The Hindu Business Line : Firing up Defence budgetary system

In his Budget speech, the Finance Minister said that funds shortage would not be allowed to affect the modernisation of the armed forces. It is for the Defence Ministry to expedite purchases, by speeding up the decision-making process.

FOR THE past one decade, the inadequacy or otherwise of the Defence budget has been the subject of much debate and controversy. The majority opinion has usually veered around to the need for a substantial hike in allocation, given the need to maintain a qualitative edge over Pakistan with regard to conventional weapons, especially after the formalisation of India's nuclear capability.

In view of this and the political vacillation on key military hardware acquisition, which has weighed heavily on the armed forces, the Finance Minister, Mr Jaswant Singh, has proposed a marginal increase in the Defence budget.

In his Budget speech, the Finance Minister said that funds shortage would not be allowed to affect the modernisation of the armed forces. He also said the allocation, if necessary, could be raised for purchasing arms. While Mr Jaswant Singh may keep his promise, it is for the Defence Ministry to expedite purchases, by speeding up the decision-making process.

The Defence budget for 2003-04 has, in fact, not moved up, as the armed forces had surrendered Rs 9,000 crore of unutilised funds this fiscal. The proposed outlay for 2003-04 is Rs 65,300 crore, Rs 300 crore more than the budgeted Rs 65,000 crore for 2001-02.

Though a cap on the Defence outlay would send positive signals to the international community, it would have a negative effect on the modernisation plans on the three Services. The Rs 300-crore increase is notional and does not cover inflation in the military, which is nearly 3-4 per cent more than the WPI-based rate.

As per the budgetary proposals, the Army gets Rs 34,574.29 crore against Rs 34,509.32 crore last fiscal — a negligible hike considering that the military needs at least a 15 per cent increase in allocation merely to maintain equipment.

The Navy gets Rs 11,744.68 crore, up from last year's Rs 8,435.49 crore — signalling the much-needed modernisation of the fleet. And the Air Force, Rs 15,410.45 crore, up from Rs 12,403.52 last year — indicating that a decision on the Advance Jet Trainer (AJT) deal or more Mirages could be on the cards.

The Defence Research and Development Organisation (DRDO) gets Rs 3,647.6 crore, up from last year's Rs 3,193.25 crore — and, unlike in the past, it is listed as a separate head.

The Finance Minister has taken a novel initiative. For the first time, realising the increasing counterinsurgency in Jammu and Kashmir, he has allocated more than Rs 1,122 crore for the Rashtriya Rifles deployed in the State. Though part of the Army, this organisation has got a separate allocation for raising more battalions and acquiring state-of-the-art weapons and gadgets to tackle terrorism.

The Defence allocation for the year works out to nearly 2.4 per cent of GDP, much lower than Pakistan's and China's, which are at 4.6 per cent and 5.5 per cent of GDP respectively. India needs to spend at least 3 per cent of its GDP on Defence to keep it modern and motivated.

The past two years' record shows the inability of the Defence establishment to use up the budgeted funds. In 2001-02, Rs 5,323 crore remained unutilised, in spite of additional unforeseen expenditure because of poorly planned mobilisation of the troops. And the Rs 9,000-crore that has not been spent this fiscal has been included in the Defence budget for 2003-04.

The surrender of such a huge amounts indicates that, contrary to expectations, reforms in Defence finances have not taken off. The real issue is not about by how much the Defence budget should be enhanced to, but on how the funds are to be spent. One reason for a substantial portion of funds remaining unutilised is the glacial pace of the procurement process.

This is partly because of what has come to be known as the `Bofors Syndrome', wherein those involved in the procurement process have become wary of taking decisions for fear of being accused of corruption. The Tehelka expose has also affected decision-making. These have, in turn, affected the preparedness of the Defence forces.

The Defence Minister, Mr George Fernandes's statement that only 10 of the 1,200 files on procurement that were referred to the Central Vigilance Commission in 1993 were found to be deserving of further scrutiny should be a vindication of the system's overall soundness.

There is need for a far more efficient planning procedure for procurement.

A policy that will take into account the medium- and long-term requirements of the armed forces is required. It is in this context that a five-year planning perspective of the budgeting process — instead of the current year-on-year system — becomes crucial, especially with regard to Defence acquisitions.

For example, the purchase of an AJT or the aircraft carrier Admiral Gorshokov (which would involve investments in related equipment, aircraft or a flotilla with the requisite fleet of defensive craft), cannot depend on an ad hoc budgeting system, wherein a year of generous allocation is followed by a tight-fisted one. The prevailing system of arbitrariness must end and a five-year budgetary system, which allows for effective planning and modernisation, instituted.

The only salutary proposal in the Budget vis-à-vis Defence is the decision to give more autonomy to the three Service Chiefs, allowing them to use the maintenance funds now clubbed under the revenue budget. This would mean that the armed forces can upgrade and modernise without approval from the Cabinet Committee on Security.

(The author is a Defence analyst and commentator.)

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