New Delhi: The central government and the armed forces are in talks to overhaul the defence budget in a way that allows the military more legroom for purchases, which can often drag on for years.
According to top sources in the security establishment, the two sides are discussing a budget model where funds are allocated on the basis of five-year purchase plans submitted by the three services.
Defence Minister Rajnath Singh and senior service officers have discussed the new model for the next Union budget, the sources added.
“It has been discussed that the capital acquisitions for the next five years should be planned by a service before the budget, on the basis of which the government would allocate funds,” a top government source said.
If finalised, it is expected to help the services utilise allocations better by giving them more time to plan the acquisition of weapons and equipment crucial to modernisation and maintenance of existing assets.
The source said a budget based on five-year purchase plans would be like an “assured fund allocation” that is based on procurement requirements and not linked to the GDP, which varies from year to year. Defence allocation in the 2019-20 budget is about 1.5 per cent of the GDP.
“The funds allocated this year may not be utilised because procurements often involve a long and complex process,” the source said. “[With the new proposal] the services can plan their crucial purchases and quantities.”
A second source pointed out how funds lapse and go back into the Consolidated Fund of India if not used in a given financial year.
“If this model is approved, the service can then plan the purchase of ammunition in the next fiscal year or thereafter and they will have the funds readily available for that because of the requirements they projected as part of their five-year plan,” the source added.
Other issues under discussion between the ministry and the services include raising money through the surplus land available with the military, such as farms.
The defence outlay accounts for the lion’s share of India’s budget, but the armed forces have repeatedly complained about shrinking defence allocations impeding fresh acquisitions and modernisation and upgradation plans, besides being barely enough to meet their committed liabilities.
The 2019-20 budget outlined a defence allocation of Rs 4.3 lakh crore.
The defence budget is categorised under four heads — defence pensions, capital outlay (for arms and other acquisitions), revenue (for salaries and schemes like the ECHS), and miscellaneous (including administrative expenses).
The capital expenditure was earmarked at Rs 1.03 lakh crore and revenue expenditure at Rs 1.98 lakh crore. The outlay for defence pensions stayed the same too, at Rs 1.12 lakh crore.
To ease some of their concerns, this year’s budget exempted defence imports from customs duty, spelling relief for the armed forces that found their purchasing power shrink because of the levy coupled with the goods and services tax (GST).
A Parliamentary Standing Committee on Defence, headed by Major General BC Khanduri (Retd), had in the past recommended creating a non-lapsable fund for defence purchases which would roll on to the next fiscal if not utilised in the current one.
While the defence ministry was in favour of the move, the finance ministry did not agree. The Standing Committee on Defence in a report tabled earlier this year had taken strong note of the finance ministry’s opposition to creating a non-lapsable fund for defence expenses.
In July this year, the Union Cabinet approved an amendment enabling the 15th Finance Commission to address concerns regarding the “allocation of adequate, secure and non-lapsable funds for defence and internal security” of India.
Subsequently, Defence Minister Rajnath Singh and other officials of his ministry held a meeting with the Finance Commission during which the ministry also shared its fund projections till the year 2025.
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