Budget 2021

Defence budget sees 10% rise even as MoD spends less than allocated

Our Bureau New Delhi | Updated on January 12, 2018

Defence eps

Uncertainty over calculation format, say experts

In an effort to modernise the ageing Soviet-era military hardware and reduce import dependence, the defence budget has been hiked by almost 10 per cent to ₹3,59,854.12 crore in 2017-18 Budget from ₹3,40,921.98 crore in 2016-17.

For defence expenditure, excluding pensions, Finance Minister Arun Jaitley provided ₹2,74,114 crore, including ₹86,488 crore for defence capital. Last year, the money allocated for defence capital expenditure was ₹78, 586.68 crore.

The Defence Ministry had been asking for higher allocation for capital expenditure to modernise the military, which consists of ageing battle guns, tanks and fighter jets.

“The 8 per cent increased allocation towards capital expenditure in the defence budget is enormous, and shows the government’s commitment toward indigenisation,” said Puneet Kaura, MD and CEO, Samtel Avionics. “The increased spend on capex will lead to a trickle-down effect and more work for small and medium enterprises. It will further help in defence and fleet modernisation.”

However, this year the government seems to have shifted to the old format for calculating the defence budget. Last year, it had introduced a new format, wherein the capital expenditure of the Defence Research and Development Organisation (DRDO) was also included.

“There is some confusion in the calculation of the defence capital outlay of the previous fiscal. If that is taken into account, the growth in the defence budget is marginal,” Laxman K Behera, Research Fellow, Institute for Defence Studies and Analyses, told BusinessLine.

According to Behera, to overhaul the military hardware and strengthen the country’s defence sector, a huge sum of money is required, which the Budget has failed to provide.

Procurement procedure

One of the biggest hurdles in the process of modernisation of the defence forces is the complex procurement procedure. Additionally, defence manufacturing has also remained pathetically low, making India the topmost country to depend on imported equipment.

“The increased allocation is evidence of the government’s renewed focus on security, and indicative of its aggressive plans on modernisation of the armed forces,” said Saket Mehra, Partner, Grant Thornton India LLP.

Although the Defence Ministry had been seeking higher allocation, it has been spending much less than what had been allocated.

Utilisation

“Percentage increase does not really matter. There has to be pragmatism in adequately utilising the money on modernisation,” said Amit Cowshish, former Financial Advisor (Acquisition), Defence Ministry. “While the Ministry has been demanding higher allocation, it ends up spending less then what is allocated.”

Cowshish said the Finance Ministry is not always able to allocate large sums of money for defence as it also has to keep aside a substantial amount for the salaries and pensions of defence personnel.

The Budget also announced a Centralised Defence Travel System through which defence personnel can book travel tickets online. A comprehensive web-based interactive Pension Disbursement System will also be established.

“This system will receive pension proposals and make payments centrally. This will reduce grievances,” Jaitley said.

Published on February 01, 2017

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