Budget 2020: Defence upgrade gets 3% hike, but pensions see 13% jump

The plans for modernisation of defence forces and procurement of arms and weapons could suffer a great deal with the defence sector getting a marginal 5.8% increase in the annual outlay.

While presenting the budget for 2020-21, the Union Finance Minister Nirmala Sitharaman has earmarked ₹3.37 lakh crore for defence, a hike of only 5.8% over the allocation for the current financial year.

Of this, a big chunk goes towards pensions. The budgetary allocation for pensions stands at ₹1.33 lakh crore, a 13.6% increase from the revised estimates of ₹1.17 lakh crore. This is much higher than the hike in the revenue and capital funds for the forces.

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The capital budget for the military, which is used for new acquisition and modernisation, has seen an increase of just 3%, or ₹3,400 crore, over the revised estimates.

While it was initially estimated at ₹1.03 lakh crore for 2019-20, the revised estimates was slightly higher at ₹1.10 lakh crore. In the 2020-21 budget, an amount of ₹1.13 lakh crore has been earmarked under capital expenditure.

The capital allocation to the Indian Air Force (IAF), which has drawn up plans to buy nearly 200 new fighter aircraft, has actually been lowered from revised estimates of ₹44,869.14 crore to ₹43,281.91 crore.

This is expected to impact several big ticket projects of the defence forces. The major acquisitions plans of the army, navy and air force could be affected. The army is procuring high-end artillery systems such as the M777 ultra-light howitzers, the K-9 Vajra self-propelled gun and the indigenously developed Dhanush for the frontiers with China and Pakistan.

The meagre allocation will also affect the plans of the navy, which had earlier approached the government for additional funds.

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Out of a total outlay of ₹30.42 lakh crore in Union Budget, the share of defence sector is ₹4.71 lakh crore, which works out to 15.5% of the entire expenditure plan of the central government.

In January last year, the Parliamentary Standing Committee on defence had criticised the government for inadequate allocation of budget to the Army.

The government does not meet the requirement of funds for increasing threat perceptions and modernisation to face a ‘two-front war’, the panel said.

The allocation under the capital budget for 2018-19 had fallen very short of the projections made by the defence ministry. “This allocation doesn’t even fulfil the ministry’s committed liabilities, which might lead to postponing payments to vendors,” it said and warned that the shortfall in funds provides no scope for modernisation of the defence services.

The defence ministry had submitted to the committee that this shortfall has been there for the last three financial years.

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For the army, the committee observed that during 2018-19, “against the projection of ₹1.96 lakh crore the allocation was ₹1.53 lakh crore”.

And, the allocation was not commensurate with the requirements of funds for facing increasing threat perception and the need for modernisation programme of the army.

“The Ministry of Defence projected requirement of ₹1.72 lakh crore, which included ₹1.10 lakh crore for committed liability and ₹31,434 crore for new schemes, under capital budget for financial Year 2018-19. However, only ₹93,982 crore were allocated under Capital Budget. The Committee fails to understand the reasoning behind this allocation where the amount allocated under Capital Budget does not even fullfill the Ministry of Defence’s obligations towards committed liabilities. The Committee apprehend that reduced allocation might lead to postponement of payments to its vendors for committed liabilities which in turn may result in litigation and additional interest burden,” the panel had said in its report.

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