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Finance Commission holds meeting with MoH&FW, decides separate chapter on health in its final report

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MoH&FW revises fund requirements to Rs.6.04 lakh crore

The 15th Finance Commission (XVFC) held a meeting with the Union Minister for Health and Family Welfare, Dr Harsh Vardhan and senior officials of Health Ministry on the specific issues of : 

  • Revising the state-specific proposals of the ministry in light of the COVID-19 experience.
  • Exploring the possibility of backloading in light of the fiscal strain  
  • Consideration of the suggestions of the high-level group of the XVFC on health by the Ministry.

Initiating the meeting the Chairman, XVFC, NK Singh announced that looking at the peculiar state of the pandemic, the commission has decided to have a separate chapter on health in its final report to the government. The commission needed to know from the ministry it views regarding the Central Government outlays, sector-specific initiatives based on conditionalities and how the money set apart for the third tier could be assigned for health and health infrastructure. Dr Vardhan described his vision for the improvement of India’s health sector and appreciated the commission’s decision to reprioritise the sector.

The ministry in a detailed presentation to the commission highlighted the National Health Policy (NHP) 2017 targets which include:

  • Increase public health expenditure to 2.5 per cent of GDP, in a progressive manner, by 2025.
  • Primary health expenditure to be two-third of the total health expenditure
  • Increase state sector health spending to more than 8 per cent of their budget by 2020.


The ministry pointed out that presently 35 per cent of the public health expenditure is done by the Central Government and 65 per cent by the state governments. The pandemic has established the importance of the need to strengthen the public health sector, surveillance and public health management, preventive and promotive healthcare with special focus on urban health. The ministry also felt that there was a need to increase the allocation of MoH&FW on a year-to-year basis.

The MoH&FW has proposed for enhanced state-specific grants in the following manner –

For untied funds:

  • Minimum 10 per cent of the fund to be earmarked for the health sector with at-least 2/3rd being reserved for the primary health
  • Gaps in funding for primary healthcare in states to be used as a criterion – will help states that have significant funding needs and health lag, to get more funds and prioritise spending on health

For performance-based incentives: 

  • Composite health index to be utilised to encourage states to demonstrate performance on year on year basis –should have a weightage of 20 per cent in the performance linked pool

The ministry has submitted a revised proposal for fund requirement to the Finance Commission. It has identified new areas on which support of the XVFC is required which include –

  • New areas for support – Urban health, essential medicines, starting DNB courses and Post-COVID health sector reforms
  • Due consideration on recommendations of the High-Level Group (HLG)
  • Partial back-loading of funds
  • Fund requirement revised from Rs 4.99 lakh crore to Rs 6.04 lakh crore for the period of the award of the XVFC ie 2021-22 to 2025-26.

The ministry after giving due consideration to the recommendations of the HLG of the XVFC on Health, and after partial backloading of the funds have prepared a revised requirement of Rs 6.04 lakh crores from the earlier requirement of Rs 4.99 lakh crores. The ministry has thus asked for additional resources to the tune of 0.4 per cent of GDP per annum to the states which they felt would lead to significant progress towards achievement of the National Health Policy target. 

The key elements of enhanced support identified by the Ministry were –

  • Set up Medical Colleges (MCs) attached with District Hospitals (DHs)
  • Training of 1.5 million skilled workforces in allied healthcare  
  • Start Super Speciality Blocks (SSBs) under PMSSY  
  • Health system strengthening including primary healthcare.

The commission noted all the points highlighted by the minister and the ministry and agreed that there was a need to increase public sector health outlay and also to develop a professional cadre of health workers. There was also a requirement for higher and continuing engagement of the States and the third tier for this purpose. The commission assured that it would not be found wanting in giving serious consideration to all the issues raised in today’s meeting.

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