With major capital acquisition programmes in the pipeline the expectation from the upcoming annual budget for FY 2023-24 the expectations are high.
All the three services in their presentations to the Ministry of Defence (MoD) ahead of the Budget presentation sought higher allocations which have been shared with the Ministry of Finance.
The focus this year according to sources in the defence and security establishment is expected to be on the pension allocation. As recently One Rank One Pension scheme has been revised and this is expected to result in an additional annual expenditure of Rs 8,450 crore. And arrears amount of Rs 23,638 crore needs to be paid over a period of three years.
Non-lapsable funds
For the modernization plans, the Armed forces are also hoping for the institution of a non-lapsable fund. According to sources at times the services are unable to spend the allotted budget during the FY, or at times the delivery of the particular system is delayed, therefore there is an urgent need to consider that a non-lapsable fund is required.
Immediate Payments
The Indian Army is in the process of getting new artillery gun systems, drones, Light Battle Tanks, new armoured vehicles, including building infrastructure for faster movement of the troops along Line of Actual Control (LAC).
Next round of payments need to go for the S-400 Air Defence systems from Russia, purchase of drone systems for the Indian Army and Air Force, missiles systems as well as upgrades of the fighter fleet of SU-30 MKI of IAF.
Which items are in the pipeline?
The Project 75I for building six new submarines is expected to be inked this year under the Strategic Partnership Model for the Indian Navy. If and when this project takes off six conventional submarines — P 75 (I) are expected to be built at a cost of Rs 45000 crore. So far the project has been pushed back due to concerns raised by the foreign OEMs. However, recently reports suggested that the concerns raised by the stakeholders have been resolved and the project will take off soon. “In that case the first tranche of payment has to be kept in consideration in the Defence allocation,” explained a senior officer.
In case the Project 75I fails to take off the Indian Navy is likely to go for a follow-on order of the `Scorpene’ class of submarines under Project 76. This is expected to be announced during the forthcoming visit of the French President Emmanuel Macron.
In the new FY Indian Navy is also expected to place an order for 27 fighter jets for its aircraft carrier and it is expected that the announcement for buying the marine version of Rafale (M) is likely to be made when the French President visits in early March.
The Indian Navy is the lead service for the Predator drones from the US based General Atomics and this deal too is expected to be signed in FY 2023-24. For this deal too the first tranche of payment will have to be made.
Payments for the ongoing projects like the new destroyers and frigates are on the list.
For the Indian Air Force the race for additional fighter jets is high on the list for which six global OEMs are in the race for MRFA (Multi-role Fighter Aircraft). It’s going to be a choice between single Vs twin engines. However reports indicate that IAF may go for a follow-on order of Rafale fighters from Dassault Aviation.
In the 2022-23 budget allocation the government had increased the capital outlay for procurement of new equipment to Rs 1.52 lakh crore. This allocation was revised from Rs 1.38 lakh crore of 2021-22 allocation.
The private sector is hoping that this year there is higher allocation for capital expenditure as it would open up procuring more platforms and weapons for the armed forces.
According to reports the private sector companies are hoping that the government will allocate funds towards R&D.
Industry View
Drones share similarities with the aerospace domain. Prototyping is not only limited but expensive too, the testbeds are expensive and limited and “government support in this field would give a great boost to the industry,” says Kishan Tiwari, Co-Founder and CEO, TSAW Drones.
“As a drone technology and drone development company a more inclusive environment needs to be created for prototyping, testing and making the product market ready,” he adds.