Defence modernization funds cut by Rs 10,000 crore

[Ray]

Anybody has the figure of the money lost in the variety of scams that have taken place and which could be put to use to ensure that the country does not suffer all this ignominy?

 

[Singh]

I am theorizing here.

MoD was regularly returning huge portions of budget as unspent.
FinMin decided to cut the budget which forced MoD to make indiscriminate purchases at the end of FY.
Thanks to CAG's and Anna Hazare's activism MoD has probably deemed it fit to accept budget cuts rather than be probed and exposed.

 

[arya]

i dont have words. The worst thing they are doing.

 

[Kunal Biswas]

Well this is may be worst news after Ban of Major Company to defense sector..

First you cant purchase the right stuff they will get ban, Now your pockets are cut short so that what you can purchase you cannot do now..

Are they with our enemies..

 

[Ray]

I am theorizing here.

MoD was regularly returning huge portions of budget as unspent.
FinMin decided to cut the budget which forced MoD to make indiscriminate purchases at the end of FY.
Thanks to CAG's and Anna Hazare's activism MoD has probably deemed it fit to accept budget cuts rather than be probed and exposed.

And as Sam Maneckshaw wrote on a file marked to Jagjivan Ram, the Defence Minister:

My Army remains naked!

The Chinese must have celebrated their Chinese New Year which followed the New Year with great gusto.

And the Pakistanis ushered in the New Year with an exuberant blast!

 

[Yusuf]

@defcon1 reining in fiscal deficit of 100 billion is not going to come down with a 2 billion dollar defence cut. Let me draw your attention to the largesse the government indulges in including paying cash to BPL. To the revenue loss du to numerous scams. that have taken place. 10,000 crores is a pittance in the larger scheme of things but 100 howitzers bought with that money can decide a war.

 

[Tolaha]

@Defcon1

If the CCP decides that it's time to divert the attention of their public to something nationalistic, they are not going to wait for the Indian economy to grow a little faster!

 

[Snuggy321]

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

They want to cut 10000cr. but assure the IAF to get another 10000cr. for the MMRCA deal???

BTW: ToI is the only source which claims this, I would not count on that till we get an official statement form Antony.

 

[Rage]

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.

No, I don't think I have. The justification for higher defense expenditure arises from planned [budgeted] acquisition during the fiscal year which in turn arises from the much needed modernization of the Armed Forces, which in turn arises from fact that our relative parity with neighbors such as China is being eroded. You will find that, over the past 10 years, the MoD has surrendered a total of Rs.358.85 billion to the exchequer, over three-fourths of which: Rs.278.09 billion has been from under the modernization/acquisition head. It's not as if the defense forces do not need modernization. In fact as various reports from the CAG, SCD and PAC suggest, force levels are as dangerously low as 33% in some combat arms, with operational availability, either because of spares, flying hours, obsolescence, maintenance or life-extension, being a constant concern. No, the surrender of funds at the end of the fiscal year year-after-year is indicative of the inefficiency of the system and decision making of Defence procurement, not of the lack of need for procurement itself.

What the surrender of funds means is that defence acquisition and modernization is being inevitably delayed year after year. With the result that when these endeavors are actually carried out, they result in disproportionate cost overruns (since defense inflation is higher than economic inflation).

This paper, although old and obsolete in respect of some arguments of the Defence Procurement Procedure (DPP), is insightful in terms of the many flaws that still remain in defense acquisition procedure today:

https://docs.google.com/viewer?a=v&...0bP-ex&sig=AHIEtbSpsrlXFZmZvfjd-4bzy-rpe-ozlA

 

[arya]

they just care for vote bank if any one is here from mediathen news snould be highlight. Well i personaalf fell force shojld give resigntion . Why they are on border wnile we cant provide them proper wepaons. Govt thi k force pefso a y like security gaurd outside them home . Well if any one want to see god then come here bcause incia is run by god not by any system. Well what you expect wnile our top chair are like pet animals to poltican . Last army cief was crying . Whatever govt put in parliment was false? Now they want money so that they buy votes.

