Hyderabad: The Andhra Pradesh government’s move to establish 10 new medical colleges in the state under the Public-Private-Partnership (PPP) model has hit a wall due to a tepid response from the private healthcare sector, two state health ministry officials told ThePrint.
Earlier this month, the Telugu Desam Party (TDP)-led National Democratic Alliance (NDA) government offered to partly finance the colleges through viability gap funding (VGF), but the tenders remain unopened because there were no bidders.
The state government requested VGF from the Centre for five hospitals it plans to construct at a cost of Rs 3,700 crore. Officials in the health department confirmed to ThePrint that an undisclosed sum has been received to commence construction work on the colleges.
Of the 17 previously planned government medical colleges, 10 are slated for execution and operation via the DBFOT (Design, Build, Finance, Operate, and Transfer) PPP framework.
“As of now, no one has come forward. We have been given to understand from the private players that they will not be able to sustain their operations under the terms currently stated in the policy,” Dr Anil Kumar, Additional Director, Department of Health Education, Andhra Pradesh, told ThePrint.
The current dispensation in Andhra Pradesh—run by the TDP, Jana Sena Party (JSP) and the Bharatiya Janata Party (BJP)—issued a formal order (GO 590) in September last year, laying out the policy to develop 10 government medical colleges under the PPP model.
It replaced the previous YSR Congress Party’s (YSRCP) decision for the government to build and run the medical colleges and hospitals.
State health minister Satya Kumar Yadav said that of the 17 medical colleges initiated during the previous YSRCP government, 11 were sanctioned under the National Bank for Agriculture and Rural Development (NABARD), while three each were taken up under Central government schemes and the Special Assistance to States for Capital Investment (SASCI) scheme.
He added that YSRCP had only spent Rs 1,550 crore on building hospitals and that the NDA government has spent Rs 900 crore on these colleges since assuming office.
“The government is taking measures to run 10 medical colleges under the Public Private Partnership model in the next two financial years,” he said, adding that the total cost is estimated at Rs 8,480 crore.
Of the 17, five hospitals in Vizianagaram, Rajamundry, Eluru, Machilipatnam and Nandyal had already begun operations in the first phase, running undergraduate and postgraduate courses. A college in Paderu was opened in 2025, and the Centre’s intervention was sought for Palakollu, Amalapuram, Narsipatnam, Bapatla, and Penukonda.
Another GO was passed in December 2025, granting procedural and financial clearance for the colleges and hospitals to be built under the PPP model Phase-I in Adoni, Markapur, Madanapalle, and Pulivendula.
PPP model unviable: Private players
One key reason given by private players for not bidding for the projects is the 33-year concession period after which the private party will have to transfer ownership of the hospital and college to the government.
Dr K. Vijay Kumar, President of the Association of Super Specialty Hospitals of Andhra Pradesh, told ThePrint, “It is an unviable project by any means. How can the government expect private players to build, run, and then transfer these assets back to it after 33 years? It is almost like nurturing a child and then giving its custody to another parent,” he said.
Dr Vijay Kumar was among the few professionals present when the first round of bids was invited. With the government interfering in the college fee structure, seat reservation, and costs of providing medical care, private players are unsure they will break even 10 years after commencing operations, private players told ThePrint on condition of anonymity.
Second, the government has mandated that 50 percent beds be reserved for patients availing the Aarogyasri free healthcare scheme. With this provision, private players are unsure if successive governments would be able to keep up the costs of reimbursement.
In April 2026, the Andhra government owed public and private hospitals at least Rs 3,000 crore in dues against free services provided to patients under Aarogyasri.
To mitigate its losses and clear dues, the state government entered into a unique One-Time Settlement (OTS) Tri-Party Bill Discounting mechanism, settling Rs 1,000 crore, leaving the remaining unpaid private sector balance at just over Rs 1,000 crore.
Healthcare entrepreneurs in Andhra Pradesh who spoke to ThePrint said that it costs Rs 75 crore to Rs 100 crore per year to run ‘Category B’ colleges in Tier II towns to pay salaries and foot recurring expenses.
Finally, the issue of policy continuity is what puts a spanner in the works of the PPP model. Former Chief Minister Y.S. Jagan Mohan Reddy issued a statement saying that all PPP contracts awarded by the current dispensation would stand cancelled if his party came to power in the future.
“For a businessman, policy continuity is a must. With cases currently pending in the Supreme Court on the government’s interference related to fees for medical procedures, the current policy does not legally protect doctors or hospitals,” said Dr Vijay Kumar.
What policy experts say
The PPP model has also come under severe criticism by policy experts and healthcare specialists.
Former Chief Secretaries, Union Cabinet Secretaries, and healthcare policy experts have argued that the framework is structurally flawed because it inherently converts a fundamentally social good into a profit-driven venture.
By handing over administrative and operational control of newly built public infrastructure to private corporate entities, the model risks skyrocketing healthcare costs and medical education through exorbitant fees and private quota seats, they argued.
K. Sujatha Rao, former Union Cabinet Secretary for health, told ThePrint, “Healthcare is a basic right, and it is the state’s responsibility to provide this to all its citizens. The PPP model threatens to dismantle the public health system if public assets are handed over to private entities without proper government oversight. Private players are known to prioritise profits over equitable healthcare access for all.”
Going beyond the economics of healthcare, she argued that this new model directly violates the Directive Principles of State Policy enshrined in the Constitution of India, which mandate that the government must actively work to raise the level of nutrition, improve public health, and secure a just social order.
Dr B. Chandrasekhar Reddy, a neurologist and Former Chairman of the AP Medical Services and Infrastructure Development Corporation, emphasised that every district must have a government-run medical college and tertiary care hospital to ensure healthcare costs remain affordable.
“Also, today, the state’s most vulnerable population visits the rural primary healthcare centres (PHCs) and subsequently secondary healthcare units at the mandal levels. If they remain within the government system, their data remains intact, and there is continuity in treating the patient’s disease. The state cannot abdicate its responsibility to the private sector, and healthcare should be treated as a non-negotiable right to life,” he told ThePrint.
Union government backs Naidu
However, the TDP and the BJP’s Satya Kumar, who is the health minister, said the PPP model is vastly different from privatisation.
He said the government retains ownership of the medical colleges and hospitals, and private entities only invest in building and operating them for a fixed period under the model.
Among the other backers are the NITI Aayog and Union Health Minister J.P. Nadda, who approved the proposal, writing a letter last December, citing PPPs’ “proven role” in strengthening healthcare infrastructure and improving service delivery.
Nadda wrote that “by strategically adopting PPP models, states and Union Territories can accelerate healthcare reforms, optimise resource utilisation, and ensure more equitable access to quality healthcare services”.
(Edited by Sugita Katyal)
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