A Long-term Insurance And Investment

The second wave of the COVID-19 pandemic has caught the citizens, and both the union and the state governments of India by surprise. There has been a surge in the number of people affected by SARS-CoV-2 and one or more of its so-called variants. This surge has stretched the availability of human capital, fixed patient-care resources and mobile patient-care resources.

India needs a rapid response to this situation. India needs a solution aimed at addressing the problems related to the availability of human capital and patient-care resources. We have some ideas that could serve both these objectives. First, we had on May 12, 2021 suggested the temporary repurposing of college and university campuses.

https://www.dhirubhai.net/pulse/temporary-repurposing-college-campuses-gopalan-ramachandran

Long-term asset and insurance

Second, we suggest the long-term repurposing of college and university campuses in this article today. The time to act on the suggestion to repurpose colleges and university campuses semi-permanently and/or permanently is now.

The second wave seems to be weakening. We are relieved. The number of recoveries has begun to exceed the number of new cases. The weakening of the second wave gives the state and the union governments some time to think. They can think, act and see beyond the intense needs forced on the public health system by the second wave.

The likelihood of a third wave is not trivial. It could be upon us without warning. Regardless of the likelihood of such an outbreak and the actual occurrence of the third outbreak, the state and the union governments should act (1) to invest in long-term public health resources and (2) to create long-term insurance assets.

Underused academic infrastructure

Education and the universe of educational institutions are both big. There is organic life teeming inside them. There are play schools. There are PhD-granting universities. There are students, teachers, administrators and budget managers.

SARS-CoV-2 would have touched all of their activities by the time the virus leaves us or loses its virulence. The effect of the virus will be heterogeneous. Play schools and PhD-granting universities will be affected in dissimilar ways.

There are different challenges that each of these face. These range from formal learning and assimilation by students to their compliance with standards of certification.

At the same time, the challenges faced by the educational institutions are immense. The principal challenge is their financial viability.Their pedagogical human capital has been seamlessly migrated to online delivery of lessons. The migration may not be complete. It is work in progress.

The physical infrastructure of educational institutions is not as amenable to such adoption as resources for online delivery of lessons. There is incompatibility. Where there is compatibility, there is a surfeit of resources. There is an abundance of resources that can serve and support the online delivery of lessons. There is a redundancy in such resources.

Owners of incompatible and redundant resources are surrounded by both peril and opportunity. The peril is the result of insufficient revenues from providing educational services. The opportunity that we visualise is the repurposing of underused educational infrastructure. These assets could be retrofitted or refitted in order to house (1) thousands of hospital beds, (2) diagnostic instruments and (3) patient-care and patient-cure equipment.

Private colleges in peril

India has numerous private colleges. Some of them are engineering colleges. Some focus on liberal arts and science. Some focus on nursing and medicine. These were started in the last two decades.

Some of the private colleges – at least over 500 across India – have been unable to attract a “viable number of students”. Viability is a function of a college’s (1) fixed and recurring periodic costs and (2) variable costs related to the delivery of lessons.

Their financial peril is the result of their inability to set such fees that pay for the variable costs and yet generate what is known as contribution. Contribution is the excess of aggregate fees over the variable costs related to the delivery of lessons.

The outbreak of COVID-19 has exacerbated the financial peril of these colleges. The peril can be converted into an opportunity. First, the underused colleges could become the medical hubs in their relevant neighbourhoods. Second, some of them could shift their focus from liberal arts, science and engineering to nursing and medicine.

Colleges, collateral and lenders

Most of the unviable colleges are sited on large tracts of land. They have large buildings. What is interesting and pertinent is that India’s public sector banks (PSBs) have funded these colleges. The significant shareholder of India’s PSBs is the union government.

Vast sums of capital – public savings channelled by the PSBs – have been invested in the physical infrastructure of these colleges. These private assets are the collateral in the loans made by the PSBs.

The private colleges own the assets. But a major part of these assets is the underlying collateral. The collateral could be repurposed to serve three constituencies: (1) the borrowers – the colleges, (2) the lenders – the banks, and (3) India’s households in the neighbourhood of the colleges.

Broad policy

The union government and the Reserve Bank of India (RBI) could act in unison to take the lead in designing policies aimed at repurposing the assets.

We suggest a broad, nationwide policy for these reasons:

First, PSBs have significant capital in these risk-prone, perilous assets. These are underused and impaired assets. The outbreak of COVID-19 has caused an exacerbation of their riskiness.

Second, many PSBs are under stress and have undergone broad-based reorganisation. They are now focused on their operations, technology and human capial.

Third, and therefore, a case-by-case resolution of the loan assets of the PSBs will be deferred and, perhaps, long drawn.

Fourth, the RBI should devise a broad-based and expeditious platform to bring the assets of the private colleges back into use.

Fifth, this common platform should offer visibility and consistency to potential users.

Sixth, we regard the state governments to be the principal potential users. Why? Public health is in the states list of the Indian constitution.

Seventh, the state governments are pressed for both time and funds in their efforts aimed at preparing for the third wave of the COVID-19 pandemic. The RBI could step in to solve both. First, the RBI could offer the collateral assets of the PSBs for expeditious conversion into functioning hospitals. Second, and thereby, it could ease the funds constraint.

Asset-cum-assurance

India has a supply problem in the health and hospital sector. Large parts of India have inadequate hospital infrastructure. The siting of hospitals is the first deficiency. The number of beds per million citizens is the second deficiency.

The state governments, the union government, the RBI and the PSBs could act together in overcoming a part of these two related deficiencies. How?

They could pursue two courses of action simultaneously. First, they could enable state-run hospitals to expand and spread their services to the repurposed sites and assets of the private colleges. Second, they could enable private hospitals to expand and spread their services to the repurposed sites and assets of the private colleges.

We may be late in addressing the pressures of the second wave. Yet we should go ahead with the repurposing. Why? The likelihood of the third wave is not too small. We need new hospital facilities to meet the contingency.

There is another important reason. The self-employed and the employed need a reliable assurance that they could get back to normal economic activities after the lockdown. They will continue to wear masks. They will follow all safety and hygiene instructions.

The sight, the site, the presence, the access and the availability of patient-cure and patient-care facilities in their neighbourhood will be the best assurance. This assurance will augment masks and their compliance with safety and hygiene instructions.

Forgive us if you deem this analogy to be inappropriate. The network of repurposed colleges will be the equivalent of the underground nuclear bunkers that European countries chose to build to infuse confidence in their citizens. Europe’s economies were rebuilt at a great pace after World War Two because the nuclear shelters and bunkers made the citizens feel secure.

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