DEFENCE NOTES
New Delhi, 20 March 2006
Defence Budget Trend
INADEQUATE YET GOING UNSPENT
By B.K. Mathur
The Defence Ministry’s budgetary
proposals for 2006-07 have the same trend as in the last few years: Substantial
increase in capital outlay but inadequate provision for running routine
expenses. The provision of Rs.77,000
crore for 2004-05 increased to Rs.83,000 crore for 2005-06 and now rose
Rs.89,000 crore. But significantly, and concernedly, much of the provisions
earmarked for capital outlay have remained unused and returned for years
now. Despite lack of planning by the
Defence Ministry, the capital outlay for 2006-07 has been fixed at Rs.37,458
crore for military hardware, a 13 per cent jump from the current year’s
allocation for capital outlay, of which Rs.13,000 crore has remained unspent.
It needs to be stressed that defence expenditure should be related to
military effectiveness after taking
into consideration security environment, current military strategies and, of
course, availability of funds that require to be used judiciously. The Finance
Minister, as often mentioned in this column, does not have any currency
producing machine. Despite this, successive
Finance Ministers post-1971 war against Pakistan have provided maximum possible for Defence. The Defence budgets since then
have invariably ranged about 15 per cent of the Union Government’s
expenditure. Also, the Finance Ministers
have invariably assured Parliament
that shortage of funds would not come in the way of the nation’s security.
Despite such commitments and
significant increase in Defence allocations year after year, the provision has
not gone beyond three per cent of the GDP during the last decade and more,
which has always been much below than that of our immediate neighbours, Pakistan and China. In rupee terms the Defence budget provisions
have undoubtedly risen annually. There
has been a steep rise of 82.5 per cent from Rs.35,620 crore in 1997-98 to Rs.65,000
crore in 2002-03. But in real terms the
hike during these years has not been more than seven per cent each year, which
has been invariably grossly
insufficient to update the military machines in accordance with the
requirements for the present security environment.
It is another matter, as
Chidambaram noted while presenting the Defence budget for 2006-07, that
environment along the Indo-Pak border, especially the LoC, has improved. But, the armed forces have always to remain
in operational readiness to face any
eventuality. Moreover, the thumb rule
for Defence budgeting is to provide for normal inflation as much as about 50
per cent more to meet the need for upgradation of military machines and their
cost escalation in regard to the import of the equipment and weapon systems. In this context, it is essential to understand the all expensive military
hardware cannot be bought or produced indigenously overnight.
It needs years of planning and
coordination between the Defence Ministry and Service headquarters. Lack of it is the bane of India’s security planning. This has led to the great tragedy that an impression has been created for the last five or six
years that the Defence Ministry fails to spend all the money allocated to it in
the budget. Even a former Defence Secretary
remarked last year when about Rs.9,000 crore was returned unused as the
allocation made for capital outlay or capital expenditure had to be returned
unspent. He told me: “The Ministry does
not spend and returns the allocation unspent.
The same happened last year and during the current fiscal, that is
2005-06.
This has been happening despite
the fact that the Defence Minister, Pranab Mukherjee had stated in July 2004
that “most of the capital outlay will be utilized on the commitments of the
defence acquisitions already made and the supplies are in the pipeline.” In fact, Mukherjee had then indicated that he
may have to ask for more on the capital outlay account, because some new and
crucial purchases were needed to be made after clearing payments for the
already finalized deals for expensive machines. Some payments may have been
made, but significant amount of funds allotted for capital outlay remained
unspent during the last two years. Nobody seems to be bothered why this has
been happening.
The main reason for this is the
Defence Ministry’s or the Cabinet Committee for Security’s failure to finalise
timely the prolonged negotiations for the purchase of expensive machines and
weapon systems from abroad. Obviously,
there is undue delay in implementing big military modernization projects,
despite the fact that defence preparedness
suffers, while an impression goes
round the world that India
spends too much on defence year after year. No effort has obviously been made
to set things right. Remember, after the
Kargil war the Chiefs of Staff Committee, headed by the, then, Army Chief, Gen.
Ved Prakash Malik, had impressed up
the Defence Ministry the need for a greater say of the armed forces in the
procurement of weapon systems.
The Chiefs Committee had
suggested that the Services representatives be also consulted when the
purchases are placed before the Cabinet Committee on Security (CCS) for final
approval. But the system has by and
large remained unchanged, with the Services’ role remaining restricted to
participation in the Price Negotiations Committees (PNCs). This is so even though the Defence Minister
has for long been talking of integrating the Service Headquarters with the
Ministry. The bureaucracy-controlled
system continues. After the Finance
Advisor (Defence Services) works out the financial liability, the Defence
Ministry gets the final approval from the CCS.
This process invariably
causes delays in the procurement of weapons and weapon systems.
The tragedy does not end
there. There have been instances when
the Ministry has “reworked” deals already endorsed by the PNC before forwarding
them to the CCS without the Service Headquarters even getting the whiff of the
changes made in the deal. One instance,
among several others, can be quoted to prove the point. APJ Abdul Kalam, as the Scientific Advisor in
the Ministry headed the PNC on Global Positioning System (GPS) for Sukhoi-30
aircraft. He had recommended the
equipment produced by the French company, Sagem. But the contract finally went to Sextant
Avionique of French. The forces want to oversee arms purchases till the final
CCS approval to ensure that the PNC heads are not blamed in the event of
contracts coming under a cloud.
Both the Finance Minister and
Defence Minister have promised that there will be no shortage of funds for
Defence. But the budgetary provisions
continue to be returned unused. The
trend should change. The whole
procurement system needs to be streamlined.
A suggestion was made by the Parliamentary Committee for Defence that
unutilized funds should remain with the Ministry and not added to the next
year’s budget. They should be put under
separate head and spent on the projects for which they are meant. It is a well-meaning proposal, which will not
only change the budgeting pattern for Defence but also avoid delays in the
implementation of projects for want of funds.---INFA
(Copyright,
India News and Feature Alliance)
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