In a developing country like ours, there are additional complicating factors in the modernisation processes. First, a large proportion of our defence equipment is still purchased from abroad. Our traditional supplier, the former Soviet Union, disintegrated and landed up in serious socio-economic crisis. Bilateral trade also suffered heavily. The negative impact on supplies of wea-pons equipment and spares created additional complications for us. Also, many inefficiencies and complexities had crept into our procurement system and decision making for modernisation. Some of these have been sorted out by implementing the decisions of the Group of Ministers taken three years ago to improve the management of national security. But the result has been that with a system that allocates funds on an annual basis, with a review half-way down, large amounts of funds budgeted for defence and modernisation have been lapsing at the end of the financial year for the past few years.

For example, for the three-year period ending March 2003, a total of Rs 25,699 crore remained unspent out of the total budgeted figure of Rs 1,85,587 crore. The effect has been that while defence modernisation had suffered earlier due to lack of resources, now the inability to spend available resources within the stipulated financial year has adversely affected defence preparedness.

Establishing a DMF of Rs 25,000 crore would go a long way in assuring that modernisation processes do not suffer due to procedural delays and other unavoidable reasons. Bo-th the National Security Advis-ory Board and the bipartisan Standing Committee on Defen-ce of Parliament have been pressing the issue for years.

The actual functioning of the DMF, of course, must be evaluated carefully over the coming years, since this is a deviation from the traditional budgetary approach. Its utility may remain less than optimal if the five year plans are not finalised well before the Plan period commences. Also, we need to redefine the budget heads to clearly indicate the resource allocation and utilisation under three functionally different heads of modernisation, maintenance and operating costs of the defence forces separately rather than the current system that does not indicate functional segments of a large amount of the tax-payers’ money in an area so crucial to our security and defence

The writer is strategic affairs editor, Indian Express