DEFENCE ISSUES

New Delhi, 13 March 2006

Defence Budget 2006

LACKS FUNDS FOR MARTYRS

By Col. P.K. Vasudeva, (Retd.)

The modernisation programmes that have been kick-started by the armed forces are set to continue, as the defence budget for 2006-07 has been hiked by 8.9 per cent (Rs. 7,300 crore) to Rs. 89,000, as against Rs. 81,700 crore in 2005-06 on expected lines. Finance Minister P Chidambram said while presenting the Budget that this hike is meant to cater to “normal growth in pay allowances, maintenance and for modernisation of the defence forces”. Now that the borders with Pakistan have been peaceful for two years,  the hike in the defence budget has been nominal.

Unlike in the previous year, the three Services did not spend all the money, but returned about Rs. 1,300 crore from the capital outlay.  The capital outlay for 2006-07 is Rs. 37,458 crore, up 13.25 per cent from the revised expenditure of last year, and constitutes a little over 42 per cent of the total defence budget.  The increase of Rs. 4,383 crore in arms acquisition funding implies that the Defence Ministry has a considerable sum in its hands to place orders for new equipment and also meet the commitments for orders placed by the previous and present governments. 

This will help the process of payments both for the aircraft carrier that India plans to build and the compliment of aircraft from Russia, submarines from France and advance jet trainers form Britain.  It will also help the Air Force call for international tenders to purchase 126 combat aircraft to shore up its depleting fighter squadron strength of MiG 21s and enable the army to purchase upgraded 155mm artillery guns. 

Despite its failures to meet the deadlines on the main battle tank and indigenous aero engines, the Defence Research and Development Organisation (DRDO) has been given a 7.48 per cent hike in allocation to Rs. 3,020.18 crore, from last year’s revised estimate of Rs. 2,809.96 crore. 

The allocation for the Army has been increased by 5.28 per cent to Rs. 33,205 crore from last year’s revised estimates of Rs. 31,539 crore, while that of the Indian Air Force  has been hiked by 7.88 per cent to Rs. 10,087.36 crore from Rs. 737.09 crore in 2005-06.  The Navy, the smallest of the three Services, has got a hike of 5.75 per cent, as the allocation been increased to Rs. 6,791 crore, compared to last year’s estimate of Rs. 6,422 crore. 

The revenue expenditure has been increased by 6 per cent to Rs. 51,542 crore, from Rs. 48,625 crore in 2005-06.  This is in line with the Army’s demand that the revenue outlay must not be downsized until the security situation stabilises to acceptable levels. 

While Prime Minister Manmohan Singh recently said that the country’s defence budget could be 3 per cent of GDP, the current budget is only 2.27 per cent of GDP, despite an 8.9 per cent hike.  India’s neighbours, China and Pakistan, allocate five to seven per cent of their GDP for their armed forces. 

The Government has also fulfilled the long-standing need of retired armed forces personnel below officer rank for better pension benefits.  About 12 lakh of these have benefited to the tune of Rs. 460 crore with effect from January 1, 2006. 

Having remained on the periphery of the Centre’s priorities in the 1990s, the defence sector came into the limelight after the 1999 Kargil conflict.  Moreover, nearly two years of full mobilisation on the border showed that the armed forces were under-prepared for a modern war.  The US-led military operations after 9/11 also contributed to increasing expenditure on military platforms and surveillance mechanisms. 

Despite the tranquil borders and a relatively stable situation in Jammu and Kashmir,  P. Chidambaram has made reasonably substantial allocations for the defence sector.  The revenue expenditure has been increased to 6 per cent because the Army will be averse to downsising until the security situation stabilises to its satisfaction.

On the capital expenditure side, the armed forces had made out a case for increasing the outlay from the current year’s Rs. 34,375 crore. Hence it has been increased by 13.25 per cent.  This is to meet the commitments for orders placed by the present and previous Governments and signed contracts for more equipment, primarily for the Army and the Navy. 

The funds allocated will help for purchasing more military hardware.  The Defence Ministry is in the process of purchasing a complement of surveillance planes for the Navy and a large number of tanks from Russia to replace its ageing Armoured Corps assets, besides air defence equipment.  The Navy is also planning to repeat an order for three warships from Russia.  It is keen on strengthening its nuclear force levels. 

Talks with Russia are highly confidential, but according to information, India is discussing the acquisition of long-range bomber planes and nuclear submarines.  However, there is no timeframe for completing the negotiations. In view of the complexity of such deals there was no requirement for Chidambaram to make allowance for these capital-intensive nuclear delivery systems. 

While India continues with high-end military purchases, industry is hoping to benefit from the spin-offs.  The Government has announced that foreign companies supplying equipment worth over Rs. 300 crore would have to source one-third of the value of the contract from the country.  The Defence Ministry is on the verge of finalizing this offset policy.  However, a question mark hangs over the policy because of pressure by foreign companies to modify some clauses to their advantage. 

While big military purchases and the huge expenditure on salaries and pensions for the armed forces are the two major components of the defence budget, the Army hoped for a little more generosity from the Finance Minister to adequately compensate soldiers who died in action.  The Defence Ministry had sent a proposal for higher compensation to its martyrs. This is unfortunate as the Finance Minister could not find funds for this noble cause. This is one of the reasons that the armed forces are not attracting sufficient number of quality youth of the country.

As a former Finance Minister, Pranab Mukherjee realises the constraints imposed by social sector commitments on the exchequer.  This is why he has refrained from  pressing for what the Prime Minister had assured: three per cent of the gross domestic product to the defence sector if the economy continued to grow at a healthy rate.  This long nurtured expectation of the armed forces, supported by strategic analysts, unfortunately has not materialised.---INFA

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