Centre exceeds procurement target on indigenous defence products

The Ministry of Defence (MoD) said on Wednesday it has marginally overspent funds for military purchases from Indian companies during the last financial year.

The government had set aside ₹71,400 crore (64 per cent of the overall capital budget) for acquisitions from local sources. The ministry was “able to overachieve this target and has utilised 65.50 per cent of capital acquisition budget on indigenous procurements through the Indian industry to achieve Prime Minister Narendra Modi’s vision of Aatmanirbhar Bharat,” it said in a statement.

Estimate vs spending

The revised estimate of the capital acquisition budget for FY22 was ₹1.13-lakh crore, but the actual spending was much less, that is ₹75,000 crore till December 2021, reveals the parliamentary standing committee on defence in its twenty-eighth report on demands for grants (2022-23). The actual expenditure and revised estimates (RE) were higher in FY21. The RE was ₹1.14-lakh crore, and the actual spending was ₹1.18-lakh crore.

The MoD also stated in the official release that the preliminary expenditure report of March 2022 pointed out that it has been able to utilise 99.50 percent of the defence services budget in 2021-22.

In the last five years till December 2021, the ministry had signed 152 contracts with Indian vendors and 87 contracts with global vendors to procure equipment for armed forces. Contracts placed were for, among others, helicopters, missiles, tanks, rocket launchers, bulletproof jackets (BPJs), aircraft, simulators, ammunition, Pinaka rocket system, assault rifles, and a secure communication network.

Encouraging self reliance

The domestic defence industry clocked production of about ₹84,643 crore in the previous financial year due to a special thrust on encouraging self reliance within the sector. Other than that, 12,000 MSMEs functioning as vendors supply different items to defence PSUs and erstwhile ordnance factory boards (OFBs).

According to Controller General of Defence Accounts (CGDA) figures shared with the parliamentary standing committee on defence (2021-22), procurement of defence equipment by the three services in the last three years from domestic sources has gone up, reflecting a corresponding decline from foreign manufacturers. Though much distance has to be covered, given that India continues to be the biggest arms exporter in the world.

Procurement expenditure

The expenditure on procurement from the domestic industry in the last financial year was ₹88,631 crore (63.6 per cent), which is 4.8 per cent more than the figure for 2019-20 and 9.6 per cent higher than that of 2018-19. The government had earmarked an enhanced budget estimate of ₹3.85-lakh crore for this financial year, owing to a continued standoff with China.

To make the country self-reliant in the defence sector, proposals for capital acquisition in defence procurement procedure (DPP) are categorised as ‘Buy (Indian-IDDM {Indigenously designed, developed and manufactured}), ‘Buy (Indian),’ ‘Buy and Make (Indian)’ and ‘Buy and Make’ with preference over ‘Buy (Global).’ 

The government has made other policy initiatives to create an ecosystem that hand holds and exploits the domestic industry’s potential to become an exporter. 

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