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Defence Budget 2019-2020

February 1, 2019 By Lt. General P.C. Katoch (Retd) Photo(s): By PIB
The Author is Former Director General of Information Systems and A Special Forces Veteran, Indian Army


The Union Minister for Railways, Coal, Finance and Corporate Affairs, Piyush Goyal departs from North Block to Parliament House, along with senior officials to present the Interim Budget 2019-20, in New Delhi on February 1, 2019.

The Interim Budget speech by the Interim Finance Minister (IFM) on February 1, 2019, covered defence budget allocation for the next fiscal year in precisely 34 words by saying, "Our Defence Budget will be crossing 3,00,000 crore for the first time in 2019-20. For securing our borders and to maintain preparedness of the highest order, if necessary, additional funds would be provided." More words were used to describe money spent on one rank, one pension (OROP), and grant of "substantial hike" in Military Service Pay (MSP), both of which are misnomer because instead of OROP what has been disbursed is one time increase in pension (OTIP), not OROP. If OROP was indeed given, why would Supreme Court issue notice to Centre on January 3, 2019 for inordinate delay in removing anomalies in implementation of OROP, and why would thousands of ex-servicemen protest at Jantar Mantar since past three years plus with media coverage blacked out by government despite so-called freedom of press?

In case of MSP, all national dailies carried headlines on December 5, 2018, stating 'government rejects demand for higher military pay', elaborating government decision had "anguished" the Army because this long-standing demand affects over 1.2 lakh military personnel including Junior Commissioned Officers (JCOs). That is why IFM couldn't quote figures of amount disbursed for the so called "substantial hike" in MSP, as he did for OTIP. But then mendaciousness is routine with lawyers and politicians. As for the 3,00,000 crore defence allocation, bit about "if necessary, additional funds would be provided" is routine and remains cosmetic. A small news item on Page 6 of a national daily dated February 2, 2019, reads 'Military gets smallest pie of GDP since China war', elaborating that military modernisation will continue in slow and haphazard manner with annual defence budget registering nearly 6.8% hike over last fiscal, and that the defence allocation of 3.18 lakh crore for 2019-2020 is just 1.5% of GDP – lowest since 1962. Capital budget for the Armed Forces is reportedly 103380.34 crore while 198485.76 crore is earmarked for the Revenue expenditure. But point to note is that Defence Budget for 2018-2019 stood at 2,96,511.41 crore (1.58% of GDP). The increase in the allocation was projected as 5.91% over FY 2017-2018, but in actual terms it was 'negative' growth considering annual inflation rates, higher costs of weapon systems etc.

Defence Budget 2019-2020 of 3.18 lakh crore amounts to numerical increase of mere 4,14,88.59 crore over previous year allocation of 2,96,511.41 crore. The bottom-line is that Defence Budget 2019-2020 also is a 'negative budget' like all previous budgets under the present government. This is not surprising considering the defence focus of the government remains solely on importing weapon systems and 'Make in India', with latter yet to fully take off. IFM has stated that in last five years, India received FDI of USD 239 billion. However, in July 2018, MoS (Defence) had told Parliament that FDI in defence in period April 2000 to March 2018 was mere USD 5.13 million (about 35 crore). This is because MoD officials even today admit that procurement procedures remain "cumbersome'.

IFM also announced progress under the Pradhan Mantri Gram Sadak Yojana (PMGSY) in developing rural roads. However, roads under PMGSY roads don't connect villages with less than 100 inhabitants, which leaves out forward villages in states like Arunachal Pradesh where these villages are eyes and ears of the Army which is sitting kms behind due to lack of border infrastructure. Recall a hunter discovering China constructing 1.5 km road south of LAC in Tuting area in December 2017, while nearest Bishing village is denied road under PMGSY due to population being less than 100. There is no reason 'norms' of PMGSY can't be relaxed for forward-most villages like Bishing, advantages in intelligence and response being obvious. Most of the defence allocation of 3.18 lakh crore for next fiscal will be consumed in committed liabilities, given the pace of imports albeit judiciousness remains questionable.

As per latest news, India has asked Russia for 18 more Sukhoi-30MKI fighters to boost IAF's fighter fleet. But India is paying USD 9.5 billion for 36 Rafale fighters while US Air Force is paying USD 11.5 billion for 141 x state-of-the-art F-35 and Japan is buying 100 x F-35 for USD 8.8 billion. Why didn't we bargain for 100-108 Rafale fighters within same price of USD 9.5 billion? With imports from US, Russia, France, Israel and elsewhere in pipeline, little money will be left for modernisation, including at the cutting edge, where battles are being fought every day. Negative defence allocations of FY 2018-2019 resulted in scores of ongoing projects of the Army being foreclosed, including vital ones like the battlefield management system (BMS). The next fiscal is likely to be more adverse. This is even more dangerous with China redoubling modernisation of the PLA, fortifying border deployment and boosting presence around India. In the absence of a national security strategy, the government appears focused mainly on economic engagement and diplomacy. There are cries about ballooning pension bills but government ignores the fact that per capita annual expenditure on 25 lakh military veterans is about 1.5 Lakh compared to 5.38 lakh for civilian-defence pensioners who also serve longer, reach highest grades in pay scales, draw OROP and Non-Functional Upgradation (NFU) Allowance, which are denied to Armed Forces. There are four lakh civilian-defence employees against 14.5 lakh Armed Forces – ridiculous ratio of 1:3.6. 41 Defence Ordnance Factories have 200 plus Joint Secretary-level officers (Major General equivalent) while civilians in MES have 11 HAG-grade officers (Lieutenant General equivalent). 36% of defence pension bill goes towards pension of civilian-defence employees. Defence expenditure also includes about 1000 crore annually on account of allowances and establishment of MoD (Finance) personnel 'attached' to MoD from Ministry of Finance.

Why should MoD spend 1000 crore annually on pensions of Finance Ministry personnel just because they were "attached" to them before retiring? Combatizing the civil-defence employees as part of Territorial Army (TA) can save crores of rupees annually and improve synergy with Armed Forces. But if government was bothered about Armed Forces synergy, it would have commenced reorganisation of the MoD in 2014 itself. How seriously the China-Pakistan collusive threat is being considered by the political hierarchy, remains questionable. Post the Modi-Xi Wuhan summit, India appears to have surrendered to Beijing. The relationship between security and economic development can only be ignored at our peril. Continuing neglect of defence certainly doesn't bode well for the country and India can't hope to be a global power without a strong military.