Budget 2019: Why Defence must figure in FM Nirmala Sitharaman’s budget speech

Published: July 2, 2019 5:42:48 PM

Budget 2019 India: The pressing need to focus on social, rural and infrastructure sectors stacks the deck against high expectations that many defence analysts have from the finance minister.

Defence budget,Budget 2019,Union Budget 2019 India,Budget 2019 India,Budget 2019-20,Nirmala Sitharaman,budget speechBudget 2019 India: Defence, accounting for more than 16 per cent of the total central government expenditure this year, deserves a special mention in the budget speech.

By Amit Cowshish

Union Budget 2019 India: The current year’s regular budget is slated to be presented to the parliament on July 5, 2019. Having won a decisive mandate in the general elections, the National Democratic Alliance (NDA) government is well placed to take bold initiatives to raise additional revenues and provide more funds to the sectors which need them.

Whether that will happen, and if it does, whether defence – perpetually reeling under the impact of insufficient funds – will be a beneficiary remains to be seen. As of now it seems unlikely. The pressing need to focus on social, rural and infrastructure sectors stacks the deck against high expectations that many defence analysts have from the finance minister.

Not that there is absolutely no possibility of any additional funds being allocated or that there is no case for doing so. As a matter of fact, to the extent it is possible, the finance minister must seriously consider providing some additional sum of money to be spent in the remaining nine months of the year for at least three specific purposes.

One, there is considerable confusion whether enough money is available for squaring up all contractual obligations during the current year. If the allocated amount is indeed inadequate, additional funds must be provided for this specific purpose. It does not behove a country of India’s stature to be seen as a potential defaulter.

Two, there is a long list of new equipment that the ministry of defence intends to procure either by way of outright purchase, mostly from the foreign companies, or under the enigmatic rubric of Make in India in defence. Not all these procurement proposals will fructify during the current year though.

It would be pragmatic for the finance ministry to take stock of the new contracts likely to be signed by the year-end and make sure that sufficient funds are available for making the advance payments against those contracts, which is all that is generally needed in the year in which the contracts are signed.

Three, the poor state of serviceability of the in-service equipment and depleted levels of war wastage reserves (WWR) have been a matter of concern for quite some time. The disturbing revelations made by the Comptroller and Auditor General of India a couple of years back about the poor state of ammunition stock of the Indian army are fresh in one’s mind.

There has been no reassuring report by the state auditor since then that the situation has improved to a satisfactory level. With meagre year-on-year increase in the allocation under the ‘Stores’ budget head which caters for expenditure on procurement of ordnance and other stores, it is hard to accept that the armed forces are out of the woods on this count.

A cool-headed assessment requires to be made of how much money is needed to meet the current year’s targets for recouping the WWR and for maintenance of the in-service equipment and, if the existing allocation is inadequate for the purpose, the finance minister would do well to provide some additional funds for this purpose.

Normally, the finance ministry only fixes the overall budgetary ceiling for the ministry of defence, leaving it to the latter to decide how the funds should be distributed among the services who, in turn, distribute the funds for various purposes as deemed necessary. This practice should not come in the way of the finance ministry making additional allocations linking them to specific purposes and quantifiable outcomes.

The budget is not all about allocation of funds; it is also a statement of the government’s policies. Defence, accounting for more than 16 per cent of the total central government expenditure this year, deserves a special mention in the budget speech. There are several issues that would of great interest.

First, it would be good to know about the accomplishments of the Defence Planning Committee set up in April last year for comprehensive defence planning which has been the bane of many a problem besetting the defence establishment in India.

Second, assured funding of defence plans has been a sticking point with the defence planners. The finance minister could lay the controversy to rest by announcing a fiscal roadmap for the next five years to set the limits to which defence plans must conform.

Third, the government has made efforts in the last five years to promote defence manufacturing in India through measures such as the strategic partnership scheme and setting up of two defence industrial corridors. A report on the state of these initiatives would enrich the budget speech.

Fourth, there are concerns about the sanctions being imposed by the USA under the Countering America’s Adversaries through Sanctions Act (CAATSA) on account of India’s decision to buy S-400 Triumf Air Defence System from Russia and generally not getting weaned away from its traditional ally. Arguably, it would be a good opportunity for the finance minister to clarify India’s stand on this tricky issue when she presents the budget.

Fifth, the finance minister is known to have been supportive of measures like setting up of a non-lapsable pool of funds for modernisation of the armed forces in her previous avatar as the defence minister. It would be interesting to see if she announces creation of this fund overriding doubts about its viability and utility.

Lastly, the first five-yearly revision of pension under the one-rank-one-pension scheme is due from July 1, 2019. Some reports indicate that the defence minister has constituted a committee to work out the modalities of the impending revision and give its report within a month.

This may have created some anxiety among the defence pensioners. The finance minister can clear the air on this sensitive and highly complex issue which could turn ugly if it is left to the social media rumour mill.

It would be far more meaningful if the finance minister were to talk about these things rather offering the usual platitudes about the government’s resolve not to compromise with India’s defence and provide additional funds, if required.

(The author is former Financial Advisor – Acquisition, Ministry of Defence. Views expressed are personal.)

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