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Guns lose to butter

New Delhi, Feb. 28: George Fernandes failed his service chiefs, fled to Samarkand as finance minister Jaswant Singh, himself an ex-serviceman, brought to an end the years of Kargil-budgeting. In the guns-versus-butter debate, the verdict rings loud and clear.

Gloom has descended in the service headquarters because of the hefty cuts in allocations for defence that the window-dressing barely disguises. No wonder, the defence minister chose not to be present in the country when his Cabinet colleague and predecessor in the defence ministry read out his speech.

Singh paid back in kind — in a marked departure from convention, not once in his speech did he mention the defence allocations separately.

“From the budgetary estimates of last year to the budgetary estimates for 2003-2004, the defence allocations register a nominal increase. Obviously, there are economic and fiscal constraints and the armed forces have to contend with less. This will have an adverse impact on the modernisation and acquisition plans of all three armed forces,” said Commodore C. Uday Bhaskar, deputy director of the Institute of Defence Studies and Analyses, a think tank of the ministry of defence.

The overwhelming reaction to the allocations for defence is that the services are being made to pay the price of political indecisiveness, a point that the service chiefs, in the run-up to the budget, had requested Fernandes to ensure did not happen. As one senior officer put it in less charitable terms: “We are being junked.”

At the other end of the spectrum is the view that the defence services are being made more accountable. In fact, the budget caps a year that saw unprecedented military mobilisation that did not yield substantive results.

“We cannot keep having a defence budget that keeps going higher and higher,” said Air Marshal Vinod Patney, former vice-chief of the air force. “We have to factor in what kind of wars can take place. I think the armed forces have to equip themselves with technology and capability that is actually usable. Otherwise, this nonsense like Operation Parakram (the code name for the military mobilisation) will continue.”

The facts:

nThe total allocation for defence for 2003-2004 is shown as Rs 76,932 crore. This includes a sum of Rs 11,000 crore under the head “defence pensions”. This head was not included in the defence budget in previous years. Take that away and, in one swoop, the allocation plummets to Rs 65,932 crore — still Rs 932 crore more than the Rs 65,000 crore allocated in the budget last year. There has not been any adjustment for inflation and thus there is a cut in real terms.

nCrucial wings of the defence establishment, the army and the air force will have to contend with less than what they had budgeted for last year. Only the navy will get more than last year’s budgeted amount, implying that a big-ticket purchase — possibly the aircraft carrier Admiral Gorshkov — may finally be negotiated.

nThe army gets Rs 34,584 crore, about Rs 4,000 crore less than last year’s budget estimate, the air force gets Rs 15,410.45 crore, Rs 400 crore less. The navy, with separate heads under naval fleet and naval dockyards (shared by defence PSUs), will get Rs 11,744.68 crore, about Rs 4,000 crore more than last year’s budgetary estimates.

Sources close to Fernandes say the defence minister was under great pressure from the finance ministry to return funds and help Singh bridge the fiscal deficit. The revised estimates of the defence ministry for 2002-2003 show that the actual expenditure has been Rs 8,500 crore less than the budgeted allocations. “Despite the revised estimates and the fact that we actually returned so much, we have been able to ensure that the defence allocations have not been cut,” the sources argue.

Others in the defence establishment point out that Fernandes had everything going for him to get a whopping hike in the allocations. First, 2002-2003 saw an unprecedented military mobilisation. Second, the services — particularly the capital-intensive air force — has completed negotiations for major procurements (like the Advanced Jet Trainer) and decisions are pending with the Cabinet. Third, every force has pleaded for technology upgradation.

“In the past, the trend in defence budgeting was that the revised estimates exceeded the budgetary estimates,” says Uday Bhaskar. “It is only since 1998-1999 that revised estimates are less than the budgetary estimates. This implies two things: first, there is pressure to bridge the fiscal deficit. Second, there is a systemic inadequacy in meeting procurement and acquisition needs. The post-Kargil study had recommended sustained modernisation.”

There are aspects of the budget that promise an element of transparency. Singh’s budget for the first time makes a separate allocation for the Defence Research and Development Organisation of Rs 913.49 crore in the capital outlay. Earlier, the research and development allocation was made out of the army’s budget. Also, the finance minister has sought to make the defence ministry more accountable by introducing “effective cash management”.

Singh said the government was introducing a cash management system in select ministries and will release budgetary allocations in a time-sliced manner to permit convergence with available resources. “Monthly or quarterly cash limits, based on the actual requirements of the ministries, will be prescribed,” Singh said. Though he did not mention the defence ministry in this context, sources said the system would apply to major defence spending. This is welcomed by analysts.

Singh made the verbal commitment that there will be no shortage of funds for the defence services when required. The defence allocation is about 2.4 per cent of the GDP, which will enable the Centre to tell the world that its expenditure in percentage terms is less than that of Pakistan and China.

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