The Telegraph
Friday , January 24 , 2014
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Rupee fall squeezes arms budget

New Delhi, Jan. 23: The government has slashed the budget for military hardware that the armed forces desperately want because the sharply cheapening rupee has led to a whopping rise in the cost of imported fuel for warships, fighter aircraft and tanks.

Defence ministry officials were taken aback after the finance ministry this week slashed the capital expenditure — meant for new acquisitions — by about Rs 7,900 crore and transferred the amount for revenue expenditure.

This was in response to a supplementary demand for grants by the defence ministry after last year’s nosedive of the rupee in the foreign exchange market. The defence ministry was expecting the additional funds after promises by the Prime Minister and the finance minister at the commanders’ conference that there would be no shortage of funds for the armed forces.

Instead, the finance ministry cut the demanded amount from the capital budget and transferred it to the revenue budget, a defence ministry official said.

The slash in the shopping budget, the official said, puts a question mark on big-ticket purchases the government has decided on but is yet to contract.

Among these are:

• 126 Medium Multi-Role Combat Aircraft (MMRCA) for which the French-origin Rafale has been selected for the Indian Air Force;

• 22 Boeing AH 64D Apache Longbow attack aircraft for the army;

• 15 Boeing CH-47 Chinook twin-rotor heavy-lift helicopters for the IAF;

• Six Airbus A330 mid-air refuellers for the IAF;

• 16 multi-role helicopters for the navy; and

• 145 M777 ultra-light howitzers for the army’s China frontier artillery units.

The defence allocations for 2013-14 total Rs 2,03,672 crore. Of this, the capital budget was Rs 86,740.70 crore for new purchases. The revenue budget allocates funds for salaries and maintenance. After salaries, a bulk of the amount is used for fuel and rations for troops stationed in harsh mountain terrain and exercises in the air and the sea among the armed forces and with the armed forces of foreign nations.

In the previous year (2012-13), the revised budget estimates show a cut of about Rs 14,900 crore from the original allocations. In the current year, of the total defence allocations, 49 per cent was for the army, 28 per cent was for the air force and 18 per cent for the navy.

The ministry source said that while the air force and the navy had spent most of their allocations, the army was lagging behind. The army could be the worst hit by the budget cut.