Defence spending - Need For A Five-Year Plan Instead Of Commitment On Funds

By PK Vasudeva
The Statesman, 21 April

On 28 February the finance minister P Chidambaram took only half-a-minute to say 36 words on the defence budget proposals in course of his 100-minute general budget speech covering 12,808 words. “I propose to increase the allocation for defence to Rs 96,000 crore. This will include Rs 41,922 crore for capital expenditure. Needless to say, any additional requirement for the security of the nation will be provided.”

His brief proposals do not provide a detailed picture of the defence expenditure as it blurs certain important issues. The figures of Rs 96,000 crore includes only the revenue expenditure on the army (Rs 34,086 crore), navy (Rs 6,968 crore), air force (Rs 10,193 crore), ordnance factories (profit of Rs 356 crore), the Defence Research and Development Organisation (Rs 3,186 crore) and capital expenditure for modernising the armed forces (Rs 41,922 crore). Inexplicably the expenditure on the ministry of defence and the pensions has been omitted.

Incomprehensible logic

As a result, the figure of Rs 96,000 crore underestimates actual spending on defence. If the sum of Rs 2,046 crore allocated for the MoD and Rs 14,649 crore allocated for defence pensions is taken into account, the actual defence expenditure will come to Rs 112,695 crore in 2007-08. This amounts to over 16 per cent of government spending, not 14 per cent as portrayed.

The logic for keeping the MoD and pension allocations out of the defence budget is incomprehensible. Similarly hundreds of crores are allocated to the defence-affiliated units like the Coast Guard, Assam Rifles and Jammu and Kashmir Light Infantry Rifles. And, defence pensions are directly related to military manpower expenditure. Fudging the defence budget need not be institutionalised as the circumstances have changed.
The finance minister increased the defence budget by 11.6 per cent largely because the previous year’s allocation of Rs 89,000 crore could not be spent in time. However, documents reveal that what was actually spent was just Rs 86,000 crore. Therefore, in real terms, the increase in the current budget is 11.6 per cent or Rs 10,000 crore.

A sum of Rs 41,000 crore has been allocated for capital expenditure against last year’s budgeted figure of Rs 37,500 crore. This indicates that the MoD had spent some, not all, of the capital outlay, as the revised estimates put the expenditure last year at Rs 34,500 crore. Clearly, the services surrendered Rs 3,000 crore.

The biggest chunk of surrendered funds was contributed by the air force followed by the army. Nearly Rs 2,000 crore was returned by the air force on account of non-expenditure on aircraft ~ an obvious indication that there had been no progress on the acquisition of the 126 fighter aircraft that the IAF wants.

The army returned nearly Rs 1,800 crore, a sum that was required to buy equipment. However, the army overspent in buying aircraft. It had a budget allocation of Rs 1,300 crore, but spent Rs 2,015 crore. Otherwise, the surrendered amount may have been larger.

This year’s capital outlay has increased because of the aircraft purchase proposals by the navy and the air force. A staggering Rs 1,965 crore has been allocated to the navy to buy aircraft. Defence minister AK Antony, said there had been some laxity in certain fields during the modernisation drive, and efforts would now focus on ensuring the upgradation of the arsenal of all three services. One has to wait and watch as this laxity has persisted over the years.

In 1999, India spent Rs 48,500 crore on defence, including the cost of the Kargil conflict. Now, the defence forces want that amount to be more than doubled. Going by the current threat scenario the case for such a huge hike in the defence budget is rather inflated.

The peace process with Pakistan is under way, the sporadic hiccups notwithstanding; troops on the Indo-China border now play volleyball matches and talks are on with insurgent groups in J&K and Nagaland. In view of the reduced threat perception the defence budget needs to be reviewed.

However, there is no need to be complacent. Hence, the modernisation of defence should continue. Still more important is to get a better and improved human resource. The quality of the present lot has been diluted. Which is a crucial factor behind such incidents as suicides and shooting down of colleagues, unprecedented tragedies till a few years ago. The quality of the recruits can be improved if the career prospects of the armed forces personnel are made more attractive to get highly motivated youth.

The budgeting system should ensure that the right amount is spent on defence in the light of the pattern of national priorities and the right military capabilities are developed in the light of the structure of security priorities. The identification of a threat to security does not automatically require expenditure in the defence budget to neutralise it. The defence budget, in short, must be seen not only in terms of what we must defend ourselves against but what we have to defend.

The defence budget should be based on the mission and objectives of the armed forces. Once the tasks are defined, the question of building up the capability to perform them follows by formulation of plans for specific programmes. If the scarce resources are to be spent efficiently for defence, the budget has to be the vehicle for implementing the programmes so planned.

Roll-over scheme

This has not been possible in India as defence budgets are drawn up in terms of inputs (amounts spent on acquisition of arms, personnel, etc) and not programmes designed to enable the defence services to meet the tasks set for them. Equipment is acquired without taking account of the personnel required to use them or their training. Budgets are focused heavily on acquisition rather than on building capabilities.

There should be a plan for five years, not necessarily a commitment on funds since such a commitment cannot be given in our system. However, it should be possible to have a medium-term expenditure framework and multi-year expenditure programme, as is being done now in many countries. The budget plan should be rolled over every year so that the next year, the provisional budget for the third year becomes the firm budget for the second year and the tentative budget for the fourth year becomes the “provisional” budget for the third year and so on.

A retired Colonel, the author is now Professor, International Trade, ICFAI Business School, Chandigarh