Defence budget must reflect reality

The military, like a child kept hungry for years, no longer dares to ask for the budget it really needs

By Ajai Shukla

Business Standard, 16th Feb 16

Since October the military has been negotiating with the defence and finance ministries to finalise financial allocations for the coming financial year, 2016-17. Unfailingly unimaginative, the military’s various departments have taken the current year’s allocations, upped them by five to 10 per cent and projected that as next year’s requirements. As usual, the finance ministry has arbitrarily cut those requests. Like always, when revised estimates are prepared at the end of the year, the capital allocation (for equipment modernisation) will be slashed further since revenue expenditure, particularly salaries, must be paid on priority. Year after year the military ends up spending money quite differently from what had been allocated.

Every military financial planner admits the services are consistently under-budget in both the revenue and capital heads. Weaponry sanctioned under the 15-year Long Term Integrated Perspective Plan requires significantly higher capital allocations. Yet, like a child that has been consistently underfed for years, the military no longer dares to ask for a full meal. To stretch this analogy further, were the military to be given that full meal, it would probably be incapable of digesting it. Yet, if only as an academic exercise, it is worth reflecting on what a realistic allocation might be for the military.

Projected Budget for 2016-17

	2014-15 (BE)	2014-15 (RE)	2015-16 (BE)	2016-17 (projected)
Revenue budget
Salary payroll	83581	86574	93216	111860*
Other revenue expenditure	50831	53831	58923	67761 **
Total Revenue allocation	134412	140405	152139	179621
Capital budget
Army	20630	16868	21574	39713
Navy	22312	17471	23911	53591
IAF	31818	31818	31481	48741
Defence R&D Org	9298	7148	7788	11682
Other heads	10530	8660	9834	9834
Total Capital allocation	94588	81965	94588	163561
Total budget allocation	229000	222370	246727	343182
Total government spending	1794892	1681158	1777477	1884125@
Gross domestic production	12876653	12653762	14108945	15167116#
% of total spending	12.75%	13.25%	13.85%	18.25%
% of GDP	1.78%	1.76%	1.75%	2.25%

  

*    Estimating salary increase of 20 per cent across the board

**  Non-salary expenditure increase of 15 per cent

@  Estimated govt spending rise 6 per cent, against 5.5 per cent in 2015-16

#    Estimated GDP rise by 7.5 per cent, against 11.5 per cent in 2015-16

In the revenue head the payroll is growing, with the government bound to accept most recommendations of the 7^th Central Pay Commission. A modest increase of 20 per cent over the current year’s salary allocation and a 15 per cent increase on non-salary spending would boost the revenue allocation to Rs 1,79,621 crore ($26.6 billion).

The capital budget would grow even more. The army, while a relatively low-tech, manpower-intensive service, badly needs new equipment --- including artillery, air defence missiles, new-generation personal weapons and battlefield communication systems. Equipment worth Rs 1,81,450 crore ($26.9 billion) is already sanctioned. Assuming these contracts divide payment into ten equal annual instalments, this year requires Rs 18,145 crore over and above the Rs 21,574 crore committed last year, which would cover liabilities committed earlier. That would take up the army’s capital allocation to Rs 39,713 crore ($5.9 billion).

Army acquisitions	Cost (Rs  crore)
Artillery gun procurements (sanctioned)	28450
2 regiments Pinaka rocket launchers	5000
Short and medium range surface-to-air missiles	30000
Short range surface-to-air missiles	30000
Tactical Communications System (Make project)	20000
Battlefield Management System (Make project)	50000
Rifles, carbines, machine guns and sights	12000
Unmanned Aerial Vehicles	6000
Total new army acquisitions	1,81,450

Urgent naval procurements include submarines, stealth frigates, logistic support vessels, anti-submarine and counter-mine vessels and, most crucially, ship-borne helicopters. This adds up to Rs 2,96,800 crore ($44 billion), of which one-tenth must be provisioned for in this budget. Catering for committed liabilities, the navy’s capital allocation must rise to Rs 53,591 crore ($8 billion).

Navy acquisitions	Cost (Rs crore)
Six conventional submarines (Project 75 I)	60000
Lease of second nuclear sub from Russia	5400
Seven stealth frigates (Project 17A)	45400
Six fleet support ships	24000
150 naval utility helicopters	15000
139 naval multi-role helicopters	60000
4 Boeing P8-I maritime aircraft	7000
4-6 landing platform docks	16000
24 mine counter measure vessels	36000
2 midget submarines for special operations	2000
Refit of 10 submarines	10000
16 anti-sub shallow water craft	16000
Total new Navy acquisitions	2,96,800

The air force, which traditionally receives the highest capital allocation, is looking to conclude contracts for the (vastly overpriced) Rafale fighter, extending the Jaguar fighter’s service life, and a range of helicopters. Contracts worth Rs 1,72,600 crore ($25.5 billion) require urgent conclusion, with Rs 17,260 crore payable this year. That takes the air force’s capital allocation to Rs 48,741 crore ($7.2 billion).

Air Force acquisitions	Cost (Rs crore)
36 Rafale medium fighter	63000
125 Jaguar re-engining and upgrade	20000
Indo-Russian fifth generation fighter	25000
56 Avro aircraft replacement aircraft	15000
20 Hawk advanced jet trainers	2000
22 Apache AH-64E attack helicopters	8500
15 Chinook CH-47F heavy lift helicopters	6600
384 Light Utility Helicopters (LuH)	13500
Surface-to-air missiles	30000
Total new Air Force acquisitions	1,72,600

Acquisitions (all services)	6,50,850

All this would take the capital allocation to Rs 1,63,561 crore ($24.2 billion), slightly less than the revenue allocation. That would boost the defence budget by almost 40 per cent from the current Rs 2,46,727 crore ($36.5 billion), to Rs 3,43,182 crore ($50.8 billion). As a share of government spending, defence would rise from 13.85 to 18.25 per cent; and from 1.75 to 2.25 per cent of the gross national product (GDP).

Can India spend 2.25 per cent of GDP on defence, given the government’s fiscal deficit targets, and the pressing need to boost spending on healthcare, education and food for the poor? That is a political call. India’s on-going border disputes with China and Pakistan, several long-running insurgencies, and the army’s frequent employment on natural disasters require high preparedness. If the government decides it cannot spend more on defence than it already does, national strategy and the military’s tasking must reflect the realities of our pocket.