The Hindu Business Line : Defence gets Rs 25,000-cr non-lapsable upgrade fund

THE Government has committed Rs 25,000 crore for a non-lapsable Defence modernisation fund to cater to the procurement needs of the three armed forces.

"The process of Defence procurement often extends to over three years. Adequate and a committed availability of funds, over such a period, for Defence modernisation and weapons systems acquisition needs a satisfactory resolution... The fund will be made available to the Ministry of Defence from the new financial year," the Finance Minister, Mr Jaswant Singh, said in his interim Budget speech on Tuesday.

The move is to ensure that adequate funds are available to pay the instalments for the purchase of the advanced jet trainers (AJT) for the Indian Air Force and aircraft carrier Admiral Gorshkov for the Navy.

Both these deals were signed in the current fiscal, after years of delay.

While the refurbished Gorshkov, along with its complement of two squadrons of Mig-29K fighter aircraft and Kamov choppers, is likely to cost upwards of Rs 7,200 crore, the 66 AJTs, to be purchased from British Aerospace would come for about Rs 8,000 crore.

The idea behind the fund is that it will not lapse annually but would be a permanent source that can be tapped by the Defence Ministry as and when the need arises. The Defence Ministry is often unable to utilise its entire allocation has to surrender substantial funds under the "Capital Expenditure" head.

Even in the current financial year, the revised estimate for capital expenditure by the Defence Ministry has shown a decline of about 20 per cent. While the Budget estimates had projected a capital account spending of Rs 20,952.76 crore, the Ministry is set to spend just Rs 16,906.32 crore.

The expenditure for the year 2004-05 has been projected at Rs 66,000 crore, which includes Rs 22,482.85 crore as capital expenditure. As a percentage of the gross domestic product (GDP), the country's projected Defence expenditure is about 2.1 per cent.