Budget: Navy and air force modernise, army remains mired in high personnel costs

By Ajai Shukla

Business Standard, 5th Feb 19

The defence Budget, which the Union government presented on Friday, underlines that each of the three services remains locked in its own expenditure pattern. The army, which most requires modernisation, continues allocating well over two third of its budget to salaries and pensions, leaving just a little over one-tenth for new equipment.

The navy manages manpower best, spending just over a quarter of its overall budget on personnel costs. Despite having the lowest capital allocation, it will still spend a healthy 45 per cent of its budget next year on new warships and equipment.

The air force spends the largest percentage – about half its budget – on modernisation and the purchase of new equipment. That is partly because it has by far the largest capital budget of all three services – Rs 39,303 crore, compared to the army’s Rs 31,815 crore and the navy’s Rs 25,541 crore (including Coast Guard allocations).

Breakdown of services’ budget

(in Rupees crore)

Year	Manpower (salary + pension)	Non-salary revenue (A)	Capital allocation (B)	Non-manpower costs (A+B = C)	Total service budget	Ratio spent on manpowr	Ratio spent on new equipment
Army*
2017-18 (Actual)	170302	41185	29962	71147	249577	68%	12%
2018-19 (RE)	181109	42246	29055	71301	252410	72%	11.5%
2019-20 (BE)	190399	44884	31815	76699	267098	71%	12%
Navy^
2017-18 (Actual)	12370	12499	22298	34797	47167	26%	47%
2018-19 (RE)	14881	14186	23141	37327	49697	28.5%	46.5%
2019-20 (BE)	15596	15251	25541	40792	56388	27.5%	45%
IAF#
2017-18 (Actual)	22274	11978	34918	46896	69170	32%	50.5%
2018-19 (RE)	26374	11989	35770	47759	74133	35.5%	48%
2019-20 (BE)	27316	13016	39303	52319	79635	34.5%	49.5%

(Source: budget documents)

* Including Border Roads, Rashtriya Rifles, J&K Light Infantry, National Cadet Corps

^ Including Coast Guard and Joint Staff

# Including Special Projects

None of these expenditure patterns have changed over the last decade. Officers responsible for preparing budgets say their detailed costing projections are mostly ignored. Instead, the defence ministry simply takes the previous year’s budgetary allocations for each service and adds a small percentage to those.

For that reason, budget allocations barely diverge from a simple formula: give the army 60 per cent, the air force 24 per cent and the remaining 16 per cent to the navy.

These are the figures that have solidified after the implementation of One Rank, One Pension (OROP) effectively doubled the pension bill, and the 7^thCentral Pay Commission recommended across-the-board salary increase. The army, already hamstrung by untenable personnel costs, took the largest hit from these.

The army hierarchy is only now coming to terms with the realisation that it will have to prune numbers to have a substantial sum left for the rifles, personal protective gear, man-portable missiles and artillery guns that it badly needs. For decades, it has justified its large size by stating that “boots on the ground” are essential for manning the sprawling mountain borders with China and Pakistan.

The Parliament’s Standing Committee on Defence has recommended revamping personnel policy, as have successive committees in recent years, including the Naresh Chandra Task Force and the Shekatkar Committee. 

Only now has army chief General Bipin Rawat ordered a sweeping reorganisation that could see a major reduction in the army’s “tooth to tail ratio”, including an unprecedented reorganisation and pruning of the Army Headquarters. In addition, there could be a shift to shorter service tenures for soldiers, which would reduce the government’s pension liability and greater promotion mobility for officers.