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India must allow armed forces to raise own finances. Defence budget will never be enough

India needs every penny during the Covid crisis. So, defence bureaucracy must let armed forces raise their own money and not divert all resources when events like Galwan occur.

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Ever since the confrontation with China in the mountains of Ladakh, and the threat of escalation to war, retired armed forces officers have been calling for an increase in capabilities of their respective Services, and advocating new strategies to ward off an aggressive enemy. The Narendra Modi government reacted with the usual firefighting tactics by approving arms procurement worth $5.5 billion, including new aircraft from Russia, and fast-tracking decision-making to allow each Service to purchase systems it requires urgently. All these are welcome moves, at a critical time. But the point is this — China may or may not have encroached on Indian territory, however it has certainly succeeded in driving New Delhi to allocate scarce resources towards defence at a time when it needs every penny to bring a pandemic-hit economy back on track.

The truth is that India’s defence budget has never been able to keep up with actual expenditures. The game of catch up has got worse with domain experts pointing out that this gap between allocations and requirements has risen steadily to about 30 per cent in the last seven years. The coronavirus pushed the Centre to further impose cuts across ministries, with the defence ministry – which consumes just one-seventh of the budget — also asked to further limit expenditures; all this when the Report of the Standing Committee on Defence had warned in 2019 that ‘huge deficiencies and obsolescence of equipment’ did not augur well for a two-front war, or indeed, any war at all.

In this and the coming years, any sustained increase in spending on defence is not just unlikely, but also criminal given the other huge requirements needed to kickstart the Indian economy.

Given this reality, it may be time for the Indian armed forces to be allowed to raise their own finances, even while increasing their technical exposure and capabilities.

Also read: Armed forces working on 100 emergency procurement contracts amid tensions with China

Bringing in own money

One way for the Services to raise their own monetary power is to alter the practise of reimbursement for Services in ‘aid to civil power’ – for instance, helicopters for ongoing floods in Assam or landslides and road clearing in Uttarakhand. As of now, the state governments reimburse the money to the Centre in the Consolidated Fund of India. For instance, the Indian Air Force billed the Kerala government Rs 113 crore for the 2018 flood rescue operations, with the Army having its own accounts. This could be repatriated back to the Service concerned to utilise for equipment purchase or refurbishing. However, that still remains a ‘book transfer’ within the government, and doesn’t go far enough.

So, ways have to be found to monetise Service capabilities in certain areas. For instance, the Border Roads Organisation and the Army Corps of Engineers could be contracted to build expressways and bridges in India on a profit basis. The latter has already done so by building an overbridge in Delhi in record time, which had collapsed days after a private firm hired by the Public Works Department (PWD) had finished it just before the start of the Commonwealth Games in 2010.

The Air Force could get into the maintenance and repair business of both small civil aircraft and military aircraft, with this clause built into new contracts as well. It could also lease out some of its less sensitive airfields for private airline operations, an industry that is rapidly gaining traction in the Covid era, as businessmen opt for this safer option. The versatile Force could also get involved in the technology intense logistics business (think Amazon) using those aircraft that are already flying almost constantly, to provide logistical support to certain vital industries.

The Navy has a ‘ready to use’ option, with its shipyards in Visakhapatnam, Karwar, Mumbai and Kochi capable of utilising idle capacity to repair or otherwise service foreign ships belonging to oil drilling companies out of Mumbai, or neighbours, or even commercial shipping, essentially taking the load off the Port Trust of India to deliver faster and more efficient turnaround time.

Also read: National security won’t wait for economic development — Modi should learn from Nehru’s mistakes

Defence innovation

Another moneymaker that could bring billions of rupees to the Service concerned is defence innovation. In the 1980s, a naval officer once suggested key innovation in the field of wireless communication technology, only to be laughed out of the Service. That technology (MIMO or ‘multiple input, multiple output’) went on to make billions outside India, with the former officer, Arogyaswami J. Paulraj, now in Stanford University. India belatedly offered him a Padma Bhushan, for an innovation that could have been marketed in India.

India has since signed on to expedite defence innovation with the US, but it is doubtful if anyone knows much about this initiative within the Services or the ‘how to’ of it. Much also depends on whether we can shed a Brahminical dislike of recognising talent when we see it.

Also read: Modi has chosen discretion on China because India’s real failure is in defence capabilities

Bureaucracy, for better or worse

There’s more, but before bureaucrats throw up their hands in horror, there is a catch to all this. The horror arises justifiably from the fear that India could go the Pakistan or China way, where the Services were more interested in their military businesses rather than national security. None of the above is to even remotely suggest that the Indian Army go the Pakistani way in creating malls and operating civil airlines, or the earlier Chinese practises, which created a culture of toxic and all-pervasive corruption.

