The defence needs more firepower

India’s defence budget has been hiked by a measly 6 per cent to ₹2,74,114 crore for 2017-18, dashing hopes for any major jump in military modernisation this year despite heightened tensions with Pakistan and China.

The defence outlay works out to just 1.63 per cent of the GDP, the lowest such figure since the 1962 war with China. Though this figure has been steadily declining in percentage terms as the economy expands, military experts contend it should be about 3 per cent of the GDP to ensure the armed forces are capable of tackling the “collusive threat” from Pakistan and China. This meagre increase will affect the modernisation and operational preparedness of the defence forces.

Using the Ministry of Defence (MoD) format, the defence budget for 2017-18 amounts to ₹2,62,390 crore. The difference in amount (between FM’s and MoD’s figures) of ₹11,724 crore is allocated under what is considered Defence (Civil Estimates), which, inclusive of defence pension of ₹85,740 crore, does not form part of the official defence budget.

A major feature is the further increase in the share of the revenue expenditure in the total defence budget. This is due to the hike in the manpower cost of the armed forces, which accounts for over 83 per cent (or ₹11,071 crore) of the overall growth of ₹13,291 crore in the defence budget. It is significant to note that the manpower driven defence budget is not unique to 2017-18.

In the last several years, it has been a recurring feature with a debilitating effect on two vital elements of the defence budget: revenue stores and capital modernisation, which together play a vital role in the operational preparedness of the armed forces.

The combined share of these two elements has declined from 55 per cent in 2007-08 to 40 per cent in 2016-17. This does not augur well, especially when there exists a huge void in India’ defence preparedness, and the armed forces have grave shortages in many areas ranging from ammunition, assault rifles, bullet-proof jackets, man-packed radars, night fighting-devices to howitzers, missiles, helicopters, fighters and warships. Needless to say, for adequate defence preparedness, the present ratio needs to change for the better, for which allocation under revenue stores and capital modernisation needs to be augmented substantially.

Among defence services, the Army with a budget of ₹1,49,369 crore accounts for the biggest share in the defence budget, followed by the Air Force, Navy, Defence Research and Development Organisation (DRDO) and ordnance factories. The lion’s share for the Army is primarily because of its overwhelmingly numerical superiority over the sister services.

Accounting for over 85 per cent of the uniformed personnel, bulk of the Army’s budget goes into meeting the pay and allowances of the personnel. In 2017-18, only 17 per cent of Army’s total allocation has been earmarked for capital expenditure. The comparative figures for the Air Force and Navy are 58 per cent and 51 per cent, respectively.

Among the three forces, Air Force is the only service whose modernisation budget has increased, whereas both the Army and Navy have witnessed a decline. The increase in the Air Force’s budget is in view of its signing several mega contracts, including for the Rafale fighters, and Apache attack and Chinook heavy lift helicopters.

The decline in the modernisation budget is a source of great concern, especially given the limited budgetary scope available for signing new contracts. In 2016-17, only 12 per cent of the total modernisation budget of ₹70,000 crore was available for signing new schemes, with the rest being earmarked for the committed liabilities arising out of contracts already signed. It is, however to be noted that this limited scope has not been fully exploited as there has been an underutilisation of a whopping ₹7,393 crore (or 10.5 per cent).

The underutilisation is across the services, although the Army accounts for over 50 per cent of total unspent funds. What is of greater concern is that underutilisation has become a recurring feature of India’s defence budget, despite numerous improvements in the procurement procedures undertaken by the MoD in the past two-and-a-half decades. Given that steady modernisation is a prerequisite for building up a strong military capability, the MoD has a big task ahead to bring in efficiency and expeditiousness in the procurement process.

Unlike last year, Budget 2017-18 has not provided any specific incentives to push the Make in India initiative in defence, although some industry-wide proposals have been promised. Among others, the Government has promised to reduce income tax from the present 30 per cent to 25 per cent for MSMEs with an annual turnover of up to ₹50 crore.

This is likely to benefit some 6,000 MSMEs, which are presently supplying parts, components and sub-systems to players such as the DRDO, Defence Public Sector Undertakings, ordnance factories and the large private companies.

The lack of any specific incentive for the defence industry may be a source of disappointment, as industry has repeatedly demanded certain concessions, which are currently extended to other sectors

Within the defence budget, however, there has been a small allocation of ₹44.63 crore made for prototype development under the ‘Make’ procedures, which have recently been revised by the MoD and some 23 projects have been identified for execution.

Of the total amount, ₹ 30.08 crore is earmarked for Army and the balance ₹ 14.55 crore for the Air Force.

The meagre increase of five per cent in the official defence budget is grossly inadequate especially in view of the vast voids existing in military capability and the diminished and incremental effect on modernisation and operational preparedness.

There is a need to augment resources substantially, particularly fewer than two critical heads of the defence budget — stores and capital procurement — which have come under severe pressure in the last several years, impacting India’s defence preparedness.

Conclusively, the demand for higher allocations is a genuine however, it must also be fully geared to utilise the available resources in a time-bound manner. There is hardly any merit in asking for more resources while the present capacity to utilise the available resources, particularly those under the capital head, is constrained.

The defence establishment must, therefore, look inward and find lasting solutions to procurement impediments. The MoD must look into tooth-to-tail ratio for better modernisation.

The writer is a retired professor

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