 

[arya]

pls china attack on us so that one more time we can cry that we are not ready.

 

[DivineHeretic]

We should not be worried with this cut. Reason being that it is actually superficial and not a cut that actually hurts our weapon aquisition plans.
In reality our Mod has managed to spend only about 70k crore for modernisation of the tri services this year and the finance ministry wants to prevent a last minute splurge by the MOD to spend the remainder when the same could be done at the beginning of next financial year without seriously compromising modernisation schedules which are in any way delayed. So it might be a clever way of stating to the world that hey we are cutting spending on our military,so you dont need to worry.
A bit cheeky if u ask me

 

[mikhail]

pls china attack on us so that one more time we can cry that we are not ready.

mate china won't dare to attack us this time as they know quite well that to defeat us in the mountainous regions they need at least a 5:1 superiority which they can't afford to have as we all know that chinis have numerous other enemies like Japan,Vietnam,U.S.A. etc!so personally i don't think they have the guts to repeat another '62 like situation:ranger:!

 

[DivineHeretic]

Guts and stupidity are mutually exclusive,but it is worth watching that many times both paths lead to the same actions. Funny that.

 

[Defcon 1]

@defcon1 reining in fiscal deficit of 100 billion is not going to come down with a 2 billion dollar defence cut. Let me draw your attention to the largesse the government indulges in including paying cash to BPL. To the revenue loss du to numerous scams. that have taken place. 10,000 crores is a pittance in the larger scheme of things but 100 howitzers bought with that money can decide a war.

Boond boond se sagar bharta hain. Everyone should make his own contribution, even the army.

No, I don't think I have. The justification for higher defense expenditure arises from planned [budgeted] acquisition during the fiscal year which in turn arises from the much needed modernization of the Armed Forces, which in turn arises from fact that our relative parity with neighbors such as China is being eroded. You will find that, over the past 10 years, the MoD has surrendered a total of Rs.358.85 billion to the exchequer, over three-fourths of which: Rs.278.09 billion has been from under the modernization/acquisition head. It's not as if the defense forces do not need modernization. In fact as various reports from the CAG, SCD and PAC suggest, force levels are as dangerously low as 33% in some combat arms, with operational availability, either because of spares, flying hours, obsolescence, maintenance or life-extension, being a constant concern. No, the surrender of funds at the end of the fiscal year year-after-year is indicative of the inefficiency of the system and decision making of Defence procurement, not of the lack of need for procurement itself.

What the surrender of funds means is that defence acquisition and modernization is being inevitably delayed year after year. With the result that when these endeavors are actually carried out, they result in disproportionate cost overruns (since defense inflation is higher than economic inflation).

This paper, although old and obsolete in respect of some arguments of the Defence Procurement Procedure (DPP), is insightful in terms of the many flaws that still remain in defense acquisition procedure today:

https://docs.google.com/viewer?a=v&...0bP-ex&sig=AHIEtbSpsrlXFZmZvfjd-4bzy-rpe-ozlA

I am not saying that defence forces don't need modernisation, but that army shouldn't be given any more money at the moment when it cannot even utilize the amount of money currently being given to it. Just allocating more money for defence expenditure won't automatically modernize our forces. First the MoD should focus on properly utilizing the existing amount of money, only then more money should be given to them.

If you allocate more money for the armed forces in the beginning of the year, you are forced to make provisions for it. If the money remain unspent at the end of the year, this results in revenue loss for the government as the same money could have been used to fund more fruitful ventures.

 

[Rage]

I am not saying that defence forces don't need modernisation, but that army shouldn't be given any more money at the moment when it cannot even utilize the amount of money currently being given to it. Just allocating more money for defence expenditure won't automatically modernize our forces. First the MoD should focus on properly utilizing the existing amount of money, only then more money should be given to them.

