Serum, Bharat Biotech to get suppliers’ credit

Govt okays ~4,500 cr upfront payment for 300 mn doses

Vaccine manufacturers Serum Institute of India (SII) and Bharat Biotech will together get ~4,500 crore from the Centre as suppliers’ credit, sources in the know said. This will be an upfront payment for the vaccine doses that these two companies will supply to the government. At ~150 per dose, excluding taxes, this roughly works out to be 300 million doses.

Of the total amount, SII will get ~3,000 crore, while Bharat Biotech will get around ~1,500 crore, multiple sources confirmed. Both SII and Bharat Biotech refused to comment.

The Department of Expenditure has agreed to

relax the General Financial Rules and permit the Ministry of Health to make an advance payment to the two vaccine manufacturers, without any bank guarantee. “So, basically, they get money to supply vaccines in the future and they get it as an advance, but they don’t have to furnish bank guarantees for that advance,” said a government official.

In the first place, the government doesn’t pay in advance for the supply, but even if it does in certain cases, it insists on bank guarantees in accordance with the General Financial Rules. “This is a relaxation that has been given to the health ministry. The ministry will make payment, and not the finance ministry,” said the official.

The relaxation, he added, would help companies get immediate cash flow support without any cost to them.

SII CEO Adar Poonawalla had sought ~3,000 crore from the government as grant to enable the firm to dedicate another plant to make the Oxford-astrazeneca vaccine (Covishield).

He had told Business Standard that “Otherwise, it is difficult for us to ramp up (vaccine production) because we have invested thousands of crores already and have borrowed ~1,500 crore in April to manage the additional opex (operating expense) requirements of these large volumes”.

A senior government officer, however, said it was not possible to give a grant to a private company. “We cannot give grants to a private agency. They wanted cash and this is the only sensible way we can provide cash to a profit-making company, which is not doing it for charity and is admittedly making considerable profits. So the question of giving grants does not arise.”

Sources indicated that in the absence of a grant, SII would continue its planned scale-up of Covishield production. From 70 million doses per month now, it would be scaled up to 100 million doses a month by July. More on business-standard.com