Home arrow Archives arrow Defence Notes arrow Defence Notes 2006 arrow Defence Budget Trend:INADEQUATE YET GOING UNSPENT, by B.K. Mathur,20 March 2006
News and Features
INFA Digest
Parliament Spotlight
Journalism Awards
Defence Budget Trend:INADEQUATE YET GOING UNSPENT, by B.K. Mathur,20 March 2006 Print E-mail


New Delhi, 20 March 2006

Defence Budget Trend


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)

< Previous   Next >
  Mambo powered by Best-IT