Instead, each proposal has to be vetted to prove that the project will add significantly to modernising and adding tech capability to the Service concerned.

India also has something that is quite unique – and in some ways, unfortunate – which is a large defence bureaucracy who’s probing and questioning largely prevents corruption. Conversely, this model of monetising capability to build efficiency will only work if the multiple bureaucratic tiers are minimised and simple legislative measures brought in to override a spiders web of British-era laws.

The ‘Aid to Civil Power’, for instance, not only involves a multiplicity of laws but also state governments, the home ministry, the defence ministry, and in the current instance of Covid management, the National Disaster Management Authority. This bureaucratic maze is what prevents even private players from making a foray into defence, and the Narendra Modi government is best placed to apply a pair of secateurs to it. In sum, the defence experts calling for new strategies are right. Now to find the money and the expertise required for launching the defence of India.

The author is former director, National Security Council Secretariat. Views are personal. Views are personal.

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  1. Ok so open repair and delivery store in a naval base where just 15 metre away a nuclear power submarine is parked…. wow … what a fucking Defence + Economics experts suggestion it is.

  2. Ok so open repair and delivery store in a naval base where just 15 metre away a nuclear power submarine is parked…. wow … what a fucking Defence + Economics experts suggestion it is.

  3. What perhaps could you be your motives to target Brahmins for all your problems – this article is per se ludicrous. It turned even lame, sad, evil, and laughable when Brahmins are dragged into the discussion for no rhyme or reason.

    Since the author is a Brahmin-hater, she needs to know that her lovely rajput clan had all the power, estates, and administration under their control, with their favored guujjus and baniyas who hoarded illegal wealth till kingdom comes, and they collectively abused all others and lost wars, making India a 1000-year slave. It is high time that rajputs should bury their heads in sand for their failure in defending India and losing wars that made their country a slave. If they cannot take responsibility for their failures, at least do not be obsessive and do not chase and blame Brahmins for your failures and evils.

  4. The author is caste-obsessed and anti-Brahmin. She is so obsessed with matters of caste that she has taken on the random exercise of countering her ambiguous, confused, and retarded ideas by regarding them the antithesis of brahmin’s approach to talent. What have the brahmin’s to do with Indian army’s budget? Since you are so obsessive, you need to know that the most efficient and greatest prime minister’s of our country have been brahmins – P V Narasimha Rao and Atal Bihari Vajpayee.

  5. Imagine sending the brain- dead author of this article to clean her office loos or to do office dishes just because The Print has a low budget. If that weren’t enough – the author goes on to write that Brahmins have a tendency to disprove of talent. Her retarded rajput clan with Indian merchants did a great job of massively exploiting and flogging India’s lower castes and consequently making India slave for 1000s of years to outside nations / races. If any accusations by brahmins are countered, they are conveniently called the uppity caste. The crass author must introspect about the laurels that her race has brought to this country!

  6. The idea appears catchy, particularly when there is dearth for finances. The Services might earn lot of money by way of contracts. Definitely, such practice would make them financially independent and would be less burden on tax payers’ money. On outset thia sounds to be good. But in such an event the Service Personnel would lose commitment to the national security and would go after earning more and more for personal benefit giving rise to amassing money and corruption. This could have been the same reason in 1980 for ignoring the invention by a navy personnel on MIMO to exploit the market gains. However, we have, now also, many examples of Officers in Services involving in corruption in defense deals for their personal advantage in spite of the fact that it is not a permitted activity, being done clandestinely. If we make money earning by them a permitted activity our Defense Forces would become worse than Pakistan Army and PLA of China.

  7. although the author herself acknowledges the seeds of future horrors in such a proposal and yet she says that we should go about it. What she does not seem to realise is that army anywhere holds the true power ( the kind Mao delighted in) which flows through the barrel of gun. You give it even a modicum of financial self sufficiency and it is a ready recipe for disaster.
    Please we are ready to bear the embarrassment of defeat from Chinese troops rather than create a Frankensteinian monster in our own backyard.

