 10% of fare.
“The 10% service tax being levied
on international travel is on the
POLL COMPULSIONS: Vayalar Ravi
fare component — basic fare
and fuel surcharge. The same is
likely to be adopted for domestic
business class, although final
clarity will come later,” said
Travel Agents Federation of India
chief Anil Kalsi.
This would mean a huge
service tax component. For in-
stance, a Delhi-Mumbai business
class ticket on an average
costs about Rs 20,000, of which
the basic fare and fuel surcharge
component is Rs 19,000. So
the service tax could rise from Rs
100 from at present to Rs 1,900 un-
der the new provision.
While the service tax shocker
will kick in next fiscal, aviation
turbine fuel (ATF) has already
started taking its toll. Oil market-
ing companies on Tuesday hiked
ATF price by about Rs 2,000 per
kilolitre (KL), raising the price in
Delhi from Rs 53,000 per KL to al-
most Rs 55,000 per KL.
Airlines have started passing
on the increased cost to passen-
gers. Kingfisher hiked fuel sur-
charge from Rs 100 to Rs 200 from
Tuesday, while Jet had already
done so some days back. Some in-
ternational airlines like Cathay
Pacific also hiked this cess from
Tuesday and others also recently
upwardly hiked their surcharge.
P K Bansal will consult leaders
of different political parties on
Thursday to rework the sched-
ule for the session.
The first phase of polling in
Assam takes place on April 4.
According to a tentative
schedule, Parliament will go
into recess on March 16 to re-
assemble on March 28. TNN
Times Now most
watched on B-Day
T imes Now on Monday issued
a statement saying that for
the third year in a row, it was the
most watched channel on Budget
day, ahead of CNBC TV18, NDTV
24x7 and CNN IBN. While Times
Now’s viewership was 3.5 times
of NDTV 24x7 and nearly eight
times that of CNN IBN, it was
64% ahead of CNBC TV18,
according to data released by
AMAP for February 28. Times
Now is 8.37 GRPs; CNBC TV18 -
5.1; NDTV 24X7 -2.27; and, CNN
IBN - 1.06. TNN