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Indian Economy

Defence Fund Shortfall

  • 16 Mar 2020
  • 2 min read

Why in News

Recently, a Parliamentary Standing Committee on Defence has shown concern at the widening gap between projections and allocations in the defence budget.

  • The Committee noted that since 2015-16, none of the three Services (Army, Navy and Air Force) has been given the matching allocation as per the projection.

Key Findings of the Committee

  • There is a considerable shortage in the allocation in the Capital Head, which is 35% less than the projection.
  • The Committee noted that committed liabilities constitute a significant part of the Capital Head and inadequate allocation would definitely lead to ‘default situation’ on contractual obligations.
    • Committed liabilities are payments anticipated during a financial year for contracts concluded in previous years.
  • Such a situation is not conducive for preparation of the country to modern-day warfare, where possession of capital intensive modern machines is a prerequisite for tilting the result of the war in favour and also to have a credible deterrence.
  • Both the Navy and the Indian Air Force (IAF) have a situation where their committed liabilities are more than their share of the capital allocation in the Budget.
    • To offset this, the Services have been forced to defer payment of committed liabilities of the Defence Public Sector Undertakings (DPSU) among other measures.
  • The shortfall in expenditure will affect:
    • Operationalisation of three tri-service organizations i.e. Defence Space Agency (DSA), Defence Cyber Agency (DCYA) and Armed Forces Special Operations Division (AFSOD).
    • Operational readiness of Andaman and Nicobar Command (ANC).
    • Maintenance of SIGINT (Signal Intelligence) equipment.
    • Administration of training institutes and operational units.
  • Recommendations:
    • The committee has recommended a dedicated fund for committed liabilities and procurements before the shortfall impacts modernisation, invariably from next Budget onwards (2021-22).

Source: TH

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