MoD slams FinMin for defence funding shortfall

After years of criticism from Parliament’s Standing Committee on Defence for defence funding shortfalls, and for surrendering thousands of crores of unspent money each year, the defence ministry (MoD) has squarely blamed the ministry of finance (MoF).

A series of reports tabled by the committee on Thursday painted a worrying picture of a government that, year after year, forces the army, navy and air force to make do with onethird to half less then the money the services requested at the time the Budget was being framed.

As evident from the chart, the services are first allocated a significantly smaller capital budget than demanded during the budget framing. Then, at the stage of revised estimates, that is often slashed further. Finally, by the time the year ends, the military is often prevented from spending even that lowered allocation.

In the best case in the last four years, the navy in 2014-15 was allocated 80 per cent of what it demanded for capital expenditure. In the worst case, the army that year got just 45 per cent — less than half of what it had demanded.

The figures in the chart are extrapolated from the committee’s Report No. 31, entitled “Capital outlay on defence services, procurement policy and defence planning”. That is one of eight reports that the committee released on Thursday.

The MoD is required to comment on the committee’s reports, which are based on information provided by the MoD in writing and in personal depositions by ministry and service officials.

In its Report No 24, titled “Action taken by the Government on the Observations/ Recommendations contained in the Nineteenth Report…”, the Committee noted that the budget allocation of ~2,46,727 crore for 2015-16 was reduced by ~22,091 crore to ~2,24,636 crore. This included a reduction of ~8,903 crore in the revenue budget and ~13,188 crore in the capital budget.

On Thursday, in its “action taken report” the MoD flatly blamed the MoF and pointed out that the MoD was “bound by budgetary ceilings conveyed by the [MoF]. Though reference was made to [MoF] for augmentation of ceilings conveyed by them, no positive response is received in this regard.”

Further, the MoD agrees with the Standing Committee that there was only a token increase in the next year’s budget. The allocation for 2016-17, amounting to ~2,49,099 crore, was an increase of only ~2,372 crore over BE 2015-16 — just 0.96 per cent.

It was only because the RE was slashed by ~22,091 crore that the BE 2016-17 appeared to be an increase of 24,463 crore over RE 2015-16, a 10.89 per cent rise.

The MoD, “action taken reply” notes: “This Ministry is in agreement with Committee’s observation that the funds allocated are not adequate to meet the requirement of Services. This fact has also been brought to the notice of Ministry of Finance but no positive response is received in this regard.”

This has been the pattern for several years: when the defence budget is allocated in February, the government vows additional allocations to make good any shortfalls. But, when the revised estimates are published, quite the opposite happens instead: thousands of crores are slashed from the budget estimates.

Sharply criticising the “miniscule” annual increase in defence spending, the Standing Committee noted: “the allocation does not account for the annual inflation and fall in the value of the Rupee…. [S]uch a MEAGER INCREASE IN THE BUDGET DOES NOT IN ANY WAY FULFIL THE BASIC REQUIREMENTS OF THE FORCES let along the modernisation aspect (sic).”

In its “action taken reply”, the MoD indicates that it deals with the dire shortfall of funds by prioritising spending on the most critical requirements, while less urgent requirements are placed on the backburner.

“There is a continuous monitoring of the expenditure progress and prioritisation of the most urgent requirements. This helps to ensure that limited resources are devoted to the most critical requirements.”

Said the Standing Committee: “Defence Expenditure as percentage of Central Government Expenditure has NOSE DIVED from the level of 15.24 percent in 2000-2001 to 12.59 percent in BE 2016-17 thereby giving an impression that the Government is not paying attention in providing sufficient allocations to the Ministry of Defence. This is highly ALARMING and needs to be rectified (sic)”.

The MoD’s “action taken reply” notes: “It is agreed that in percentage terms there is a decreasing trend in Defence Expenditure vis-à-vis Central Government Expenditure. It may, however, be added that every year there has been increase in Defence Expenditure.”