Defence Budget is likely to get a modest hike of ten to 12 per cent in the next fiscal and the Government may provide for finances for the much awaited ‘one rank one pension (OROP) scheme.’ This will amount to Rs8,000 crore and benefit more than 25 lakh ex-servicemen.
The Defence allocation for this financial year is Rs2,29,000 crore announced by Finance Minister Arun Jaitley, who was also holding Defence portfolio, in July last year. The Budget was hiked by about 12 per cent from the 2013-2014 allocation and the Government is likely to go along with a modest jump for next year too, sources said here on Saturday.
Having committed to address the issue of OROP, the Finance Minister may clear the long pending demand of ex-servicemen. Intense discussions were on in the Defence Ministry last week over this proposal with Defence Minister Manohar Parrikar repeatedly saying the Government was serious to address it.
If the OROP comes through, about Rs8,000 crores will be given as military pension from the revenue budget of overall Defence allocations. Incidentally, revenue budget includes day to day running of the Services like operational training, maintenance of weapon systems and related issues besides salaries and pensions.
The revenue budget accounts for 60 per cent of overall budget and Rs1,34,412 crores were allotted in the present budget while Rs94,588 crore accounted for capital budget for procurement of weapon systems and sustain the ongoing modernisation drive.
However, the proposed hike of about 12 per cent will be negated by rising inflation and falling price of rupee compared to dollar. Moreover, rising prices of weapon systems means that the hike will take care of only meeting ongoing contractual obligations.
The capital budget is likely to cater for payment of Rs10,000 crore as payment of first installment if the medium multi-role combat aircraft deal (MMRCA) come through. Negotiations between the Defence Ministry and Dassault, the French aviation manufacturer whose Rafale fighter jet was selected, are in the final stages. The deal often termed as “mother of all defence deals” is worth over Rs45,000 crore and the two sides are engaged in complex contractual negotiations for the last two years.
Besides this big ticket item, the capital budget also has to cater for ongoing raising of the Mountain Strike Corps of the Army. This corps is specifically meant for meeting China threat in the East and nearly Rs70,000 crore are needed for this project. The Corps is to be ready for operations in the next five to seven years after the raising started last year.
Several proposed deals like 22 Chinook and 15 Apache helicopters and C-17 transport aircraft are in the pipeline and likely to be inked in the next fiscal. The Chinook and Apache deals are worth over two billion dollars. India has already inducted all ten C-17s and the total deal is worth over $4.116 billion. The Government has to honour the contract in terms of time bound payment in installments.
While the Modi Government has cleared projects worth over Rs2 lakh crore in the last eight months as part of ‘Make in India’ policy but global tenders are yet to be issued for most of them. It means that the budget will only cater for procurement of any item urgently needed for operational requirement and payments for signed deals.