If you allocate more money for the armed forces in the beginning of the year, you are forced to make provisions for it. If the money remain unspent at the end of the year, this results in revenue loss for the government as the same money could have been used to fund more fruitful ventures.

Here's the problem with that argument: money that is given to the Armed forces that remains unutilized is returned to the exchequer; it does not stay with the services nor is it accessible to them in the following fiscal unless provisioned for in the Budget. Meanwhile, capital acquisition remains on hold, programs build up and equipment approaches obsolescence. At some point, the lack of schedule adherence [the primary cause of underutilization of funds] is bound to skew the defence budgets categorically upwards in succeeding fiscals, even while it impinges on defence preparedness in the interim.

Now, I'll be the first to admit that not all of this lack of schedule-adherence is the GoI's fault. There are many factors- other than the customary 'defective planning, bureaucratic apathy and procedural complexities'- that are responsible for this and that have a bearing on underutilization of Capital Acquisition funds. The Capital Acquisition budget, which is a subset of the total Capital Outlay for defence, consists of three 'main' categories: 'recurrent committed liabilities', which include all funds set aside for meeting contractual obligations signed in previous years; 'new schemes', which are funds meant for new acquisitions during the current fiscal; and 'DGOF supplies', which are funds meant for payment for equipment from Defence Public Sector Undertakings. These are 'notional': in that they do not constitute a pre-defined budgetary head and funds can be reallocated between one and the other, with the exception of the last category: 'DGOF supplies'. If you want to understand why underutilization occurs; and why retraction, or curtailment, of the defence budget is not the answer, read on:

MoD and MoF beadledom is typically responsible for 'new schemes' delays: the 'big ticket' items like the MMRCA, etc. on which armed forces modernization truly depends. The reasons for this are structural and bureaucratic: the MoD, under Antony, is typically concerned with incidence and antecedents of contractual negotiations: the possibility of corruption, if you will. While, on the other hand, prior MoF and CCS (Cabinet Committee on Security) approval is required for all defence contracts that exceed Rs.500 crore and Rs.1000 crore respectively. This preponderance of authority in Budgeting decisions impacts 'new schemes' most adversely, since 'new schemes' are typically most likely to involve individual contracts that exceed those figures. Each of these latter organizations: the MoF and CCS have their own parameters for sanctioning funds; and the processing of files to and fro between the Ministries of Defence and Finance lead to delays and deferrals that disrupt patterned spending under this notional head, adversely affecting modernization itself because it delays contract finalization and leading to underutilization in certain years"¦ and a predictable overutilization of funds in succeeding ones.

Now, the bulk of the expenditure on the Capital Acquisition budget comes from the second category: 'recurrent committed liabilities'. The MoD has little control over this, since payments under this head are released at pre-negotiated stages in design and manufacturing processes for contracts related to these; or at pre-defined stages of delivery in supply contracts. This also implies that payments cannot be released unless pre-defined stages of manufacturing/design are attained or delivery targets met. Most of the slippages in this regard are because of the inability of suppliers/manufacturers/vendors to reach stipulated targets or delivery milestones as per contractual obligations. But this may also be construed as an inherent flaw of a modernization process that is heavily reliant on imports.

The third category of the capital acquisition budget consists of allocations earmarked for supplies made by the DGOF. The Services (mainly the Army) have to provision in their budget for an amount equal to the value of estimated supplies receivable from the DGOF during the particular fiscal, but while these funds get blocked for the Services they have no control over production and supply by the DGOF. All budgetary targets, including this notional 'DGOF supplies' are subject to revision somewhere mid-way during the year, at the revised estimates stage. But while discrepancies in extrapolated or actual expenses under other notional heads: viz.'new schemes' and 'recurrent committed liabilities', can be adjusted through reallocation, any shortfall or revision in the targets set by the DGOF for supplies of capital assets to the Services results in underutilization of the amount earmarked for them because of two reasons: a) the funds under this notional category 'DGOF supplies' are blocked expressly for that purpose; and b) even if they were re-allocable, since book adjustments with the DGOF gather pace at the end of the year, revised DGOF estimates come with both uncertainty and at a point too late for the Services to reallocate these funds towards other expenditures.

