Union Budget 2021 India: The Defence Capital expenditure amounts to a major part of the Government’s total capital budget and it is primarily meant to enhance the infrastructure and modernize the Armed Forces.
By Milind Kulshreshtha,
Indian Union Budget 2021-22: In the Union Budget, the government’s focus to revive economic growth post pandemic year has been very evident, but details on the policy on Defence too was expected in the Budget highlights statement by the Finance Minister. The Defence Capital expenditure amounts to a major part of the Government’s total capital budget and it is primarily meant to enhance the infrastructure and modernize the Armed Forces. The modern technologies like fighter jets, helicopters, Missile systems, Gun mounts etc. are required to be upgraded continuously by Armed Forces so as to maintain a tactical edge over the adversaries. The allocation under Capital Expenditure has been set for Rs 1,35,060.72 crore for this Financial Year, but the Defence Capital outlay increase by 18.75 per cent over last year needs to be looked at from the perspective that such major systems take many years for Ordering and the deliveries mostly occur in stages. With military crisis seen at the Sino-Indian border, multiple emergency purchases were initiated last year. These equipment are in the pipeline for delivery and are likely to consume up part of this Budget enhancement. The desired military technology is tailor made by the foreign OEM for niche applications and the equipment pricing for these do not follow the same curve as seen for Commercial-of-the Shelf (COTS) items.
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The Revenue expenses are utilized to support India’s large Land, Air and Sea areas of interest, necessitating large expenditure to maintain these assets on a high alert 24/7 and be war-fighting ready. The non-Salary Revenue to meet operational requirement has been increased to Rs 54,624.67 crore, however, this six per cent growth shall be consumed to maintain an enhanced and extended ISR (Intelligence, Surveillance and Reconnaissance) during the heightened military activities of today. IAF and Navy’s role extends much beyond the land borders and the large area required to be covered makes it necessary to fly more sorties and more ships to be deployed at sea. This too puts a strain on the maintenance of these assets to meet the operational requirements. Indian Army requires to maintain a high volume of troops in the northern hostile regions for a longer duration now than any time before and this deployment may be required throughout the year. Only when the technology on the body of the soldier gets enhanced, the Army may consider to gradually regulate the Revenue expenditure. But induction of modern technology for Network Centric Operations has been slower for Army when compared to other two sister services. The IAF and Navy’s uniformed manpower gets limited mainly due to the human carrying limitations of the war fighting platforms like aircrafts and warships deployed.
In the Policy document, the Defence along with Atomic Energy and Space forms the Strategic Sectors for the Government. The policy outlines that in the strategic sectors, it is planned to have bare minimum presence of the public sector enterprises and the remaining CPSEs shall be privatised or merged or subsidiarized with other CPSEs or closed. Even the intent of the Government may be aligned towards better work efficiency and private participation, this kind of vision shall require many years for an effective implementation since each activity handled by these sectors is critical, and the private substitutions shall take some more time. The document also mentions that the Customs duty on raw materials and inputs used by aviation sector components or parts (including engines) for manufacturing by Public Sector Units of the Ministry of Defence (like HAL) shall see the reduction of duty from 2.5% to zero.
The Budget proposes 100 new Sainik Schools in partnership with State Governments, NGOs and Private participation. Sainik schools do provide the Defence with mentally ready manpower but is not the only route for manpower induction.
Indigenization in Defence
The indigenization in Defence even with buzzwords like Atmanirbhar Bharat or self-reliant India in Defence has not shown the leap forward required to support the Defence Forces. The Negative list was in any case simply the list which was on the anvil for indigenization by Defence Forces for the last decade or so. Overall, this highlights the lack of vibrant Defence equipment manufacturing within India. Surely, the Defence Procurement procedures (which are obviously tilted towards Defence), encourages induction of well proven and mature equipment for purchase after their due Tests and Trials.
Even though the Capital allocation for DRDO has been increased to Rs 11,375.50 crore, indigenization efforts for large projects (like Tejas, Rustom UAVs, Arjun Tanks) through DRDO Labs have often been adversely impacted by various Transfer-of-Technology (ToT) shortcomings. Lack of acknowledgement of limited indigenization capabilities (be it Private agencies, DRDO, or OFBs) for Defence has impacted the Armed Forces’ preparedness. Dovetailing Defence modernisation with these Organisations may only leave the Defence forces wanting.
Overall, the Budget did not bring in the focus towards bringing new Technology to replace the manpower for defensive and other ISR activities. The lack of Netcentric Warfare technology as required to be implemented for the Theatre Level Commands may leave the modernization of the Armed Forces at a snails’ pace. Defence cannot be tied down by progress of the local industry to produce the military equipment and such an option can be detrimental on the Armed Forces’ edge to effectively handle rapidly modernizing adversaries like China.
(The author is a C4I expert & Strategic Analyst. Views expressed are personal and do not reflect the official position or policy of Financial Express Online.)