Defence modernization funds cut by Rs 10,000 crore

[Daredevil]

The modernization budget of the armed forces has been slashed by around Rs 10,000 crore in a major jolt to them in the New Year. The cut is contrary to defence minister A K Antony's earlier promise of a hike in the defence budget to cater for the threat of the expansive China-Pakistan military nexus.

The finance ministry conveyed the decision for the Rs 10,000 crore cut in the capital acquisitions for the Army, Navy and IAF to the defence ministry, arguing that fiscal adjustment was necessary since the economic situation was grim, said sources.

The move will lead to a major slowdown in the ongoing acquisition projects—ranging from aircraft and helicopters to howitzers and missiles. It also makes it clear that the already much-delayed $20 billion MMRCA (medium multi-role combat aircraft) project to acquire 126 fighters will not be inked anytime before March 31.

IAF had been assured an additional Rs 10,000 crore to cater for the first instalment of the MMRCA project—under which final commercial negotiations are underway for French Rafale fighters—if inked within this fiscal.

Antony, during a rare discussion on defence preparedness in Parliament in May, himself had declared he would seek a hike in the Rs 1,93,408 crore defence outlay in the 2012-13 budget due to "new ground realities" and the "changing security scenario" in the backdrop of the China-Pakistan nexus.

But, now the armed forces' hopes have been dashed. As it is, they get much less than what they demand every year. The armed forces, for instance, had sought a defence outlay of Rs 2,39,123 crore this fiscal that would have amounted to 2.35% of the projected GDP for 2012-13, but got only Rs 1,93,408 crore, or 1.9%.

Then, revenue expenditure (day-to-day costs and salaries) in the defence budget continues to far outstrip the capital outlay for new weapons, sensors and platforms. The two stood at Rs 113,829 crore and Rs 79,579 crore, respectively, this fiscal.

"The actual capital acquisitions budget was even less at Rs 67,672 crore. First, the revenue budget (non-salary) was cut. Now, the capital outlay also has been hacked. The forces were on course to spend 67% of the allocated capital outlay by this time. Many projects will be pushed to the next fiscal," said a source.

While Navy and IAF are better placed, the real worry is the "critical operational hollowness" in the 1.13-million Army. The Army had projected a requirement of over Rs 10 lakh crore for the 12th Plan (2012-17) period to acquire new capabilities and plug huge operational gaps in artillery, aviation, air defence, night-fighting, ATGMs (anti-tank guided missiles) and specialized tank and rifle ammunition.

A crucial project during the 12th Plan is to raise the new mountain strike corps, with two specialized divisions for high-altitude areas, at a cost of well over Rs 60,000 crore. Dedicated for "rapid reaction ground force capability" against China, this corps will have its HQs in Panagarh (West Bengal) and add to the two new infantry divisions already raised at Lekhapani and Missamari (Assam).

Defence modernization funds cut by Rs 10,000 crore; Army operations may be hit - The Times of India

 

[Daredevil]

The mis-rule of the UPA government spreads to defence as well. Very sad.

 

[manishhot]

WTF, what are they doing:Rs.Rs

 

[Defcon 1]

This is not a bad thing according to me. Last year our defence budget was hiked by 17% although the economic growth was just about 6.5 percent. The defence budget should increase in tandem with GDP growth so that the economic budget as a percent of GDP remains constant and not increases to higher levels, otherwise, we will also become security state like Pakistan. Development should be the priority, and not weapons.

 

[Yusuf]

Diverting into the national bribe scheme I suppose.

 

[Yusuf]

This is not a bad thing according to me. Last year our defence budget was hiked by 17% although the economic growth was just about 6.5 percent. The defence budget should increase in tandem with GDP growth so that the economic budget as a percent of GDP remains constant and not increases to higher levels, otherwise, we will also become security state like Pakistan. Development should be the priority, and not weapons.

Spoken like a true left intellectual. Saar, when there is no strong defence which is a deterrent for others to no attack, there can be no sustained growth either. The old argument of spending on poverty and education etc and not on weapons certainly does not hold any water.

 

[Defcon 1]

Spoken like a true left intellectual. Saar, when there is no strong defence which is a deterrent for others to no attack, there can be no sustained growth either. The old argument of spending on poverty and education etc and not on weapons certainly does not hold any water.

The defence expenditure should be increased in tandem with the economic growth, otherwise the defence expenditure as a percentage of GDP increases. We have enough deterrence I believe, If pakistan has deterrence then surely we do. The economic condition of the country is very very bad at the moment. See it in this manner, what would you prefer, increasing the price of petrol/diesel by 5-10 rupees, or cutting back on arms purchase?

