Despite Budget Cut, Defence Ministry Continues With Modernisation

Discussion in 'Defence & Strategic Issues' started by AVERAGE INDIAN, Jan 13, 2014.

  1. AVERAGE INDIAN

    AVERAGE INDIAN EXORCIST Senior Member

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    Despite resistance from Defence Ministry, the government has cut more than Rs 7,800 crore from the former's budgetary allocation for this year.

    However, notwithstanding the financial constraints, the ministry, in this fiscal till December 31, has been able to spend over 82 per cent of its budget for modernisation while continuing with the drive to procure and upgrade military assets, which has seen a whopping Rs 3.25 lakh crore (around USD 55 billion) being spent over the last five years.

    There was a cut of more than Rs 7,800 crore in the defence budget of Rs 2.03 lakh crore for the 2013-14 fiscal despite opposition to the same from the ministry, defence sources said. They, however, added that, with the diversion of funds internally, the ministry has been able to manage.

    Last year as well, Defence Ministry had faced a budget cut of more than Rs 10,000 crore in view of the economic slowdown in the country.

    Utilising its full allocation of funds and reversing the earlier trend of limited utilisation, the ministry procured and upgraded a large chunk of military equipment, including nuclear submarines, special operations transport aircraft and fighter planes, sources said.

    This year, the ministry has already spent 82 per cent of the capital acquisition budget of around Rs 80,000 crore and is slated to fully utilise its allocation.

    Major procurements this year

    10 C-17 heavylift
    12 C-130J ransport aircraft
    2 P-8I anti-submarine warfare planes
    Akula-II class nuclear submarine (on lease)
    Su-30MKI aircraft
    Besides, money was spent on developing the indigenous LCA Tejas for the IAF and to upgrade 51 Mirage-2000 combat planes.

    Previous spendings

    2009-10 - Rs 51,112 crore (106% of the allotted funds)
    2010-11 - Rs 62,056 crore (102% of the allotted funds)
    2011-12 & 2012-13 - Over Rs 1.38 lakh crore (102% of the allotted funds)
    For this fiscal, the ministry's allocation was Rs 2.03 lakh crore, of which around Rs 80,000 crore were to be spent on modernisation. So far, 82 per cent of those funds has been spent. The balance would also be spent in the next few weeks, sources said.

    A number of procurements are in the pipeline while some are in their final stages and expected to materialise in the coming months. Those include deals for 22 Apache combat choppers, 15 Chinook heavylift helicopters and the 126 Rafale combat aircraft.

    Defence Ministry is also in advanced negotiations for a Fifth Generation Fighter Aircraft (FGFA) programme with Russia, on which it is expected to spend around Rs 1.5 lakh crore in the next 10-15 years.

    It is also in the process of issuing the tender for the approximately Rs 60,000 crore deal for procuring six large conventional diesel electric submarines for the Navy.

    The ministry has been seeking additional funds of Rs 40,000 crore since last year, but that request has been turned down in view of the slowdown, the sources said.

    In view of the defence scams in which foreign firms were involved, the ministry has also worked towards promoting indigenisation in the defence sector for which it made a major procurement policy change to make the importing of weapons systems the last option for the three Services.

    Despite Budget Cut, Defence Ministry Continues With Modernisation Drive - The New Indian Express
     
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  3. t_co

    t_co Senior Member Senior Member

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    It does not look like there is room in the budget for the Rafale.
     
  4. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    Please point out how. We plan on signing a smaller 18 aircraft deal this financial year followed by the remaining 108 aircraft the next year. And the money is not transferred in bulk on the day we sign the contract anyway, it will be carried out over the next 10 years. Even if you take the contract value at $20 Billion for just inducting the aircraft with minimum amount of spares (a very high figure), we will end up paying $2 Billion a year. Is that too high?

    Anyway, according to the French Senate, the unit flyaway cost of a Rafale is $100 Million on average for the two variants. The total fly away costs will be around $13 Billion. Adding ToT and industrial production and with a maintenance and servicing contract along with training, it should be a little over twice the fly away cost, so assume $200-250 Million for a unit over 30-40 years. That's $25-30 Billion over 30 or 40 years. Overall, the investment is less than a billion every year for the entire lifetime of 126 Rafales. This is not counting a MLU program.

    Anyway, the remaining 18% for the next two months is well over $2 Billion. Plenty to sign a MRCA contract along with a whole host of other expected contracts like IL-214 and Apache. Next budget allocation is in late Feb and financial year starts in April.
     
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  5. t_co

    t_co Senior Member Senior Member

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    The repayment period for the Rafale contract is ten years?
     
  6. p2prada

    p2prada Stars and Ambassadors Stars and Ambassadors

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    Of course. We pay most of the money after delivery.

    And delivery is expected to go on until 2022 for 126 Rafale according to today's timetable.
     

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