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Defence Budget: Looking at new weapons, forces find capital outlay slashed

Defence budget rises less than 5%, capital allocation reduced 8.5 % following under-utilisation.

File photo of an army personnel on patrol. File photo of an army personnel on patrol.

For once, the finance minister’s budget speech did not mention military spending, but budget documents showed it will be Rs 2.58 lakh crore, or 1.74 per cent of the GDP. And at a time when the forces are looking at modernisation, the capital outlay has been slashed by 8.5 per cent.

The defence allocation is only 4.87 per cent higher than last year’s Rs 2.46 lakh crore, of which the ministry was able to spend only Rs 2.33 lakh crore. Of the Rs 13,000 crore returned in FY 2015-16, Rs 5,738 crore was used for additional expenditure on defence pensions.

In another deviation from what has been the practice since the mid-1980s, the budget documents have included the pensions, leading to an overall budget of Rs 3.40 lakh crore. The corresponding figure for FY 2015-16, if defence pensions were to be included, would be Rs 2.93 lakh crore against an allocation of over Rs 3 lakh crore.

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The current allocation includes Rs 1.44 lakh crore for revenue expenditure, out of which Rs 94,000 crore will go towards pay and allowances. This caters for the increase on account of the implementation of the recommendations of the Seventh Pay Commission. Rs 1.32 lakh crore was allocated for revenue expenditure of defence services in FY 2015-16, but the ministry could spend only Rs 1.26 lakh crore. This is the first time in recent past that defence services have been unable to spend the money allocated in their revenue budget.


An amount of Rs 78,586 crore has been allocated for capital expenditure, a reduction from Rs 85,894 crore last year. The defence services were able to spend only Rs 74,229 crore from the allocated amount, which means that 13.5 per cent of the capital budget was returned.

Organisations directly under the defence ministry such as Rashtriya Rifles, Coast Guard, Border Roads Organisation, National Cadet Corps, Defence Research and Development Organisation and Ordnance Factories Board have been allocated Rs 35,683 crore. This includes Rs 11,243 crore for capital expenditure.

The capital budget is mainly used for procurement of weapon systems and platforms. More than half goes towards paying for committed liabilities which are annual payments due for military equipment already bought. This leaves little for signing deals to buy new equipment, reflected in the fact that new deals worth only Rs 39,955 crore have been signed in FY 2015-16, compared to Rs 1.33 lakh crore from FY 2012-13 to 2014-15.


The 8.5 per cent drop in capital outlay raised concerns over ongoing modernisation works. “The capital outlay has been slashed, which leaves us with less money for modernisation. It is surprising that the minister did not make a mention of the defence budget in his speech,” said Colonel Anil Kaul, defence analyst.

The ministry had in December pegged the total number of cleared projects at Rs 1.50 lakh crore. Moreover, projects worth Rs 55,800 crore have been cleared under the Make in India initiative. Some of the critical weapon systems in the process of being acquired include the M- 777 Howitzer gun systems for the Army’s artillery arm. While the Indo-French Rafale deal which has been pegged at Rs 60,000 crore has yet not been signed, also in the pipeline are contracts for six conventional submarines under Project 75i at about Rs 80,000 crore, torpedoes for the submarines, choppers for IAF as well as Army. Last year, the government has also signed a deal with Boeing for Apache attack helicopters and Chinook heavy-lift choppers, towards which payments will have to be made.

In a report in Parliament last week, a parliamentary standing committee had recommended the defence budget be fixed at least at 3 per cent of the GDP and said: “It can be averred that the budget cuts leave the possibility of having adverse implications on the country’s security. The committee, therefore, reiterates their earlier recommendation and desire that the defence ministry take up the issue of providing adequate budgetary resources at the highest level, so that the modernisation programme as well as other priorities are not hampered.”

First published on: 01-03-2016 at 03:35:20 am
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