Rs 7,900 cr shifted from Capital Budget to Revenue Budget of Defence Ministry
The Government has cut nearly Rs 7,900-crore from the Capital Budget of the Defence Ministry for this fiscal and diverted it to the Revenue Budget of the Ministry to meet rising operational costs due to hike in petroleum products. This deduction will hit acquisition of critical weaponry for the armed forces and have long-term impact on modernisation plans.
The Revenue Budget of the Defence Ministry comprises transportation, maintenance, operational costs, pay, allowances of personnel and stores. Since the armed forces have to constantly operate warships, planes and tanks to maintain operational preparedness, the rising cost of petroleum products over the last one year could have hampered effectiveness, officials said here on Thursday.
The cut in the Capital Budget and no substantial jump expected in Budget allocations for next year will affect several key projects like the Mountain Strike Corps of the Army that is being set up to counter China, the nod for building six submarines in India, and procurement of long range artillery guns. The Government could have diverted funds from elsewhere to ease the pressure on the Army, but it chose to let the Defence forces fend for themselves.
The Mountain Strike Corps, which was given the go-ahead by the Cabinet Committee on Security in July last year, will comprise nearly 40,000 personnel and will cost the exchequer Rs 80,000-crore spread over the next seven to eight years. The Army will have to acquire artillery guns, howitzers, helicopters besides creating new infrastructure for the corps in Bihar, West Bengal and Jharkhand.
The Army’s proposal to acquire artillery guns and howitzers worth over Rs 20,000-crore is hanging fire for the last many years and the force has not acquired new artillery guns in the last 25 years in the wake of the Bofors scandal.
Similarly, the Navy’s plan to build six submarines under project P-75 I are also likely to be hit by this budget cut. This project is worth over Rs 50,000-crore and the Navy plans to build these submarines at public sector shipyards under transfer of technology pact from the selected vendor.
Faced with a resource crunch over the last three years, the Navy is yet to issue Request for Proposal (tender) from international submarine builders and sources said the project is not likely to go through in the next year too.
However, Army sources argued that as no new deals were inked during the financial year and nearly 75 per cent of the Capital Budget of Rs 86,740-crore was spent so far on meeting contractual obligations, the decision was taken to shore up the Revenue Budget to meet the immediate operational requirements of the armed forces.
Also, since the medium multi-role combat aircraft (MMRCA) deal with the French company Dassault for its Rafale jets is also not likely to be finalized during the present fiscal, the money earmarked for the proposed deal was diverted, sources said.
Nearly Rs 10,000-crore was to be paid as the signing amount for the Rs 45,000-crore MMRCA deal and cost negotiations are now on between the manufacturer and the Defence Ministry. Sources said this project will be a major casualty due to the economic slowdown and badly hamper the IAF’s modernization plan. The force was planning to induct 126 MMRCA over a period of four years after the deal was inked and replace the ageing MIG-21s which are in the last phase of their operational life.
Rs 1, 16,931.41-crore was allocated as the Revenue Budget in the total outlay of Rs 2,03, 672.12-crore while Rs 86,740-crore was earmarked as the Capital Budget. While the budget for this fiscal was hiked by nearly five per cent as per the revised estimates of the last fiscal, officials did not rule out the situation improving in the next fiscal.
In fact, Defence Minister AK Antony also indicated some weeks ago that given the current economic situation, the armed forces will have to rationalize expenditure and bring forward only those proposals which have direct bearing on immediate operational preparedness.