Now, while the budgets are fiscal-specific, the Services work on the basis of Annual Acquisition Plans (AAP's), which are two year roll-on plans that contain the list of 'new schemes' to be processed in a particular fiscal. Not all schemes included in the AAP's can be processed in a single year. And so, the number of schemes to be processed for approval is decided in such a manner that, after making allowance for likely slippage in obtaining approval in respect of some, the remaining approved schemes would be sufficient to consume the budget earmarked for new schemes. This extrapolative calibration is not always perfect, and has had the undesired effect of underutilization in several cases, in particular the Army, which has the greater number of new schemes. If the number of new schemes and consequent liabilities and the attendant ineffectiveness of this Budget-AAP calibration is any indication, the increasing number of schemes for the Navy and Air Force is likely to lead to accentuated underutilization in these Services as well.

Moreover, while the bulk of the expenditures under the Capital Acquisition budget: 'new schemes' and 'committed/recurring liabilities' are processed by the Capital Acquisition wing of the MoD, there is also a pecuiliar vestigial custom where the expenditure on items which are capital and defence in nature, but are procured from under the Defence Revenue Budget, are debited to the Defence Capital Budget. You can see the problem with this: since expenditure under the Defence Revenue Budget involves many more authorities- from the Stores and Defence Accounts Departments of the MoD to its Finance Division and the Executive branches of the Armed services; and the procurement is made following procedure under Revenue Budget procurements-- and this has carried forward, despite these actually being taken out from the Capital Budget.

So, the reasons for the underutilization of funds in the Defence Budget are essentially economic (in the sense of incentives), structural and procedural: those within our control and slippages from external suppliers: those without. This cannot be remedied through withholding munificence in the Defence Budget, since the quantum of modernization and the programs envisaged actually demand such largesse. The solution to un- or underutilization lies in addressing these problems.

An inter-ministerial panel between the MoD and MoF, as suggested by several eminent members of both the Parliament and Ministries themselves, might help reduce the time taken to process the proposals that fall under the 'new schemes' and 'revenue budget' segments of the Capital Acquisition Budget- and thus avert, or at least mitigate, underutilization of the Defence Budget. Making Ordnance Factories more productive, incentivizing targets and coordinating budgetary disbursements under the 'DGOF supplies' category more rigorously with planned output are other methods.

 

[nrj]

Historically MoD returns the allocated money back to FM anyways. Armed Forces will react sharply if this cut was supposed to make major difference.

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[Payeng]

MoD should learn form the private sector about cost cutting without effecting the efficiency, well economics is economics and the all sectors are to be effected with it. but yet MoD can do something about it like improving management and so.

 

[hello_10]

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.

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

this also makes clear that Rafale isn't worth for its price...... hardly $105mil is required for a similar capable 'Super Sukhoi' SU30mki, bit better in fact by many observers, while there will be additional training etc expanses too for Rafale which will eventually take its price to around $200mil per piece for IAF........ Rafale does need to prove its worth paying $20billion + training etc for 126 piece only
we would expect this deal to be delayed till 2015 until Rafale comes with a upgraded version of it, lets see :ranger:

(hence we hope for a deal of $2.0 billion, or something like it, for at least 40+ Mig29s to cover gap of "Multi Role" 4.5 gen aircraft. as it has a running production line, having infrastructure in India and already training etc too, which may straight be employed on the border areas this way, among the mostly tested 4.5 gen front line aircraft :thumb

 

[nrj]

this also makes clear that Rafale isn't worth for its price...... hardly $105mil is required for a similar capable 'Super Sukhoi' SU30mki, bit better in fact by many observers,

'Similar capable' ?? Lol

Rafale & MKI are class apart in terms of role and capabilities. If they were so similar then IAF wouldn't have bothered about Medium multi role drama.

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