De­fence Budget (2014-15): What it im­plies

No coun­try can be mil­i­tar­ily strong when 77 per cent de­fence re­quire­ments are met through im­ports. It is ob­vi­ous that a pri­or­ity of the new govern­ment would be to re­view the coun­try’s budget in­clud­ing the de­fence budget, lat­ter in re­la­tion to threats pose

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Post the state­ment by the Prime Min­is­ter dur­ing the Uni­fied Com­man­ders Con­fer­ence last Oc­to­ber that the mil­i­tary should be pre­pared for a cut in the next de­fence budget, the an­nounce­ment by the Fi­nance Min­is­ter in the Par­lia­ment on Fe­bru­ary 17, 2013, of a 10 per cent hike in de­fence budget over the pre­vi­ous year caused much ju­bi­la­tion and thump­ing of ta­bles in Par­lia­ment. A 10 per cent hike brings the fig­ure to ` 2,24,000 crore which ap­pears sub­stan­tial at first look even it in­cludes ` 500 crore of OROP (against some over ` 2,600 crore that was re­quired to sanc­tion OROP fully).

How­ever, a closer ex­am­i­na­tion re­veals that the sit­u­a­tion is not what it outwardly ap­pears es­pe­cially con­sid­er­ing that the ex­ist­ing short­ages of am­mu­ni­tion and equip­ment alone, dis­count­ing mod­erni­sa­tion, is to the tune of ` 1,41,000 crore. Dur­ing the cur­rent fis­cal (2013-14), the de­fence budget al­lot­ted was 1.7 per cent of GDP – ` 2,03,672.12 crore. Of this, a ma­jor part was rev­enue budget with only ` 86,740.71 crore al­lot­ted for cap­i­tal ac­qui­si­tions. Most sig­nif­i­cantly, the Long-term In­te­grated Per­spec­tive Plan (LTIPP) for pe­riod 2012-27 that is al­ready ap­proved by the De­fence Ac­qui­si­tion Coun­cil headed by the De­fence Min­is­ter, as also the Twelfth Five Year Plan, was based on a de­fence budget al­lo­ca­tion at three per cent of the GDP.

There­fore, the de­fence bud­gets in the last and cur­rent fis­cals at 1.6 per cent and 1.7 per cent of GDP by them­selves were in­ad­e­quate.

De­spite aus­ter­ity mea­sures im­posed by the mil­i­tary, wors­en­ing of the econ­omy, par­tic­u­larly de­pre­ci­a­tion of the ru­pee has af­fected de­fence mod­erni­sa­tion. Des­per­ate mea­sures to in­crease for­eign di­rect in­vest­ment (FDI) in de­fence has not paid out ei­ther be­cause of ac­qui­si­tion and de­fence pro­cure­ment pol­icy that is not found at­trac­tive by for­eign firms due to un­cer­tain­ties and the time fac­tor. In the cur­rent fis­cal, the in­creased run­ning ex­pen­di­ture of the mil­i­tary (due to de­pre­ci­a­tion of the ru­pee) forced trans­fer of ` 7,870 crore from cap­i­tal budget. This had to be re­sorted to de­spite aus­ter­ity mea­sures like even cut­ting down the fuel for warm­ing at the frozen fron­tiers in the thick of win­ter.

Presently, large or­ders are pend­ing for mod­erni­sa­tion (with 90 to 95 per cent com­mit­ted li­a­bil­i­ties) that re­quire huge cap­i­tal ex­pen­di­ture even though the De­fence Min­is­ter has hinted that there is no money likely to be avail­able for the ac­qui­si­tion process of Rafale air­craft to com­mence to meet the medium multi-role com­bat air­craft (MMRCA). So, for­get cush­ion for new schemes, costs of ap­proved ac­qui­si­tions too will likely go up sharply with time over­runs. Rais­ing of the Moun­tain Strike Corps it­self will en­tail an yearly ex­pen­di­ture of ` 7,000-`10,000 crore for next seven years, in ad­di­tion to about an over­all ` 25,000 crore re­quired for in­fra­struc­ture to sup­port the Moun­tain Strike Corps.

Even though the Rafale ac­qui­si­tion is de­layed, ma­jor ac­qui­si­tions like at­tack and heavy-lift he­li­copters, light ar­tillery he­li­copters and tech­nol­ogy agree­ment for the fifth-gen­er­a­tion fighter air­craft, and other ap­proved pro­cure­ments will need to be pro­gressed. Though the De­fence Min­is­ter has said that we are not mod­ernising our mil­i­tary in re­la­tion to any other coun­try but that is more in line with po­lit­i­cal eti­quette. How­ever, China-Pak­istan col­lu­sion and the two-and-a-half front threat can hardly be ig­nored. It goes with­out say­ing that the 10 per cent hike in de­fence budget does not match the LTIPP and the mil­i­tary will be forced to ex­er­cise more aus­ter­ity and pri­ori­tise what ac­qui­si­tions are pos­si­ble with the money in hand.

Kan­wal Sibal, for­mer For­eign Sec­re­tary, wrote in his ar­ti­cle, ‘Adrift With­out a Strate­gic Cul­ture’, pub­lished March 12, 2013, “Our fail­ure to build an indige­nous de­fence man­u­fac­tur­ing base shows the fragility of our strate­gic think­ing. We have re­duced our de­fence ex­pen­di­ture to 1.7 per cent of GDP in the last budget….That we pro­duced Chanakya al­most 2,400 years ago is not suf­fi­cient ground to claim that to­day’s In­dia possesses a strate­gic cul­ture.” The new govern­ment, there­fore, must work over­time to give a boost to the indige­nous de­fence in­dus­trial.

No coun­try can be mil­i­tar­ily strong when 77 per cent de­fence re­quire­ments are met through im­ports. It is ob­vi­ous that a pri­or­ity of the new govern­ment would be to re­view the coun­try’s budget in­clud­ing the de­fence budget, lat­ter in re­la­tion to threats posed to the na­tion’s se­cu­rity. There is def­i­nite need to make more money avail­able for mod­erni­sa­tion of the mil­i­tary. In Pak­istan, pen­sions of mil­i­tary vet­er­ans are paid through re­spec­tive State Gov­ern­ments and not through the de­fence budget. Such mea­sures need to be adopted by us con­sid­er­ing some 60,000 per­son­nel re­tire an­nu­ally from the army alone and the snow­balling ef­fect adds to re­duc­tion of mea­ger al­lot­ments of the de­fence budget. The views ex­pressed herein are the per­sonal views of the au­thor.

LT GEN­ERAL (RETD) P.C. KA­TOCH

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