Modernise to stay on top

Defence is a critical and vital area that the country needs to address with a clear defined policy and a sense of urgency. Modernisation of Armed Forces is the utmost need of the hour to face the contemporary challenges. This can be speeded up through public-private partnership in areas where it is necessary.

Appropriate technology flow should be ensured by inviting foreign direct investment (FDI) and co-production in the country. The government has begun realising this need, but more appropriate action is needed in right direction.

Defence, being a strategically critical area, focus should also be to encourage domestic technology and indigenous production. On the whole the Armed Forces should be equipped with state-of-the-art technologies. To achieve the goal in a time bound manner, it is necessary that adequate allocations are made and the earmarked funds are spent accordingly.

Lot is being talked about the Defence Budget being raised by Rs 5,000 crore over the interim Budget. With this increase the Defence Services Budget for the year 2014-2015 stands at Rs 2,29,000 crore, a hike of 12.43 per cent over the previous year’s revised estimate. True, this is the highest year-on-year hike since 2005-2006, excepting the back-to-back increase of about 25 per cent in 2008-2009 and 2009-2010 necessitated by the implementation of the Sixth Pay Commission.

But the allocation and expenditure of the defence sector need to be looked at as percentages of the GDP and total government expenditure. A cursory look at the Defence Budgets in the past shows that the defence expenditure has fallen from 2.24 per cent of GDP in 1997-1998 to 1.79 per cent of GDP in 2013-2014 and to 1.78 per cent of GDP proposed in 2014-2015. Similarly defence expenditure as a percentage of the central government’s total expenditure has fallen from 15.24 per cent in 2004-2005 to 12.76 per cent budgeted expense in the year 2014-2015.

However, stressing the need for modernisation of the Armed Forces, the finance minister Arun Jaitley said, ‘Modernisation of the Armed forces is critical to enable them to play their role effectively in the defence of India’s strategic interests. I, therefore, propose to increase the capital outlay for Defence by Rs 5,000 crore over the amount provided for in the interim Budget. This includes a sum of Rs 1000 crore for accelerating the development of the Railway system in the border areas. Urgent steps would be taken to streamline the procurement process to make it speedy and more efficient.’

Does the finance minister actually want to hasten the pace of modernisation by this allocation? This hike by Rs 5,000 crore over the interim Budget accounts for the total hike in the Defence Budget. Let’s analyses the additional allocation of Rs 5,000 crore. The finance minister has already admitted that out of this Rs 1,000 crore is for accelerating the railway system in border areas. Out of the remaining Rs 4,000 crore, the Defence Research and Development Organisation (DRDO) has been allocated Rs 3,323 crore and the Ordinance Factories Rs 677 crore. This will help both the DRDO and the Ordinance Factories to hasten the process of indigenisation and developing new technologies.

Thus, this additional allocation of Rs 5000 crore is not intended for the purchase of the state-of-the-art platforms and big ticket items from abroad which are in the pipeline.
The finance minister has, however, acknowledged the role of small and medium sized enterprises (SMEs) in defence production. He has proposed setting up of a Technology Development Fund with an initial corpus of meagre Rs 100 crore. Apart from SMEs this fund will assist both the private and public sector companies.

The finance minister has made a new inclusion in the Defence Budget by setting aside Rs 1,000 crore for accelerating the railway system in the border areas, which should have been reflected in the Railway Budget as the allocation for the Border Roads Organisation (BRO) forms the part of the Demand for Grant of the Ministry of Road Transport and Highways. BRO is administratively controlled by the Border Roads Development Board under the Ministry of Defence and yet the allocation for border roads do not form the part of the Defence Budget.

If it is the intention of the finance minister Arun Jaitley to bring the railway network in border areas under the Defence Budget, he should have done the similar thing for border roads also.
the budget for the Ministry of Road Transport and Highways, the allocation for works to be executed by BRDB has been pegged at Rs 3,226.44 crore. In the previous year Rs 3,387.12 crore was allocated, out of which only 2,882.76 crore was spent for development border roads.

Presenting the Railway Budget, the Railways Minister D V Sadananda Gowda said about enhancing rail connectivity to remote areas and raised the outlay for projects in Northeast India by 54 per cent to Rs 5,116 crore. It is to be noted that many rail projects for remote and border areas announced earlier are yet to be completed.

In the budget for the Home Ministry, the finance minister has allocated Rs 2,250 crore for modernising border infrastructure and also Rs 990 crore for socio-economic development of the villages along the borders. A sum of Rs 150 crore has been ear marked for construction of Marine Police Stations, jettis and for purchase of boats.

It would be better if all the infrastructure development in border areas including roads and railways are brought under one administration with provisions for time-bound implementation and monitoring.

It is not just increase in allocation that can aid modernisation, but the ability to spend the amount allocated. In the previous year Rs 86,740.71 crore was allocated to the Defence Services on capital account, out of which only Rs 78,872.23 crore was spent. However, in this year the total capital budget for Defence Services has been fixed at Rs 94,587.95 crore. Last year there was an over spending from revenue account of Defence Services pushing it to Rs 1,24,799.89 crore from the original estimate of Rs 1,16,931.41 crore. This year the revenue account is fixed Rs 1,34,412.05 crore.

With all these things in the perspective, it all depends on the Finance Minister Arun Jaitley, who continues as the country’s Defence Minister as well, to restructure the Defence Budget in the next year to boost the pace of modernisation and indigenisation of the defence industry. IPA
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