Budget hike demand turned down, MoD to juggle capital funds

Sources say the shortfall is mainly due to unexpected rise in fuel costs that led to rationalisation of equipment usage and exercises this year. As the armed forces are one of the largest consumers of fossil fuel, the hike in global prices coupled with exchange rate variation resulted in a huge hike in expenditure. Also, the government announced new measures this financial year for increased pensions that put an additional burden on expenditure.

Sources said a request had been made to the Finance Ministry for a hike. However, the ministry was informed that while it would not be asked to cut expenses to the tune of 10 per cent as other ministries have been told to, there is no question of a budget hike.

The Finance Ministry was not averse to reallocation of funds from the overall budget for meeting increased revenue expenses.
It is believed that Rs 6,500 crore allocated for Army and Ordnance Factory Board projects will be diverted. It may be noted that unlike its sister services, the Army has not been able to spend its modernisation budget, given that no major deal was struck. Two major projects that were to be signed this year — M777 Howitzers and 197 new helicopters — have not gone through. On the other hand, the Navy and the Air Force managed to spend funds earmarked for acquisition and modernisation. Both exhausted over 80 per cent of their capital acquisition fund.