For the armed forces, Budget brings no cheer

By Ajai Shukla

(Expanded version of Business Standard article)

10th March 2015

The defence budget announced on February 28 has disappointed the army, navy and air force. With acquisitions in the pipeline worth over Rs 20 lakh crore, military planners protest that the capital budget allocation of Rs 94,588 crore --- not even a rupee more than what was allocated in last year’s budget --- is far less than what is required.

Rs 31 lakh crore worth of acquisitions are needed over a 15-year period, say top level sources in the Integrated Defence Staff (IDS), which carries out long term planning of acquisitions for the three services. This is formalised in the classified Long Term Integrated Perspective Plan (LTIPP), which compiles the military’s equipment requirements over the 12^th Defence Plan (2012-13 to 2016-17), the 13^th Plan (2017-18 to 2022-23) and 14^th Plan (2023-24 to 2027-28).

Budget projections: 2012 - 2027

User	Capital budget
	12th Defence Plan					13th Defence Plan
	2012-13	2013-14 (RE)	2014-15 (RE)	2015-16 (BE)	2016-17	2017-18	2018-19	2019-20
Army	10872	10749	16868	21574	23731	26104	28714	31585
Navy	16889	19600	17471	23911	26302	28932	31825	35008
IAF	31053	36017	31818	31481	34629	38092	41901	46091
Other*	11685	12506	15808	17622	19385	21324	23457	25803
Total	70499	78872	81965	94588	104047	114452	125897	138487

Capital budget
13th Defence Plan		14th Defence Plan					TOTAL
2021-22	2022-23	2023-24	2024-25	2025-26	2026-27	2027-28
34744	38218	42040	46244	50868	55955	61551	499817
38509	42360	46596	51256	56382	62020	68222	565283
50700	55770	61347	67482	74230	81653	89818	772082
28383	31222	34344	37778	41556	45712	50283	416868
152336	167570	184327	202760	223036	245340	269874	2254050

Adding to the military’s disquiet is the repeated inability of the ministry of defence (MoD) to spend the capital budget on new equipment. Year after year, chunks of the capital budget are surrendered unspent, or diverted to the revenue budget for funding running expenses like military salaries, and maintenance of equipment.

In the current year, the MoD has managed to spend only Rs 81,965 crore of the Rs 94,588 crore allocated for capital spending, a shortfall of Rs 12,623 crore. Rs 6,630 crore was returned to the finance ministry, while over Rs 6,000 crore were diverted to expenses like salaries.

A Business Standard analysis of equipment requirements over the next 15 years and the likely fund availability during this period finds a precarious balance between needs and means.

In the near term, there is precious little money to meet the three services’ requirement of Rs 20 lakh crore worth of equipment. However, as the years go by, especially in the next decade, an expected real increase of 10 per cent per annum will have allocated Rs 22.5 lakh crore by the end of the 14^th Defence Plan in 2027-28 towards the military’s capital budget (see graphic below).

This includes a cumulative total of Rs 5 lakh crore for the army, 5.65 lakh crore for the navy, and Rs 7.72 lakh crore for the air force. Another Rs 4.17 lakh crore will provide capital funding for Defence R&D Organisation (DRDO), Ordnance Factory Board (OFB), joint staff, army railroads and military land and buildings.

Given the army’s requirements of Rs 5.29 lakh crore, that leaves a shortfall of Rs 30,000 crore. The navy will be short of Rs 1.75 lakh crore, given that it must spend Rs 7.4 lakh crore. The air force alone might have the money it requires, with budgetary projections providing it Rs 7.72 lakh crore to meet its equipment requirements of 7.28 lakh crore.

These projections assume that the distribution of funds between the three services remains static. In fact, the share of the navy has steadily grown over the years, rising from barely 5 per cent of the overall defence budget to 16 per cent today. The military implications of a “Look East, Act East” policy might result in further increases to the navy, with some analysts predicting that the navy’s allocations might inch up to 20-23 per cent of total military spending. That would come at the cost of the army and air force.

Future budgetary projections are always uncertain, and Lieutenant General Anil Chait, who coordinated tri-service budgetary and acquisition planning until he retired as chief of the Integrated Defence Staff (IDS) last May, points out that Business Standard’s funding projections assume low inflation and a stable rupee. With 60 per cent of the military’s equipment requirements being sourced from abroad, any significant rupee devaluation would indeed buy less bang for the Indian buck.

Even so, financial planners within the military admit that, given the current inflation environment and a stable rupee, these calculations are probably realistic.

