The finance minister deserves to be congratulated for establishing a non-lapsable Defence Modernisation Fund from the next financial year —- a measure that should have been put into practice decades ago. This would remove a major hurdle in the modernisation process. Acquisition of new weapons and equipment is a complex process and inevitably generates strong pressures from various quarters. Even in the United States which manufactures all its military weapons and equipment, there are substantive pulls and pressures, many of them due to differences in professional judgements, some due to availability or otherwise of resources, many due to the proverbial turf battles, and others due to political considerations. The users, the defence services, obviously want the best in military technology, since in the ultimate analysis, they are the one’s who carry the responsibility for success or failure in battle. And rapid advances in military technology have raised the premium on better weapon systems. In fact superior technology is a major factor in modern warfare as indeed all the recent wars across the world prove. In a developing country like ours, there are additional complicating factors in defence modernisation processes. To start with, a large proportion of our defence equipment is still purchased from abroad even 57 years after independence. Global defence industry has been going through dramatic changes since the Cold War ended more than a decade ago. Our traditional supplier of weapons and equipment, the former Soviet Union, disintegrated and landed up in serious social-economic crises. Bilateral trade also suffered heavily. The negative impact on supplies of weapons equipment and spares created additional complications for us. As it is, many inefficiencies and complexities had crept into our procurement system and decision making for modernisation. Some of these have been sorted out by implementation of the decisions of the Group of Ministers taken three years ago on improving the management of national security. But the result has been that, with a budgeting system that allocates funds on an annual basis, with a review half-way down, large amounts of funds budgeted for defence and its modernisation have been lapsing at the end of financial year for the past couple of years. For example, for the three year period ending in March 2003, a total of Rs 25,699 crore remained unspent out of the total budgeted figure of Rs 1,85,587 crore. The inability to spend as much as an average of 14 per cent of the budgeted amount would undermine any budgetary control and defence planning. And the effect has been that while defence modernisation had suffered earlier because of lack of resources, now inability to spend available resources within the stipulated financial year has adversely affected defence preparedness, adding to the backlog. Establishing a non-lapsable Defence Modernisation Fund of Rs. 25,000 crore would go a long way in assuring that modernisation processes do not suffer due to procedural delays and unavoidable reasons like thorough evaluation of the systems being acquired. It needs to be recalled that the National Security Advisory Board had been reportedly pressing for such a step ever since the present NSC system was established in 1999. The bipartisan Standing Committee on Defence of Parliament have also been pressing the issue for years, as have been most of the informed opinion on the subject. One wonders why it took such a long time to introduce what in essence was very much part of the budgetary system till 1947! Perhaps it is our unwillingness to change that causes such problems in management of defence. The actual functioning of the modernisation fund, of course, must be evaluated carefully over the coming years especially since this is a deviation from the traditional budgetary approach. Its utility may remain less than optimal if the Five Year Plans are not finalised well before the plan period commences. At the same time, we need to re-define the budget heads to clearly indicate the resource allocation and utilisation under three functionally different heads of modernisation, maintenance and operating costs of the defence forces separately rather than the current archaic system that does not indicate functional segments of a large amount of the tax-payers money in an area so crucial to our security and defence.
