Poor capital management, inefficient budgeting root causes of sorry state of Indian Armed Forces

Inefficient budgeting and underutilisation of defence funds emerge as major hurdles for the Indian services — army, navy and the air force — according to an action taken report submitted to the Parliament

Hassan M Kamal December 21, 2017 18:53:50 IST
Poor capital management, inefficient budgeting root causes of sorry state of Indian Armed Forces

Poor funding has always emerged as one of the major issues in what's said to be ailing the Indian Armed Forces. But it turns out lack of funding is not the only problem slowing the modernisation of the Indian Army, Indian Navy and the Indian Air Force.

Poor capital management inefficient budgeting root causes of sorry state of Indian Armed Forces

Representational image. Reuters

According to an action taken report on an older report of a Parliamentary Standing Committee on Defence, tabled in Parliament on Tuesday, inefficient budget planning and management appears to be slowing down the modernisation of the Indian Armed Forces.

The report, in particular, blamed inefficient budgeting of the Ministry of Defence (MoD) behind the sorry state of the Indian services, while also holding the Ministry of Finance (MoF) responsible for failing to create non-lapseable fund account to ensure allocated capital is available to the services despite delays in utilisation.

A study of estimated projections and allocations (budget and revised) as well as expenditures show a depressing trend in both revised allocation as well as utilisation of funds with reference to budget estimates. The only exception emerges is 2016-2017, which saw a fall in unitilised funds with reference to budget estimates. However, the constant blame game between the MoF and the MoD, as highlighted in the report, points at an inherent policy failure, which neither the MoF nor the MoD seem willing to correct.

In fact, the report cities, "The Ministry of Defence has completely passed the onus of underutilisation of funds to either cuts imposed by the finance ministry or delay in delivery of product/equipment by the vendor... there appears to be no self-introspection in regard to underutilisation of funds," the report said criticising the MoD. The MoF, on the other hand, blamed the MoD saying — the committee seems to agree too — MoD's "persistent failure to utilise allocated funds has contributed to the reduction in MoD's budget allocations by the Finance Ministry..."

But is the MoD solely responsible? The MoF appears unwilling, going by its responses to the committee, to bring a policy change in order to resolve the capital issues of the defence services.

One of the major issues which emerge in the report is how funds allocated to the MoD for the three services lapse if unutilised. Though this is a common practice across all ministries, it proves a major hurdle for MoD, since defence procurements are complex and often take a lot of time, cites the report; lapseable capital thus acts as a detterrent for India's national security apparatus.

"Our forces' plans for capacity enhancement and heightened operational preparedness would be negatively affected due to reduced allocation of funds in the capital head and this would ultimately be detrimental to our national security," the report says.

Pressing for the creation of a non-lapseable capital fund account, the committee expressed its disagreement with the contention of the MoF that the desired objectives of MoD towards meeting its contractual liabilities, acquisitions and defence modernisation can be achieved through normal budgetary mechanisms.

Towards this, the committee suggested the creation of a non-lapseable fund for the defence services. Even though defence has been a top priority for the government amid rising security concerns and threats, the MoF's reluctance to accept the committee's suggestion doesn't seem to make sense.

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