Par­lia­men­tary Com­mit­tee on De­clin­ing De­fence Bud­get

Rais­ing se­ri­ous ques­tions over the de­clin­ing fund al­lo­ca­tion for de­fence, Stand­ing Com­mit­tee on De­fence has asked for fresh look at the cre­ation of ‘Non-lapsable De­fence Cap­i­tal Fund Ac­count’ for cap­i­tal ac­qui­si­tion


Rais­ing se­ri­ous ques­tions over the de­clin­ing fund al­lo­ca­tion for de­fence, Stand­ing Com­mit­tee on De­fence has asked for fresh look at the cre­ation of ‘Non­lapsable De­fence Cap­i­tal Fund Ac­count’ for cap­i­tal ac­qui­si­tion.

Ro­hit Sri­vas­tava

IN ITS LAT­EST RE­PORT, Par­lia­men­tary Com­mit­tee on de­fence crit­i­cised govern­ment for de­cline in al­lo­ca­tion for de­fence ac­qui­si­tion. Com­mit­tee un­der the chair­man­ship of Ma­jor Gen­eral B.C. Khan­duri (Retd) in its Ac­tion Taken Re­port (36th re­port) on the rec­om­men­da­tion of its ear­lier re­port, laid in the Par­lia­ment on De­cem­ber 19, said there is de­cline in bud­getary al­lo­ca­tion for the cap­i­tal ac­qui­si­tion.

“The Com­mit­tee ob­serve that from 2012-13 on­wards, the ‘Cap­i­tal’ com­po­nent of the bud­getary al­lo­ca­tion has de­creased in com­par­i­son to ‘Rev­enue’ com­po­nent of the Bud­get. The over­all ‘Rev­enue’ to ‘Cap­i­tal Ra­tio’ of the bud­getary al­lo­ca­tion stands at 61:39, 61:39, 63:37, 65:35 and 68:32 for 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 (RE), re­spec­tively,” the re­port said.

The rev­enue com­po­nent of the bud­get caters to salary, pen­sion, es­tab­lish­ment ex­penses, ord­nance, trans­porta­tion, main­te­nance and other oblig­a­tory ex­penses and the cap­i­tal com­po­nent pro­vides for land ac­qui­si­tion, con­struc­tion works, new weapons sys­tems, etc.

Ex­press­ing its deep an­guish over the ra­tio which is af­fect­ing the mod­erni­sa­tion of forces, Com­mit­tee in its rec­om­men­da­tion said, “Min­istry of De­fence should look into this as­pect and over­haul their plan­ning and bud­get­ing mech­a­nism to en­sure a pru­dent and equitable dis­tri­bu­tion of funds to ‘Rev­enue’ and ‘Cap­i­tal’ heads.”

Min­istry in its re­sponse to the rec­om­men­da­tion had said that “rev­enue out­lay ex­pen­di­ture fol­lows a pat­tern due to its in­her­ent char­ac­ter­is­tics, cap­i­tal out­lay fluc- tu­ates depend­ing on mile­stone pay­ments, new ac­cru­als etc., which may not nec­es­sar­ily in­crease ev­ery year.”

Com­mit­tee after ex­am­in­ing the De­mands for Grants ob­served that the “cap­i­tal ex­pen­di­ture has never re­mained un­der con­trol and the al­lo­cated funds un­der Cap­i­tal Head are never fully utilised.”

Ac­cord­ing to the re­port, “In Bud­get Es­ti­mate (BE) 2016-17, un­der cap­i­tal head, Army was al­lo­cated 26,935.81 crore at BE stage and 24,017.86 crore at Rev­enue Es­ti­mate (RE) stage but was able to spend only 17,198.92 crore upto De­cem­ber, 2016. The al­lo­ca­tion for cap­i­tal ac­qui­si­tion for Navy which was 21,041.22 crore dur­ing BE 2016-17 was re­duced to 18,742.17 crore at RE stage, but ex­pen­di­ture upto De­cem­ber, 2016 was 12,167.23 crore. The al­lo­ca­tion for cap­i­tal ac­qui­si­tion for Air Force which was 29,795.42 crore dur­ing BE 2016-17 was re­duced to 28,239.86 crore at RE stage, but ex­pen­di­ture upto De­cem­ber, 2016 was 23,770.25 crore.”

