The Telegraph
Since 1st March, 1999
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Budget slash signal triggers defence jitters

New Delhi, Feb. 16: The chiefs of the armed forces have made a fervent plea to the defence minister against a move by the finance ministry to prune defence allocation for 2003-2004.

But the finance ministry does not want to get into the guns-versus-butter debate in a budget that will be prepared with an eye on the Assembly and general elections to follow.

A cut — even pegging the defence budget at last year’s level will effectively amount to a cut after adjusting for inflation — will allow the finance ministry to channel more funds into welfare budgets. It has asked the defence ministry to be prepared for a smaller budgetary allocation than last year’s.

The service chiefs’ plea to the defence minister followed intimation to the defence ministry that its allocations for the next financial year (2003-2004) will be pared. Estimates in the defence ministry put the possible expenditure this year (2002-2003) at about Rs 55,000 crore till March 31. This would be Rs 10,000 crore less than the allocation of Rs 65,000 crore in the budget.

However, defence ministry officials say they are not unduly perturbed because no service chief can be expected to agree to a cut in the budget. “The way we go about it, the budgetary allocation is only ‘notional’. Funds are available under different heads and never in the last 10 years has an acquisition been delayed for want of funds,” said an official.

The shortfall in expenditure owes itself to the inability of the ministry to incur all expenditure under its capital outlay for 2002-2003 of Rs 21,410.63 crore. This has been the pattern of defence expenditure year after year.

The revenue outlay is almost entirely spent. There is the possibility that the ministry could even overshoot the revenue expenditure for 2002-2003 because all the expenditure under Operation Parakram, the 10-month mobilisation of the armed forces, will have been incurred from this head. The mobilisation began in December 2001 (2001-2002 fiscal).

The service chiefs are understood to have told the defence minister that the shortfall in capital expenditure is the outcome of political indecisiveness in making big-ticket purchases. The armed forces and the defence establishment should not be made to bear the cost of political dithering.

It is understood that the finance ministry wants to peg the defence budget for 2003-2004 at around Rs 60,000 crore — Rs 5,000 crore less than that of last year but Rs 5,000 crore more than the estimates of expenditure till now.

Nearly 90 per cent of the army’s budget and about 60 per cent of the air force and naval budgets are used for maintenance and salaries and special allowances. The expenses under special allowances will be larger this year because of the deployment. Among the three services, capital expenditure in the Indian Air Force is the highest in 2002-2003. By the end of the current fiscal, it could be close to 75 per cent of the IAF’s capital outlay of Rs 7402.17 crore.

Even then, it is highly unlikely that — with a little over a month to go — the Cabinet can clear the purchase of advanced jet trainers. The AJT deal could cost up to Rs 7,000 crore. Usually, for such big-ticket purchases, expenses are spread over 36 months. In the first year of signing the contract, the government would have to pay 10 per cent upfront.

The air force has pointed out that it has completed its part of the deal — evaluations and price negotiations — and cannot be penalised if the Cabinet Committee on Security is still sitting on the proposal.

Sources in the defence ministry said the finance ministry has given the assurance — as always — that funds will not be scarce for exigencies. This year, the ministry had also not made supplementary demands for grants in the winter session of Parliament.

The defence budget is a document that is far from being transparent. For the last three years, the budget has been passed by Parliament almost without discussion. There is a wide disparity in views on military expenditure. While defence analysts say India’s defence expenses are either not adequate or are not wisely spent, others, such as economist Amartya Sen, hold that it is excessive.

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