 

[Yusuf]

The defence expenditure should be increased in tandem with the economic growth, otherwise the defence expenditure as a percentage of GDP increases. We have enough deterrence I believe, If pakistan has deterrence then surely we do. The economic condition of the country is very very bad at the moment. See it in this manner, what would you prefer, increasing the price of petrol/diesel by 5-10 rupees, or cutting back on arms purchase?

I don't see petrol price remaining stable or decreasing from any defence cuts. This cut as I see it has been made to find the national bribery mission.
10,000 cr is about $2 billion for a 2 trillion economy is 0.1% of the GDP which really is insignificant.

 

[jalsa]

They need the money for the cash transfer scheme.

 

[Rage]

Any idea on what particular programs this will be affecting?

@Defcon 1

Defence expenditures are rarely hiked in proportion to economic growth. They usually depend on a host of incumbent geo-politico-military factors- which include regional militarization and geopolitical developments- even though they may be deemed fiscally profligate at times of economic slowdown. That 17.6% hike in FY2012-13 was necessary given the number of programs pending financial clearance. A large part of that was allocated to the IAF for the finalization of the MMRCA deal, which hopefully will happen by end this financial year (Mar), and to the Rashtriya Rifles which witnessed a much needed modernization-cum-standardization drive through a 25-fold hike in its capital funds. Despite this, defence spending remained under 2% of GDP, expanding marginally from 1.83% the previous financial year to 1.9% of GDP. What really bothers me is the amount of funds that remain unutilized (4.41% in 2011-12) every year because of Def Min protocol or delays, that are skewing defence budgets by returning funds to the exchequer. The devaluation of the Rupee against the dollar has also not helped.

My guess is, that if the reduction is from Tri-service Capital Acquisition funds, the quantum of the reduction signifies the MMRCA deal will indeed be finalized by end Mar. In that case, a reduction in the Air Force's Capital Acquisition funds would be warranted, because this was expanded by over 38% last year solely for the MMRCA. I really do hope that it does not affect the Army's critical artillery modernization program, because this has been long delayed and will be debilitating to our war fighting capabilities along the frontier. The unutilized defence budgets in successive years and the reduction this fiscal year by Rs.10,000 Crore is particularly worrisome given the rapid military buildup in China, which is pursuing an unprecedented level of military modernisation with an official defence budget of $106 billion in 2012. From the Indian perspective, what is disconcerting is the pace at which China has increased its military budget in the past two decades or so: as per the estimates of the Stockholm International Peace Research Institute (SIPRI), Beijing's military expenditure in real terms has grown by 620 per cent between 1990 and 2011, while India's has grown by about 152 per cent in that period. Consequently, the gap between the two countries' military spending which was almost negligible in 1990 has been widened by a factor of almost three in Beijing's favour. Consequently also, while China is boasting of a military capability which is increasingly becoming state-of-the-art across the spectrum, India is still struggling with basic requirements, as highlighted by the Army Chief's leaked letter to the Prime Minister and the recent report of the parliamentary standing committee.

 

[Kunal Biswas]

Almost Everything ..

Its time to upgrade every small thing from a bayonet to a tank from what available in country, Need to improvise to make weak points as strong..

The move will lead to a major slowdown in the ongoing acquisition projects—ranging from aircraft and helicopters to howitzers and missiles. It also makes it clear that the already much-delayed $20 billion MMRCA (medium multi-role combat aircraft) project to acquire 126 fighters will not be inked anytime before March 31.

 

[Ray]

Must be for a good reason politically to balance other vote catching programs.

2014 is too close to worry about such mundane things as defence and its toys.

 

[JBH22]

Thank you UPA with a volatile neighbourhood out of all the wastage of funds they decided to cut on defence expenditure.

 

[Kunal Biswas]

Poll added ..

 

[Blackwater]

its good ,waise bhi kon sa use hona tha

 

[Ray]

Thank you UPA with a volatile neighbourhood out of all the wastage of funds they decided to cut on defence expenditure.

The PM is all for good relations with Pakistan, notwithstanding terrorism. In fact, terrorist attacks are now appearing to be of the past.

Khurshed, the FM or some equally hot, felt that the Naval Chief was talking out of turn when the Chief said that the Navy would protect Indian interests on the high seas, for which it is designed.

Therefore, the UPA certainly feels that all is well in the neighbourhood and a few hiccups are merely hiccups!

And so, cut the defence budget since it is such a waste as they feel.

Of course, their security is a high priority since the public has got real mad and buzzing around like irritated bees.

Even Pratibha Patil continues to be Z plus and her relatives Y and X and for good reasons too. There are too many people of India who are wild that she pardoned many to include rapists and murderers!

Water cannon were used to dissolve the people, but then, funnily the people and the crowd did not dissove.

And our good old Chidabaram, the PM candidate for some, calls the Indian public and their growing anger, 'the flash mob'!