Min­istry of De­fence, re­spond­ing to the query on rea­sons for re­duc­tion in bud­get al­lo­ca­tion at RE stage for last fi­nan­cial year, said that the Min­istry of Fi­nance (MoF) did not grant ad­di­tional al­lo­ca­tions due to slow pace of ex­pen­di­ture.

Blam­ing the un­der­util­i­sa­tion of funds to the loop­holes in the plan­ning and bud­getary ex­er­cise of the MoD, which lead to re­duc­tion in al­lo­ca­tion of the funds by MoF, Com­mit­tee, has asked min­istry to “rec­ti­fied the de­fi­cien­cies/anom­alies in their bud­getary plan­ning and ex­pen­di­ture and took foolproof mea­sures to en­sure max­i­mum util­i­sa­tion of the funds.”

‘De­tails of Bud­get Es­ti­mates (BE), Re­vised Es­ti­mated (RE), Mod­i­fied Ap­pro­pri­a­tion (MA-Fi­nal Grant) and Ac­tual Ex­pen­di­ture un­der Cap­i­tal Head dur­ing the last five years is given in ta­ble:

Talk­ing about how the cuts made by the MoF at the RE stage af­fects ex­pen­di­ture by MoD, the re­ports said that the cuts leads to shift­ing of large pay­ment to next fi­nan­cial year.

“It may also be added that bulk of Cap­i­tal ex­pen­di­ture com­prises of Cap­i­tal Ac­qui­si­tion which in­cludes Com­mit­ted Li­a­bil­i­ties and New Schemes. Com­mit­ted Li­a­bil­i­ties be­ing mile­stone pay­ments may not fruc­tify due to slip­pages in achiev­ing project mile­stones by the ven­dor or de­lay in de­liv­ery of prod­uct/equip­ment,” it said.

Rap­ping the MoD for pass­ing the onus of un­der­util­i­sa­tion to MoF cuts or de­layed de­liv­ery, the com­mit­tee said, “There ap­pears to be no self-in­tro­spec­tion by the Min­istry of De­fence in re­gard to un­der­util­i­sa­tion of funds.”

To over­come these prob­lems, the com­mit­tee had rec­om­mended ‘ Roll on’ and ‘Non-Lapsable’ al­lo­ca­tion for de­fence mod­ern­iza­tion but the min­istry did not favoured the pro­posal as sub­stan­tial amounts was not avail­able as sur­plus for rolling over.

Ac­cord­ing to the re­port, MoD has re­viewed its po­si­tion and has ac­cepted the use­ful­ness of roll over fund for cap­i­tal pur­chase.

“A pro­posal for ob­tain­ing ‘in-prin­ci­ple’ ap­proval of Min­istry of Fi­nance on cre­ation of Non­lapsable Cap­i­tal Fund Ac­count has been sent on Fe­bru­ary 9, 2017 by the Min­istry of De­fence after ob­tain­ing ap­proval of Hon’ble Rak­sha Mantri and re­sponse from the Min­istry of Fi­nance is awaited,” re­port said.

But the pro­posal is not cut­ting favour with MoF which ac­cepts the ad­van­tages of ‘roll on’ fund but feels that the prob­lem can also “be ad­dressed through nor­mal bud­getary mech­a­nism.”

Dis­agree­ing with the MoF, Com­mit­tee said, “De­fence pro­cure­ment and ac­qui­si­tion is a com­pli­cated process in­volv­ing long ges­ta­tion pe­ri­ods and funds al­lo­cated for cap­i­tal ac­qui­si­tion in a par­tic­u­lar fi­nan­cial year are not nec­es­sar­ily con­sumed in that year and ul­ti­mately have to be sur­ren­dered by the Min­istry of De­fence.”

Com­mit­tee has asked Fi­nance Min­istry to have a fresh look at the mat­ter.

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