Budget shortfall worries Defence Services
May derail capacity enhancement, modernisation and maintenance under way; major deals coming up
The shortfall in defence allocation in the interim Budget 2019-20, especially in its capital allocation, has left the Services worried as it threatens to derail the capability enhancement and modernisation under way. This comes at a time of fast-paced developments in the region, and China’s rapid advancements will only leave India further behind in terms of military capabilities.
A look at the numbers reveals the shortfall is so significant that, for the Navy and the Air Force, the capital allocation does even meet the committed liabilities, that is, payments for deals already contracted. The Army, meanwhile, is looking at a shortfall in its non-salary revenue expenditure.
“The Services have conveyed their concerns to the Defence Ministry. Defence Minister Nirmala Sitharaman is taking up the matter with the Finance Ministry to address it,” a Defence official said.
For instance, the Air Force, which has signed major deals in the past two years, including for the 36 Rafale jets and S-400 air defence systems, and is beginning to induct platforms like CH-47F Chinook heavy lift helicopters and AH-64 Apache attack helicopters, has committed liabilities of ₹47,413 crore. In contrast, the entire capital allocation is ₹39,347 crore and the projected capital requirement is ₹74,895 crore. Similarly, for the Navy, the committed liabilities for the coming year stand at ₹25,461 crore, while the total capital allocation is ₹22,227 crore.
The defence allocation in the interim Budget was ₹3.18 lakh crore, and Defence pensions stood at ₹1.12 lakh crore. Of this, allocation for revenue expenditure (net) is ₹2.01 lakh crore and capital expenditure (net) is ₹1.08 lakh crore. The share of the three Services in the overall defence budget stands as follows: Army–54%, Navy–14% and Air Force–22%.
However, the Army, with its large size, has a huge revenue burden compared to the other two Services, and a significant part of it goes for salaries. For the coming year, the Army has a total shortfall of ₹12,000 crore, of which ₹6,300 crore is under the capital head and around ₹5,500 crore is non-salary expenditure.
The Army has also embarked on its biggest reorganisation drive since Independence and that would also entail some financial requirement.
Recently, to shorten procurement cycles, the Vice Chiefs of the three Services and Army Commanders were given greater financial powers for emergency procurement of spares and essential items, but the money for them goes from the revenue stream.
Similarly, no separate allocation has been made for the project to strengthen perimeter security of military installations. These eat into the already scarce revenue component affecting training and routine maintenance activities. Another concern is the large proportion of vintage equipment in the Army and even the IAF, which is in urgent need of replacement. For instance, last year, the Army had stated that 68% of its equipment is vintage.
The three Services are pushing through several procurements on a priority basis, many of which were to reach a decisive phase in the coming year, but there are no funds left for their conclusion.