  8. Free thinking means any shit coming out of brain. The person who is floating this idea is not aware of surrounding countries and what is happening there when defense forces given free hands of raising and handling money. Look at Iran, Pakistan and China s PLA. All these countries have defense forces free handling of money by way gift from US in case of Pakistan, doing business in Iran and what ever by PLA in China. Government as such has secondary role and in fact no role creation relationship problems with neighboring countries. Some where down the line Indian middle class has acquired the knowledge that all is well, jonest, disciplined and honest in Defense service and hence every responsibility be given to them and all will be nice. Perhaps they should meet people from Kashmir Pjnjab Assam , Nagaland, Mizoram and get the knowledge updated.

  9. There is so much focus on software and services where need of the hour is manufacturing, especially high tech! India needs large and small scale manufacturing! Toys, basic needs, high tech gadgets and so on. India is great at services but lacks manufacturing. There is no incubation environment where industry, universities, and government can work hand in hand.

  10. How about allowing Gurkha Battalion to open Momo Stalls across India. Bihar Regiment can open Litti Chokha stalls and supply construction workers to all over the place. Sikh regiment can start major car cleaning business across zones and Madras Regiment can supply Sambhar Vada to corners of India.
    That’s how the deficient defence budget will be taken care of.

    Soon, Indian Army will join the Pakistan Army to claim the status of ‘victor of all corner plots” in India. Fauzi companies will supply maggi, atta, eggs, bathroom slippers, toilet papers and sugar !! That’s what this author intends to bring about in Indian defence discourse !!

  11. National Security is not something that could be outsourced to a mercenary armed force, which, in my opinion the armed forces will become if an idea as that of the author actually takes shape. The author does make very plausible points about control that could be exercised by the bureaucracy but then again aren’t we already having trouble with bureaucratic red tape that is always at loggerheads with defence acquisitions and while the author suggests that every proposal could be vetted – doesn’t it then only further complicate this red tape?

    Again, the author does make mention of the Pakistan and China way and how the Indian Armed Forces could be prevented from taking that path. The author seems to be very optimistic in this regard but again I have my reservations – why try something which has failed or at least further complicated the situation in two of our neighbouring counties?

    I am sure the author is very knowledgeable but such an idea seems like an armchair scholar’s fantasy.

  12. I was expecting Ms. Kartha to propose that the Indian Army should follow the example set up by Pakistani Army. They control everything from petrol pumps, logistics to drug smuggling and gun running. It seems to be quite profitable. Pakistani servicemen look forward to their retirement to enjoy the fruits of such ventures. p.s.can we have some real journalists please.

  13. Imagine for a moment, that in a country like ours, this proposal goes thru, here is a likely scenario of what will happen
    a. A committee will be set up to explore all areas, where revenue can be raised
    b. The report will be placed before CCS and assume to have approved
    c. A huge bureaucracy will be set up to get this done
    d. Three services instead of defending our borders will be setting up targets and doing performance appraisals on how much revenue can be raised and how many opportunities were lost. They will be haggling and chasing bills with civilian authorities.
    3. Three C’s will make their appearance in no time
    All the tri-service chiefs and their deputies will be answering their queries on a daily basis Oh what a distraction in a Post Covid world.
    The defence forces have a Job # 1 and that is defending us and let nothing distract them from this.

  14. Completely flawed idea. This will be disastrous for armed forces. Whoever wrote this article shall resign immediately from office.

  15. Please remove the author from the NSC Sectt as he wants the State should abdicate its responsibility for the security and integrity of the nation. The preamble of the Constitution ‘ Assures the unity and integrity of the Nation’. The task of the Armed Forces is to fight for the nation and not raise resources for the nation. Next, he will tell the Armed Forces to outsource for private security so that the resources can be raised to buy arms. A sorry state of the Advice? I hope someone is not taking him seriously.

  16. This article had more than 8 comments about how this is such a bad idea and all them are deleted now. been following Shekhar sir and this site since the beginning and never saw such an attempt to censor viewers. Why write radical articles if you can’t take criticism of your idea.
    whoever is moderating this shame on you.

  17. If Rajeev Gandhi is to be believed this country has been on 15% of budget with 85% going into various pockets. No wonder the congress is not as rich as the BJP.
    IF the full budget goes to where ever it is meant to go we should have no problems let us see if RaGa agrees.

  18. Age of bad ideas as Shekhar sir calls it. The thing with corruption is that you only need to show the doors to it and it will barge into the whole system. Govt already knows the solution to poor utilisation of Defence budget i.e Reducing the no. of army personal and modernizing the equipment. What you are suggesting is let army compete with other organizations in the market. In an age where everyone wants to privatize the PSUs and poorly run government bodies why would you want to bring another such organisation into the market (that has weapons and trained killers to do its bidding). Here is a less radical solution. why not focus on improving the economy and local defence equipment manufacturing capabilities of India, so everyone benefits from it and not just the Army. And please be less obvious of a Clickbait next time.

