IDSA COMMENT

The Defence Budget 2013-14: Reasonable in the Existing Circumstances but Need for Re-orientation and Reform

March 4, 2013

Finance Minister P. Chidambaram has in his 2013-14 budget speech assured that “constraints will not come in the way of providing any additional requirement for the security of the nation” over and above the Rs. 2,03,672 crore allocated for defence, which is 18 per cent of the total Union Non-Plan budget for the next year. While the Services will face some constraint with a 2.7 per cent increase in the Budget Estimates (BE) 2013-14 allocation on Revenue Account compared to the BE 2012-13 provision, it appears that the Government of India could not afford a higher Revenue budget for defence considering that interest payments and the debt servicing burden would continue to increase, the government’s overall pension payment liability will remain high and a substantial quantum of Central devolution to the State Governments would be involved in the Non-Plan segment. However, the Government appears to have provided a reasonable growth of nine per cent with an expenditure budget provision of Rs. 86,741 crore for defence on Capital Account for 2013-14 vis-à-vis BE 2012-13. Moreover, it has to be appreciated that the Government has given a 14 per cent increment for defence between Revised Estimates (RE) 2012-13 and BE 2013-14 as against a 10.8 per cent hike in the overall Central Non-Plan budget between RE 2012-13 and BE 2013-14.1

Some salient features of the defence budget 2013-14 are:

  • Revenue expenditure budget increase for defence is relatively less than the overall Non-Plan Revenue expenditure budget growth between RE 2012-13 and BE 2013-14;
  • gross Revenue budget for Navy has declined from Rs. 12,748 crore in BE 2012-13 to Rs. 12, 394 crore in BE 2013-14 (there are reductions under salaries, transportation and miscellaneous heads while there are negligible increases for repairs & re-fitment works and in respect of Coast Guard);
  • Capital budget support for the Indian Coast Guard will be less in 2013-14 – Rs. 740 crore in BE 2013-14 vis-à-vis Rs. 899 crore in BE 2012-13;
  • the value of supplies of stores (not classified as Capital assets) from Ordnance factories to the Services will only marginally increase from Rs. 11,213 crore as per BE 2012-13 to Rs. 12,141crore provided in BE 2013-14;
  • Ex-Servicemen Contributory Health Scheme (ECHS) – a welfare oriented organisation for ex-Servicemen and their dependants in the defence set-up – has been allocated less budget (Capital and Revenue taken together) for the next year as compared to the actual expenditure of 2011-12 and RE of 2012-13; and
  • virtually no funds have been earmarked for development of prototype stores in association with indigenous trade sources (a token provision of Rs. one crore has been made for the next year as against Rs. 29 crore actually spent in 2011-12 and a BE 2012-13 of Rs. 89 crore).

It is a mixed picture and does not seem to indicate that the Services will try to be more self-reliant and involve the available indigenous technological capacity in the defence effort. An enhanced future role for the Indian Coast Guard in strengthening maritime coastal security seems doubtful and the designated role of the ECHS is unlikely to evolve towards consummation.

Some concern has been expressed by certain defence analysts and think-tanks on the likely adverse impact on major acquisitions and the modernisation programmes of the Services. However, the fact of the matter is that, vis-à-vis actual requirement of cash-flow for supplies contracted, there has never been any default in payment on the part of the Government. Furthermore, deferment of discharge of liabilities in respect of contractual payments or re-negotiation of payment schedules owing to budgetary shortfall has never been observed.

An interesting phenomenon which is manifest nearly every year is that broadly 78 to 82 per cent of the respective BE provision is utilised till January, i.e. within the first ten months of the financial year, leading to an accelerated cash-flow and expenditure classification in the end, practically in the last two calendar months of the financial year and during a window of approximately one and a half months thereafter available in the system for accounting adjustments-inter-departmental payments before close of the financial year. Paucity of funds at the time of need is therefore not an issue. The reality is that there is an enormous drive at the Services’ Headquarters as well as in the Ministry of Defence at the end of the year to just spend and classify the expenditure before the accounts close for the financial year. All this goes to highlight that fund constraints owing to inadequate budget provision has never been the case in respect of defence acquisitions – first-time procurements and also apropos maintenance or replenishment supplies.

The systemic problems are different. The acquisition plans of the Services or rather the items subsumed in them are not properly prioritised, the procurement procedures are long and the existing systems and institutional arrangements do not enable a long-term commitment at the Union Government level on firming up of core plans and budgetary thresholds. Therefore, a so-called syndrome of inadequacy of funds for major modernisation, provisioning and even overhaul programmes seems to loom large. This syndrome tends to get accentuated by observations of some senior retired Service officers and also through inspired comments in the media, which in turn seems to create a scenario of perennial shortage of funds constraining defence preparedness.

A total re-orientation of focus in defence planning and budgeting is required. It is the building up and ensuring of a capability to defend vital national interests that should be the thrust of our defence preparedness and the underpinning of defence budgets. In the context of such an approach, prioritisation from among competing programmes and related weapons-equipment acquisition proposals of the Services will become easier and goal oriented. This will consequently impinge on the plans and budgets. The funding thresholds will thus not be viewed from an incremental angle or apropos costs of select weapons-equipment systems. The inter-se demands among different arms of the Services and their support establishments and also the Services will therefore be more optimum and efficient with consequent impact on not only the requirement of weapons & equipment but also on levels of manpower, skill enhancement of combatant and non-combatant personnel and concomitant capability outcomes. The entire defence budget and its existing functional allocation among the existing different classification heads such as ‘pay and allowances’, ‘transportation’, ‘stores’, ‘works’, ‘other expenditure’ i.e. miscellaneous expenditure, etc. will perforce have to undergo a change. An outcome budget supported by programmatic outlays rather than an input based budget is the need of the hour. An economical and optimum budgeting process may thus be achieved rather than an incremental one. It may be apposite to cite the views of former US Defence Secretary Robert McNamara who had once opined that the law of diminishing returns begins to apply at a stage where each additional increment of resources applied produces (only) a smaller increment of overall defence capability.

There is a need for an overhaul of the defence planning and budgeting systems to make them outcome oriented, which will lead to the development and maintenance of requisite capability through the defence forces as an entity over a specified long-term horizon. Decision on systems to be procured will get prioritised accordingly, ad hocism and short-term profiles will be obviated and decisions on qualitative requirements (which form the basis of specifications of weapons and equipment) will be based on long-term logic and not be subject to frequent variations with attendant need to change suppliers and prolong the selection-trial process with resultant delays in actual contracting and the obtaining of supplies. The defence budget is a tool in the overall process which institutes national security. The present arrangement will have to re-orientate to suit the environment in which we are presently placed, which is multi-dimensional, requires a synergised support from surface, subterranean, undersea, and aerospace assets within a defence set-up functioning in harmony with the civil milieu, and most importantly with optimum deployment of financial resources already under pressure from critical demands from the social and economic sectors of the nation.

Assessing the defence budget of 2013-14 without a perspective as above will really not lead to a judicious appraisal on whether the Government has provided a justified and need-based allocation for defence of the nation.

Gautam Sen is ex-Additional CGDA and presently Adviser to a north-eastern state government.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.

  1. 1. The figures on budget allocations are based on the Budget documents 2013-14 laid in Parliament with the presenting of the Union Budget 2013-14 on 28 February 2013 by the Union Finance Minister.