Chi takes the cake!

 

[Ray]

They need the money for the cash transfer scheme.

Have they plugged the leaks so that the cash is not transferred to those in the conduit?

 

[JBH22]

Glory to mighty UPA and its allies with such people in power we do not need enemies

Congress ki Jai ho Jai ho

In the meantime our neighbour builds robust railway lines in Tibet

 

[jalsa]

Have they plugged the leaks so that the cash is not transferred to those in the conduit?

Sir, this cash transfer scheme will become one of the biggest scams. Here in Andhra Pradesh they wanted to implement when over 70% of people don't have Aadhaar but somehow miraculously they will complete the scheme in few months as they claim.

 

[Defcon 1]

I don't see petrol price remaining stable or decreasing from any defence cuts. This cut as I see it has been made to find the national bribery mission.
10,000 cr is about $2 billion for a 2 trillion economy is 0.1% of the GDP which really is insignificant.

That is not the point. Think about our fiscal situation for a second. Last years fiscal deficit was 6.1%. This year, we will try to limit it to 5.3%. For a 2 trillion economy, it means a deficit of $106 billion. Such huge fiscal deficits are usually met by internal or external borrowing. Now think of the interest that would have to be paid on such a huge amount of money. I am not saying that we should curtail the defence spending forever. But now is not the time to spend. The economic forecasts for the following years is generally positive. The economy will start coming back to normal this fiscal. Increased tax receipts, and opportunity to take back financial stimulus will bring down our fiscal deficit to an acceptable rate of 3-4% in maybe 2-3 years. Once that happens, we are free to spend as much as we want.

Any idea on what particular programs this will be affecting?

@Defcon 1

Defence expenditures are rarely hiked in proportion to economic growth. They usually depend on a host of incumbent geo-politico-military factors- which include regional militarization and geopolitical developments- even though they may be deemed fiscally profligate at times of economic slowdown. That 17.6% hike in FY2012-13 was necessary given the number of programs pending financial clearance. A large part of that was allocated to the IAF for the finalization of the MMRCA deal, which hopefully will happen by end this financial year (Mar), and to the Rashtriya Rifles which witnessed a much needed modernization-cum-standardization drive through a 25-fold hike in its capital funds. Despite this, defence spending remained under 2% of GDP, expanding marginally from 1.83% the previous financial year to 1.9% of GDP. What really bothers me is the amount of funds that remain unutilized (4.41% in 2011-12) every year because of Def Min protocol or delays, that are skewing defence budgets by returning funds to the exchequer. The devaluation of the Rupee against the dollar has also not helped.

My guess is, that if the reduction is from Tri-service Capital Acquisition funds, the quantum of the reduction signifies the MMRCA deal will indeed be finalized by end Mar. In that case, a reduction in the Air Force's Capital Acquisition funds would be warranted, because this was expanded by over 38% last year solely for the MMRCA. I really do hope that it does not affect the Army's critical artillery modernization program, because this has been long delayed and will be debilitating to our war fighting capabilities along the frontier. The unutilized defence budgets in successive years and the reduction this fiscal year by Rs.10,000 Crore is particularly worrisome given the rapid military buildup in China, which is pursuing an unprecedented level of military modernisation with an official defence budget of $106 billion in 2012. From the Indian perspective, what is disconcerting is the pace at which China has increased its military budget in the past two decades or so: as per the estimates of the Stockholm International Peace Research Institute (SIPRI), Beijing's military expenditure in real terms has grown by 620 per cent between 1990 and 2011, while India's has grown by about 152 per cent in that period. Consequently, the gap between the two countries' military spending which was almost negligible in 1990 has been widened by a factor of almost three in Beijing's favour. Consequently also, while China is boasting of a military capability which is increasingly becoming state-of-the-art across the spectrum, India is still struggling with basic requirements, as highlighted by the Army Chief's leaked letter to the Prime Minister and the recent report of the parliamentary standing committee.

I agree that defence expenditures don't follow economic growth. I just meant that, in a long term, we should try to do so to keep focus on development. You have compared defence expenditure hike with China to show justify hike in defence budget. But you forget that China has an economic growth to match its defence expenditure. We don't, so we shouldn't try to compare with them. If we try to do so, it won't be long before we will be standing in league of nations like Pakistan or Russia.

Also, you have contradicted your own point in your post. On one hand you say hike in defence budget is necessary, and on the other hand you bemoan low utilisation of funds by the armed forces. Tell me, why should our money be tied up in coffers because people at MoD are not capable enough to utilise it. Shouldn't this money be used for other things which will secure us a bright future. Reducing the defence budget will also improve the utilisation rate of armed forces. I believe that one of the reasons that this reduction was done was probably due to the low utilisation rate.