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Interim Defence Budget: NOT MUCH TO CHEER ABOUT By Col (Dr) PK Vasudeva (Retd), 19 Feb, 2014 Print E-mail

Defence Notes

New Delhi, 19 February 2014

Interim Defence Budget


By Col (Dr) PK Vasudeva (Retd)


Finance Minister P. Chidambaram on February 17 announced a 10 per cent hike in defence expenditure to Rs 2,24,000 crore while presenting the interim budget for 2014-15 in Parliament. This is against the Rs 2,03,627 crore allocated in the budget for 2013-14. While Rs 89,588 crore hiked from Rs 86,740 crore (2013-14) has been set aside for defence acquisitions, Rs 127,082 crore will go towards payment of salaries and pensions and other expenses.


The increase is only marginal. In fact, a closer look will show that modernisation of the forces has taken a beating. It will be seriously affected meaning thereby that the threat perception from adversaries such as China and Pakistan has not been given the importance it deserves while preparing the defence budget.


The pay and allowances of the Indian armed forces have gone up from Rs 102,322 crore (BE 2013-14) to Rs 118,728 (RE 2013-14), an increase of Rs 16,400 crore. Thus, most of the 10 per cent increase in the budget has gone into this kitty. In 2014-15, the pay and allowances of the armed forces will amount to Rs 127,082 crore.


The hike in the allocation comes at a time when the Defence Ministry has a number of procurements in the pipeline whereas some others are in their final stages and expected to materialise in the coming months. These include the deal for 126 multi-role combat aircraft, which is expected to cost thousands of crores. Other acquisitions in the pipeline include deals for 22 Apache combat choppers, 15 Chinook heavy lift helicopters and the 126 Rafale combat aircraft.


The Defence Ministry is also in an advance stage of negotiations for a Fifth Generation Fighter Aircraft (FGFA) programme with Russia, on which it is expected to spend around Rs 1.5 lakh crore in the next 10-15 years. It is also in the process of issuing the tender for the approximately Rs 60,000 crore deal for procuring six large conventional diesel electric submarines for the Navy.


Importantly, the Ministry has been seeking additional funds of Rs 40,000 crore (Rs 400 billion) since last year, but that request has been turned down in view of the general overall slowdown. Sadly, the Congress-led UPA Government has overlooked the national security requirement, which goes without saying is under grave threat from both internal and external forces.


Interestingly, the most innovative--and potentially most costly -- feature of the defence budget is the acceptance in principle of ’one rank, one pension’ (OROP), which has been long-pending with the Defence Ministry. When Chidambaram made the announcement, Defence Minister A K Antony particularly was visibly happy in the Treasury Benches, thumping the desk with both his hands.


Apparently, the General Election, two months away may well have prompted the Government to take the decision. More so, as it is learnt that Congress Vice-President Rahul Gandhi gave such an assurance recently after having received the representation from the veterans. This would have been additionally hastened by BJP’s prime ministerial candidate Narendra Modi being critical of the delay in announcing OROP and the issue may have figured prominently in the party manifesto.


Although Chidambaram announced that he was putting aside Rs 500 crore to finance OROP, the consensus among defence administrators and ex-servicemen league/other organisations was that even conservatively, the aggregated cost of OROP across the forces and ranks would be anything between Rs 3,000 and Rs 4,000 crore, excluding the arrears. This does not include the administrative cost of calculating OROP.


Nevertheless, all ranks and veterans congratulated the Government for finally granting OROP to them. At the same time, they hope it is implemented. Opinion is that it will not be in vain because the UPA Government cannot risk annoying the large chunk of voters in the armed forces-- 1.4 million serving soldiers, 2.4 million pensioners, and a family unit of four each! 


OROP means that uniform pension shall be paid to defence personnel retiring at the same rank with the same length of service, irrespective of their date of retirement because of their early retirement. Any future enhancement in pension will be automatically passed on to the past pensioners.


At present, there are two groups of retirees-- those who retired before January 1, 2006 and others who retired thereafter and their pensions vary. In some cases, senior officers get lesser pension than their juniors. For example, the pension of a Colonel, who retired before January 1, 2006 is Rs 26,050. A Colonel, who retired in 2014, draws a pension of Rs 34,000. The decision will be implemented prospectively from 2014-15 and the contours of the scheme to be worked out over the next few weeks. Officials have stated that the formula had been accepted and that pensions would be revised accordingly.


The hike would be anything between Rs 8,000 to Rs 15,000 per month. Further, while Rs 500 crore is provisional allocation, the exact figure will be known in due course. It is important to note that defence pensions are not paid from defence allocations, but this rising figure is a reminder that the growing manpower costs are blocking force modernisation. In 2013-14, just 42 per cent of the budget (it should be 60 per cent) was earmarked for modernisation, with 58 per cent reserved for running costs. After Rs 7,868 crore was diverted in December 2013 from the capital to the revenue account, modernisation expenditure will fall to just 38 per cent this year.


The interim Budget also allocates 42 per cent to modernisation, a sum of Rs 92,601 crore. However, the decision to raise a mountain strike corps for the China border, which will add 80,000 soldiers to India's already bloated 1,373,678-man military, could again lead to funds meant for weaponry ending up being spent on salaries and pensions. In fact, it seems to be a trend every year, wherein modernisation of equipment is blunted by predictable events; the same patterns dealing double and triple whammies to capital spending.


Thus, the effective increase in the defence budget is actually 9.98 per cent but the increase in modernisation is just about 3.5 per cent. The present budget barely caters for inflation, and it assumes defence allocations of about 3 per cent of GDP, while actual allocations are barely 2 per cent.  So is there much to cheer about? – INFA


(Copyright, India News and Feature Alliance)

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