Army: battling for modernisation

System	Cost	Remarks
	(Rs crore)
145 ultra light howitzers	5000
1580 towed artillery guns	15750	Cleared in Nov 2014
814 mounted gun systems (MGS)	4700
100 tracked self-propelled guns	3000
414 Dhanush guns from OFB	2000
2 regiments Pinaka rocket launchers	5000
Brahmos missiles	3500
Strategic missile systems (nuclear capable)	20000
Armour upgrade and new tanks	10000	T-72, T-90 and Arjun
Future Main Battle Tank (FMBT)	60000	1000 new tanks
Future Infantry Combat Vehicle (FICV)	60000	2600 new ICVs
Short Range Surface-to-air Missile (SR-SAM)	30000	Develop and produce
Tactical Communications System (TCS)	20000	Under “Make” category
Battlefield Management System (BMS)	50000	Under “Make” category
Rifles, carbines, machine guns and sights	12000
Future Infantry Soldier as System (F-INSAS)	10000	Under “Make” category
Unmanned Aerial Vehicles (UAVs)	6000
Dedicated army mobile networks	3000
Anti-tank guided missiles	10000	300 Spike cleared
Surface-to-air missile systems	30000	SR-SAM and Akash
Miscellaneous gear, arms, ammunition	100000
Raising of mountain strike corps (MSC)	70000	Estimated cost
TOTAL	5,29,950

While the army remains the service most in need of modernisation, land systems in general are significantly less expensive than aircraft and naval equipment. A large chunk of the army’s modernisation budget will go towards procuring, or indigenously building, modern howitzers, rocket launchers and various missile systems. There will be large expenditure on modernising the army’s mechanised forces, including the indigenous development and production of a Future Main Battle Tank (FMBT) and Future Infantry Combat Vehicle (FICV).

Also being developed indigenously is the digital backbone for a “networked force”, which will include communications and data networks like the Tactical Communications System (TCS), as well as soldier-specific networks like the Battlefield Management System (BMS), which was kick-started last week. Besides these high-tech systems, the army will also spend on basic combat equipment, including new rifles, carbines and machine guns.

Another big army expenditure will involve raising a new mountain strike corps (MSC) for offensive tasks on the mountainous northern border. While the government had announced it would spend Rs 67,000 crore on this new formation, most of that money remains to be allocated.

Navy: trouble at the seas

System	Cost	Remarks
	(Rs crore)
Six Scorpene submarines (Project 75)	10000	Balance payment
Six conventional submarines (Project 75 I)	60000	Being processed
Lease of INS Chakra from Russia	4200	Lease payments
Lease of second nuclear sub from Russia	5400	Lease payments
Two Arihant-class nuclear submarines	36000	INS Arihant follow-ons
Six nuclear-powered attack submarines	100000	DRDO project
Seven stealth frigates (Project 17A)	45400	MDL and GRSE to build
Four anti-submarine corvettes (Project 28A)	5000	Balance payment
Three stealth destroyers (Project 15A)	22000	INS Kolkata delivered
Four stealth destroyers (Project 15B)	30000
Two indigenous aircraft carriers	50000	Cochin Shipyard
Six Fleet Support Ships (FSS)	24000
150 Naval Utility Helicopters	15000
139 Naval Multi-Role Helicopters (Navy)	60000	First 16 being procured
8 Medium Range Maritime Recce (MRMR) aircraft	6000
8 P8-I Multi-Mission Maritime Aircraft (MMA)	12000	Deliveries began from December 2012
4 additional P8-I Multi-Mission Maritime Aircraft (MMA)	6000	8 procured earlier
4-6 Landing Platform Dock (LPD)	16000
24 Mine Counter Measure Vessels (MCMV)	36000	To be built in India
2 midget submarines for special operations	2000	Building in HSL, Vizag
12 Dornier aircraft	1850	Building in HAL Kanpur
10 Submarines overhaul	10000
16 ASW Shallow Water Craft (ASWC)	16000
Naval LCA Tejas development cost	3000	Including Mark II
65 Tejas fighters	12000
Miscellaneous gear, arms, ammunition	100000
Development of Karwar Naval Base	50000	West coast base
Development of Rambilli Naval Base	100000	East coast base
Development of Andaman & Nicober Comd	25000
TOTAL	7,40,000

The navy’s Maritime Capability Perspective Plan (MCPP) envisages a 160-ship force that is centred on 90 capital warships, like aircraft carriers, destroyers, frigates and corvettes. While there are currently more than 140 vessels, the navy has barely half the destroyers and frigates it needs. About five ships need to be inducted each year just to replace warships that are decommissioned after completing their 30-40 year service lives. Much of the navy’s modernisation budget, therefore, would go towards constructing new warships and submarines.