  19. Allowing military to get into profit making enterprises is recipe for disaster. It will increase military influence in all spheres of society which is definitely not a good proposition. Look at Pakistan. Egypt and other Military driven states, Military in these countries literally runs petrol pumps to sugar mills.

  20. Are you implying that fighting a war is the sole responsibility of the military ? A very flawed aargument.It is the nation that goes to war when required, and not just the military. All concerned must find the wherewithal to equip the military as their bounden duty ,and not just sit tight, leaving everything to the military ,as happens in all nations across the world

    All concerned will be well advised to remember that there are no runners up in war – indeed there is no second chance too in war. Wake up to the reality and put in your bit – don’t advocate ‘ fend for yourselves ‘ arguments

  21. TARA, you have NO clue about funding of our armed forces.You cannot allow our armed forces in procurement process by themselves because you inviting corruption which was rampant during Congress rule.
    BJPO has just given direction of allowing procurement up to 300 crore per one event.You must be very young and without experience and paid by Congress.

    • Mr Sunil Chohan: Corruption in the militray procurement process has been rife regeradless of the government in power – the BJP is no exception. For instance, the Rafale maintenance contract was awarded to Anil Ambani’s firms. Of course, our Gujarati crony capitalist Anil Ambani is close to the Gujaratis who rule and run the country as they see fit.

      Anil Ambani has zero – I reiterate zero – experience in the highly specialised aerospace industry , has a track record of botched industrial ventures and his NPAs have nearly brought down YES bank and Vijaya Bank. Yet, Modi awards him the contract for a high profile, extremely strategic venture for which he is unfit.

      Only fools and bhakths believe that the BJP has eliminated corruption. It is as corrupt, if not more corrupt that the Congress.

  22. What is the difference between this journalist’s suggestion and another suggestion that government should send RSS men on China border to fight with lathis and rods. Afterall, the Army is basically doing the same thing… Shouldn’t this too reduce defence expenditure and increase efficiency in the Armed forces?

    Military, civilian government and private organisations should never be allowed to interfere in each other’s spheres.

    I would like to give a better suggestion. Just stop elections all over the country. Instead of wasting money on elections, it will better be used for defence! LOL

  23. The author wants each proposal to be vetted so that India does not go the Military Industrial Complex way. But those who vet the proposal would take care to vet it in a manner which helps to make them rich. Thus in mid 90’s (Kargil war Era) the INSAS rifle which cost Rs 19000 was vetted as more suitable than the Rs 4000 AK-47 imported from Bulgaria (See’Atmanirbhar’ India’s Quest forArmy Rifle’ in THe Wire 22 July). Most people would think that as in the case of Rafale it was pure patriotism which led to the choice but some anti national minds could have dirty thoughts. The solution is not to make the military a money spinning machine which makes everyone except the beast of burden happy.The best solution is to have peace first of all with your own people , then with your own states and then with your neighbors.This is easier said than done because the easiest road to riches like the road to hell is paved with jingoism and patriotism and every rascal wants to be rich in the easiest possible way and in the shortest possible time.
    Gau Raksha , Temple ,Personal Law and Citizenship slogans will always fetch more votes and wealth than speeches about Health , Education, Infrastructure and Per Capita Income..The hell at the end of this road would be a Siachin as big as Ladakh.

  24. What do you mean by Brahminical dislike of talent? It is our leftist reservation policy that discards talent. How slyly you link brahmins here.

  25. Essentially the suggestion boils down to Services getting back the money they spent back into their budget. Well that’s not bad. They cannot get back that sum from the Central Government, until next budget. But, what is defence innovation? How does it yield money. I am afraid the writer’s views are not very clear.

  26. The author needs to study the working of Armed Forces during peace and war time time. before trying to employ the Armed Forces in private business for making money.We have suffered due to this attitude of thinking that money spent for defence is not being spent usefully.If there is a war we will be pushed back many years .Better tremain prepared.A long term plan should ne made.

  27. Great analysis, but again, as army gets into business, corruption will get in the system. All financial transactions risk corruption. In case of government intra transactions, there is least monitoring. What indian army need the least is corruption. Corruptions can destroy the basic foundation in the army. It can further lead to unwanted infiltration in our forces making them vulnarable. Please put in some ideas on how to avoid it.

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