House panel’s view of defence funds: What flags it raises, how those affect the forces

The report notes the Budget “is not supportive to the inevitable needs of the Army”, and the allocation will fail to reduce the “huge deficiencies and obsolescence of weapons, stores and ammunition existing in Indian Army”.

Written by Sushant Singh | New Delhi | Updated: March 16, 2018 8:59:38 am
defence budget, gdp, indian army budget, 2018 budget allocation to airforce, budgetray allocations to navy, armed forces, indian express news The operational capabilities of the armed forces are at stake. (Express Photo: Shuaib Masoodi)

The Parliamentary Standing Committee on Defence, which submitted its 41st report in Parliament Tuesday, has been critical of the government’s budgetary allocations for the defence services. The report notes the Budget “is not supportive to the inevitable needs of the Army”, and the allocation will fail to reduce the “huge deficiencies and obsolescence of weapons, stores and ammunition existing in Indian Army”.

What does the report say?

The report points out that the budgetary allocations for the defence forces in the 2018-19 Union Budget were inadequate. It notes the allocations will affect the state of preparedness of the forces. The testimonies of senior military officials, quoted ad verbatim in the report, paint a dismal picture of the prevailing situation.

But is the allocation really inadequate?

It depends on how one sees it. The defence budget (excluding pensions) for the coming financial year is Rs 2,79,305 crore, having risen steadily from Rs 2,03,499 crore in FY13-14, the last full Budget presented by the UPA dispensation. But as percentage of total central government expenditure, the budget has come down to 11.44% in FY18-19 from 13.05% in FY13-14. The numbers are starker when seen as a percentage of GDP — going down from 2.08% in FY13-14 to 1.49% in FY18-19 (see box). This is perhaps lower than even pre-1962 levels, when the Budget hovered around 1.6% of GDP.

As per Stockholm International Peace Research Institute, a Swedish organisation conducting research in conflict and armaments, Pakistan spends 3.4% of its GDP on defence; the figures for the US, UK and Russia are 3.3%, 1.9% and 5.3% respectively (see box).

Source: 41st report of Parliamentary Standing Committee on Defence

What did the Services want and get?

For the capital budget — meant for procurement — the Defence Ministry projected a budgetary requirement of Rs 1,72,203.30 crore for FY18-19. But it was allocated only Rs 93,982.13 crore by the Finance Ministry.

Similarly, for the revenue budget (excluding salaries), the ministry’s projection was Rs 80,160.02 crore. However, it was allocated just Rs 46,339.62 crore.

What does the budgetary shortfall mean?

The shortfall in the capital budget will restrain the armed forces from undertaking any major procurements in FY18-19. In fact, so grave is the magnitude of the shortfall that the defence forces might lack the requisite funds to pay for their committed liabilities — payments made every year for procurement deals that have already been signed. Although the committed liability for FY18-19 is estimated to be Rs 1,10,043.78 crore, the government has allocated only Rs 93,982.13 crore.

According to the testimony of Vice Chief of the Army Staff Lt Gen Sarath Chand, the marginal increase in the capital budget allocation has dashed all hopes of the Army, as it would be barely enough to counter inflation, and the increased tax burden due to the implementation of the GST.

How will the shortfall affect the Army?

Lt Gen Chand informed the Committee that “allocation of insufficient funds to meet liabilities of routine maintenance, making up of deficiencies, emergency procurements…, will definitely have a negative effect. This shall also affect the serviceability of the equipment that we are holding besides leading to legal issues of not making payments in time. In addition to this, there is an additional burden of Rs 5,000 crore because of new taxation laws… which has come into force in the last one year… So, there is a net shortfall of Rs 9,282 crore in our revenue requirements.”

The shortfall will also adversely affect the security of military installations, as expenditure for this purpose will have to be pruned. The Vice Chief said: “We have had instances of fidayeen attacks, people entering the cantonment areas… The Ministry of Defence has again delegated powers to the VCOAS [Vice Chief of Army Staff] to spend as much as Rs 14,097 crore towards security-related issues. However, there is no separate allocation for this. So, this money also [has] to be found from the same budget leaving us with no choice but to re-prioritise either to reduce our requirement as far as the security of military stations are concerned or to go slow on some other acquisition.”

Why should all of this worry us?

The Army is expected to maintain adequate ammunition and spares to fight a 40-day war, with the critical stocking level fixed at 10 days of intense fighting. In order to maintain the critical level, the government delegated financial powers to the defence forces last year. Contracts worth Rs 2,246 crore have already been signed, and have to be paid for. Agreements worth Rs 9,980 crore are on the cards.

To make up for the shortfall in the critical stocking level, the Army would require Rs 6,380 crore. However, the government has allocated just Rs 3,600 crore for the purpose.

What is the situation with the Navy and the Air Force?

The current allocations, according to the report, would constrain the progress of new deals and the ability to conclude contracts, delay the induction of critical capabilities, ammunition and spares, besides affecting the day-to-day running of the Navy and hampering the pace of its modernisation.

The Air Force has informed the Committee that the budget shortfall would lead to an inability to procure spares and fuel, and affect the maintenance and training of fleet, and serviceability.

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