A pair of Rafale jets, India has purchased 36 fighters in a Govt to Govt deal

The budget allocated is far short of the money the IAF has committed to pay for purchasing aircraft. It will need a mid-year bail out

by Manu Pubby

New Delhi: The Indian Air Force (IAF) has projected that it may not be able to make tranche payments (akin to EMIs) for its past purchases in fiscal 2018-19, as adequate resources haven’t been allotted by the finance ministry.

The projection underlines the crisis that an increasingly lopsided defence budget has brought to the defence services.

The IAF has been allocated Rs 35,755 crore for the next fiscal year, a sum that top officials say falls well short of the amount it has to pay for purchases made in the past few years, including for systems such as the Rafale fighter jets, Apache attack choppers and Chinook heavy lift helicopters.

All these aircraft are to be delivered by 2019-2020, but part payments need to be made every year as they go through the production cycle in France and the US, and training and associated activities commence from the Indian side.

With the allocated budget short of its committed liabilities, the IAF will need to apply for special budgetary sanctions mid-year, throwing its financial planning out of gear. Sources said that the Air Force could be short by as much as Rs 14,000 crore, but that special provisions will be made later in the year to ensure that all commitments are honoured.

Empty Pockets

Senior officials say that while every year the allocated budget is far short of what the services project as expenses, this is the first time in recent memory that it will fall short of the ‘compulsory payments’ that need to be made.

In 2017-18 for example, official records show that the IAF requested the finance ministry for Rs 62,049 crore under the capital head, as it had planned to make payments for the Rafale fighter jets and associated components. However, given financial constraints, the service was allotted just 54 per cent of this sum (Rs 33,570 crore).

As reported by ThePrint, the Indian defence budget is now dangerously skewed as the revenue bill has zoomed over the years. The sustained manpower-intensive nature of the services has resulted in a situation where resources available for modernisation of the forces are far outstripped by the allocations required for paying salaries and pensions to soldiers.

Reports of the parliamentary standing committee on defence show a steady decline in the capital budget of the defence ministry. From 2007, when the ministry spent 41 per cent of its money on capital expenses, the ratio was down to 32 per cent in 2016-17.

A shrinking capital budget means that the money available to initiate new purchases has reduced – in the case of the Army, for example, the money available for new purchases in 2016-17 was Rs 2,080 crore, or just 14 per cent of its total capital share.

What can be done to fix this?

The parliamentary standing committee on defence, headed by BJP veteran Maj. Gen. (Retd) B.C. Khanduri, has been a strong advocate of creating a non-lapsable, rollover fund for modernisation of the armed forces.

This would collect all unspent amounts from the defence capital budget at the end of a financial year into a corpus that can be used for future purchases.

While this concept was given a go ahead by the defence ministry last year, the finance ministry has resisted all moves to set it up. Sources said that the standing committee is set to make a fresh bid to set up this fund in its next reports that are to be tabled in Parliament shortly.