January 05, 2009

Public Private Partnership model may inject more funds into medical education

Medical education may soon become a profit-making venture and private players investing in it would have to pay tax on the profit they
make from it. The government is considering a proposal to allow private sector investments in medical education under the public-private partnership (PPP) model. The idea is to encourage investment in the sector to meet the shortage of medical professionals in the country.

At present, only governments, universities, trusts or charitable societies can set up medical colleges. Private companies, which want to establish medical education centres, can do so only through a not-for-profit organisation and are exempt from income tax.

With the changed norms in place, private players are likely to face lesser entry barriers while making big investments in the medical education sector. “We have finalised the proposal to relax the norms for setting up medical colleges. The new guidelines include private sector participation through PPP model among other things. We have already submitted the proposal to the Medical Council of India,” a health ministry official close to the development told ET.

E&Y partner (risk advisory services) Kali Prasad said: “The move will attract private sector participation including private equity into medical education. This will help companies to make investments and make reasonable returns over time while the government will also benefit as companies will have to pay tax.”

The new guidelines seek to relax other rigid regulations such as land area restrictions and the teacher-to-student ratio. “The proposals also suggest that medical colleges may be allowed to have minimum 25 acres in two locations within 12 km, instead of the 25 acres of contiguous land required now,” the official said.

The move came after the Planning Commission had recommended opening of the medical education sector for private sector participation to increase the supply of human resources at all levels while the country is facing an acute shortage of professionals in the healthcare sector. According to a Planning Commission report, for every 10,000 Indians, there is one doctor. India is short by around six lakh doctors, 10 lakh nurses and two lakh dental surgeons.

“A group headed by the secretary of health has examined and actively considered relaxing the norms for investing in medical education. We are looking at an option to completely open up private sector participation and also easing infrastructure norms. A notification to this effect may be made soon by the health ministry,” a senior Planning Commission official said.

The move is expected to boost corporate chains, most of which have planned to set up medical education hubs to meet its human resources need. Delhi-based Fortis Healthcare has plans of setting up 10 medical cities in the next 10 years with an investment of over Rs 5,000 crore.

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