GS-2 (Mains), Mains-2018 (English)

PPP in Healthcare – The NITI Aayog Proposal


It is widely acknowledged that health is pivotal for human development and nation’s future.

India’s Current situation:

-> India which is home to around 1.3 billion people has made important progress, as average life expectancy at birth has risen to 65 years for male and female combined which is twice the time at late 1940’s.

However large section of population doesn’t have reliable and affordable access to good quality healthcare. India’s healthcare system is far behind those of other emerging economic powers.

-> India contributes to 21% of the global disease burden, but has one of the lowest public health spending in the world, spends only 1.3% of GDP on public health.

-> There is shortage of infrastructure and human resources, 72% of the rural population and 79% of those living in urban areas have sought access to healthcare in the private sector.

-> The draft National Health Policy 2015 document highlighted the need to increase public health funding to reach 2.5% of the GDP by 2020, a much needed and welcome step, which however may not be sufficient, given the magnitude of the problem.


Recently, NITI Aayog and Union health ministry have put forward a public-private partnership (PPP) model for the management of non-communicable diseases in tier 2 and 3 cities across the country, with World Bank will be serving as a technical partner.

-> The private hospitals said some provisions need to be clarified. This include the rates that can be charged to patient who aren’t covered by National Health Protection (NHPS), Rashtriya Swasthya Bima Yojana (RSBY), Central Government Health Scheme (CGHS), or state insurance schemes.


The salient features of the NITI Aayog’s proposed PPP are:

-> It pushes for PPPs focussed on cancers, heart conditions and respiratory tract diseases in non-metros.

-> It would see private healthcare service providers bid for a 30-year contract to upgrade and operate these facilities within district hospitals.

-> The scheme is designed to address the acute shortage of trained personnel and infrastructure in public hospitals, particularly those situated away from large cities and metropolitan centres.

-> The NITI Aayog asserts that the scheme will lead to infusion of resources by the private sector, and will expand access to healthcare services.

-> Beneficiaries of the government insurance schemes and general patients will be able to get treatment at these hospitals but there will be no reserved beds or quota of beds for free services.

-> It proposes to make state governments more accountable if they default on paying their private partners through a penalty.


Arguments in favour of PPP in healthcare:

-> The basic objective of favoring PPP in the health sector is to ensure universal health coverage with special focus on Primary Health Care.

-> Private players will Improve infrastructure and upgrade technology. It will increase quantity and quality of manpower.

-> Increase accessibility and availability of quality healthcare services to rural India (Most of the major private hospitals are located in the metro centres and PPPs could really help improve services in rural India).

-> PPP models have worked remarkably in the international healthcare scenario. More or less all international healthcare providers or regulators work on the PPP model the most notable example being the WHO.

-> It will reduce budget allocation to healthcare services which can be diverted to other services.

Arguments against PPP in healthcare:

-> PPPs offer little assurance in providing integrated and universal healthcare and act as means for the expansion of the private sector.

-> It goes against the spirit of India’s national health policy.

-> The arrangement lacks institutional mechanism to keep a check on private sector.

-> Profit seeking approach of private sector is incompatible with the idea of affordable healthcare services.

-> In case of delay of PPP projects, gestation period increases which increases the cost of project this increases burden on the Exchequer.

-> One major concern in such an arrangement is to ensure that the bulk of health spending, whether from government funds, subsidy or private insurance, goes into actual care provision, and that administrative expenditure is capped under the contract.


-> The solution for combating drawbacks in implementing PPP model in healthcare lies in developing a smart business model for private entity, legal and regulatory framework , a framework which ensures transparency and accountability , balanced agreement over scope of work which ensures commitment to public good.

-> In consonance with the goal to provide health for all under the National Health Policy, care should be universal, and free at the point of delivery.

-> Results from pilot case studies need to be analysed and then implemented nationwide.

-> A market-driven approach to providing district hospital beds for only those with the means would defeat the objective. Given the already high prevalence of cardiac and pulmonary conditions and cancers, having more beds for treatment is a necessity.

-> Strong oversight is also necessary to ensure that ethical and rational treatment protocols are followed in the new facilities, and procurement and distribution of drugs are centralised to keep costs under control.

-> Ultimately, the success of such systems depends on medical outcomes on the one hand, and community satisfaction on the other. Both dimensions must find place in a contract, and be assessed periodically.

-> A provision for audits, penalties and cancellation of contracts is essential. Given the recourse to tax funds for viability gap funding and use of public infrastructure, the operations should be audited by the Comptroller and Auditor General (CAG).



Countries that have done well in providing quality care have one system for all. Therefore, there is need to boost spending on healthcare in India. The National Health Policy, 2017 advocates a positive and proactive engagement with the private sector for critical gap filling towards achieving national goals.

It is imperative to ensure that the association with the private sector, as far as healthcare is concerned, is rooted in principles of justice rather than financial expedience.

Economists such as Adam Smith and Amartya Sen have focused on justice as equally as economics – the two being inseparable, since without justice, economies is merely budgeting devoid of ethics.


2 thoughts on “PPP in Healthcare – The NITI Aayog Proposal”

  1. Nice work, doing bilingual blog and cover 360 degree angles. Specially for Mains examination and one more time nice one…….
    For suggestions:- please cover more C&A and factual thinks in your blog to make cheque and balance between Prelims and Mains.
    Thanks, Sir keep writing…..


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