Submarines will form a thrust area. These include twelve conventional submarines, of which six Scorpenes would start rolling out of Mazagon Dock Ltd next year. Another six will be built in India along with a foreign partner shipyard. The DRDO will build another two nuclear missile-carrying submarines of the Arihant class (SSBNs); and develop and build six nuclear-powered attack submarines (SSNs) in India. INS Chakra, the SSN leased for ten years from Russia, will be joined by a second leased SSN.

Capital warships are being built in numbers, including seven stealth frigates under Project 17A; four stealth destroyers under project 15B; two indigenous aircraft carriers, INS Vikrant and Vishal, and four anti-submarine warfare (ASW) corvettes under Project 28A. In addition, the navy will acquire six fleet support ships (FSS), 4-6 landing platform docks (LPDs) for amphibious assaults on enemy coast lines, 24 mine counter measure vessels (MCMVs) to guard against sea mines laid by the enemy outside our ports, harbours and on shipping lanes.

 A hefty chunk of expenditure will go towards developing a brand new naval base on the Andhra Pradesh coast at Rambilli, which will be the key operational base for the Eastern Naval Command. Money will also be spent on the Western Naval Command’s premier new base at Karwar, and on naval facilities in the Andaman & Nicobar Islands in the Bay of Bengal.

Air strike capabilities

System	Cost	Remarks
126 Rafale medium fighter	120000	Under negotiation
LCA Mark II development cost	2500
123 Tejas fighters	20000
125 Jaguar re-engining and upgrade	18000
51 Mirage 2000 upgrade	15000
80 Sukhoi-30MKI production	30000	Balance remaining
272 Sukhoi-30 overhaul	30000
Fifth generation fighter development	30000	Partnership with Russia
144 Fifth generation fighters production	65000	In Russia and India
150 Advanced Medium Combat Aircraft	100000	Develop and build
Multi-role Transport Aircraft development	5000	Partnership with Russia
45 Multi-role Transport Aircraft production	6750	In Russia and India
56 Avro aircraft replacement programme	15000
60 Hawk advanced jet trainers	6000
22 Apache AH-64E attack helicopters	8500
15 Chinook CH-47F heavy lift helicopters	6600
126 Basic trainer aircraft (BTA)	5000	Pilatus and HTT-40
85 Sitara intermediate jet trainers (IJT)	8500	Being built by HAL
384 Light Utility Helicopters (LuH)	13500	To be built in India
80 Dhruv/Rudra advanced light helicopters	4000	Being built by HAL
Surface-to-air missile defences	30000	MR-SAM and Akash
Miscellaneous gear, arms, ammunition	200000
TOTAL	7,28,350

With just 35 fighter squadrons operational presently against the air force’s authorised strength of 42 squadrons; and with another 11 squadrons likely to be decommissioned before the end of the 13^th Defence Plan, the air force’s focus is on acquiring fighter aircraft. Besides the Rafale medium multi-role combat aircraft (MMRCA), it will buy six squadrons of Tejas light fighters; 80 more Sukhoi-30MKI fighters under an existing contract; and upgrade its fleet of 50 Mirage 2000 and 125 Jaguar fighters. There is an Indo-Russian development programme under way for 144 fifth generation fighter aircraft (FGFA); and another DRDO development project for at least 150 advanced medium combat aircraft (AMCA).

Transport aircraft are another thrust area, including the Indo-Russian programme to develop a multi-role transport aircraft (MRTA); the replacement of 56 Avro HS-748; and the on-going procurement of C-17 Globemaster III heavy lift aircraft from the US. In addition, the air force is procuring large numbers of helicopters, including the billion dollar purchases of the Apache AH-64E attack helicopter and the Chinook CH-47F heavy lift chopper.

These procurements do not include a host of high-tech development projects that are planned for developing the battlefield capabilities of the future --- space surveillance; launch-on-demand satellites; hypersonic vehicles that will translate into more effective strike vehicles; electronic warfare systems; cyber warfare capability; active armour; active counter-IED technologies, unmanned combat aerial vehicles to replace manned fighters and a range of drones that have precision strike capabilities. The DRDO also has programmes under way to develop high altitude long endurance (HALE) and medium altitude long endurance (MALE) drones, long range cruise missiles and an anti-ballistic missile shield to shoot down incoming nuclear-tipped ballistic missiles.

None of these have been budgeted for, except through the DRDO’s budget. However, in a 15-year perspective, some of these projects might will reach fruition, and their introduction into service would require additional funds.