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How do we Modernise the Indian Military in Times of Inadequate Defence Budgets?
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Lt Gen Philip Campose | Date:13 Feb , 2017 0 Comments
Lt Gen Philip Campose
is the Former Vice Chief of Army Staff.

With the announcement of Budget 2017-18 on Feb 01, 2017, yet another opportunity to modernize the Indian military has come and gone unutilised, without as much as raising a whimper among the masses, the media and those in authority. Paeans have been sung about the government’s alacrity in coming up with a visionary yet realistic annual national budget in times of economic uncertainty. But, concurrently, it needs to be noted that, not one good word has been written or spoken about the defence budget.

That is because, if analysed carefully, it becomes obvious that, despite an announcement of  Rupees 86,500 crores as the capital component in a defence budget worth 2.74 lakh crores for 2017-18, there may be little or no money at all this time for the numerous pending ‘big ticket’ schemes for modernization of the military. GlobalSecurity.Org had estimated last year that the military’s pending equipment needs were worth US $ 400 billion, i.e about rupees 28 lakh crores. The less than 6 percent increase in the budget this time does not cater even for the annual rise of 10 to 15 percent in defence costs.  In fact, the military has been given just enough budget ‘to keep its head above water’.

This, at a time when the military desperately needs new guns, fighter aircraft and ships as well as a variety of other critical needs like ammunition and spares to carry out its mandated role of defence of the country in the current and future context. Today, serious deficiencies exist even in critical components of operational preparedness, which can be left unaddressed only at grave peril to the country’s security and its strategic autonomy.

Why is there such a drastic inference after analyzing the defence budget? Anyone who would care to do serious arithmetic with the estimated figures given by the Ministry of Defence, in combination with an assessment of actual costs that the military is likely to bear, would come to a similar conclusion. In fact, they may come to a more dire conclusion – the military may even need additional infusion of funds this year to meet its ‘committed liabilities’ (installments for previous capital purchases), even before it seeks additional funds for making up its deficiencies in essential operational stores and war wastage reserves. And what about the funds needed for providing better security infrastructure at its defence installations? There is not even a mention of that in the amounts budgeted under various heads.

Firstly, let us take a closer look at the revenue budget. As in previous years, this component, which majorly consists of money for salaries, allowances, rations, fuel, travel, military stores, clothing, ammunition and Ex-Servicemen Contributory Health Scheme (ECHS), is likely to fall short for a number of reasons. The raisings of additional units and manpower for the Northern front is continuing since the last four years, without any additional budgetary support. At least ten thousand personnel could be added to the Army’s rolls on this account during this financial year.

The military, especially the Army, will need more funds towards pay and allowances, once the 7th Pay Commission comes into effect this year after existing anomalies are resolved. Further, the fuel bills of the military are likely to be higher than the allocations, if the oil import bill goes up. The military will need much more infusion of funds to make up its shortfalls of essential war wastage reserves, as were identified after the Uri attack, for which special financial powers have been provided to the three Services.

Furthermore, the cost of general stores, clothing, ammunition and equipment is also likely to be hiked up during the year for a number of reasons. And, as per previous experience, the ECHS is going to cost more than what has been allocated. Thus, anything from 5000 to 10,000 crores is likely to fall short in the revenue allocations. It is common knowledge that, when the revenue budget falls short, the funds to meet the shortfall are normally reappropriated by the Defence Ministry from the capital budget, especially the modernization component.

Next, let us take a closer look at the capital budget. The figure of Rupees 86500 crores allocated gets cut down to a mere 5000 crores for capital modernization of the military, once the amounts for DRDO (7552 crores), Ordnance Factories (803 crores), Land and constructions (7867 crores) and Committed liabilities (estimated at 65,000 crores) is taken into account.

This would not leave more than 1000 to 1500 crores for capital modernization of the Army which desperately needs to kickstart its modernization process. Consequently, by September 2017, just halfway into the financial year, the Defence Ministry will be under pressure to transfer funds from the capital budget to the revenue budget, to make up key sustenance shortfalls, with serious repercussions on the military’s modernization plans.

Another issue that needs highlighting relates to funds which were to be specifically allotted for enhancing security infrastructure at defence installations. There is no mention of this component anywhere in the defence budget. Hence, it can be presumed that the government has left it for the Services to conjure up the funds required from the budget allocated for other purposes. Such a situation can only lead to delays and shortfalls in the security preparedness of our military bases.

Invariably, when the shortfalls are pointed out with regard to defence budget, reference is made to the need to cut down manpower holding of the Services, especially the Army. However, given the territorial nature of our disputes and the current weaknesses in India’s military capability to meet perceived external threats from our potential adversaries, especially a ‘two front threat’, it would not be possible for manpower cuts to be applied at this point, till equipment modernization takes place.

It needs to be noted however that, even if manpower were to be reduced, systemic infirmities would not allow the savings that accrue to be reappropriated towards pending capital modernization projects. Such plans cannot be implemented till a system of ‘non lapsable capital modernisation budget’ – an issue long pending with the government – is introduced.

In sum, non allocation of adequate defence budget over the years has led to serious delays in our military modernisation plans, with concomitant adverse effects on conventional and sub-conventional deterrence. With regard to modernization plans, it needs no reiterating that, ‘the more you delay, the more it will cost’. An example of this is the reported fourfold increase in cost of the ‘replacement light helicopter’ project in the nine years since its inception.

The defence budget this year amounts to just 1.63 percent of the GDP, a figure that is reportedly less than the defence allocations of 1.66 percent in 1962. The government needs to find ways immediately to raise the defence allocation to at least 3 percent of the GDP if modernization needs of the military are to be addressed.

The government could even consider introducing a ‘defence modernisation cess’ to meet this justifiable need, in the interests of security needs of the country. Otherwise, we will have to keep infusing emergency funds, in fits and starts, to meet critical requirements whenever there is a crisis situation, thus leaving the larger  issue of defence modernization still unaddressed.


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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

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