In its report submitted in parliament on Saturday, the FC has said that it will set up an expert group, comprising representatives from the ministries of Defence, Home Affairs and Finance to consider detailed modalities to the implementation of the plan. As reported by ET, the shortfall in capital expenditure, which was set at Rs 1.08 lakh crore in the last budget, means that there are not enough funds even for committed liabilities to pay for equipment already purchased

NEW DELHI: The defence ministry has recommended levying of a special cess to meet requirements as current funds are not adequate for adequate preparedness of the armed forces. The ministry’s proposal to set up a non lap-sable fund and other options including monetising the land bank has been made to the Finance Commission (FC) that is tasked with examining alternate funding mechanism for security.

In its report submitted in parliament on Saturday, the FC has said that it will set up an expert group, comprising representatives from the ministries of Defence, Home Affairs and Finance to consider detailed modalities to the implementation of the plan.

The Defence Ministry’s recommendations come after it has told the government that even though the nation is not currently engaged in conflict, the nature of threats faced require more preparedness. The ministry has said that current provisions made in the annual budgets are not adequate to fund the large capital outlay needed to procure new weapon systems.

As reported by ET, the shortfall in capital expenditure, which was set at Rs 1.08 lakh crore in the last budget, means that there are not enough funds even for committed liabilities to pay for equipment already purchased.

This gap in the budget means delayed payments to public sector units and a pushing back on purchase of new equipment like fighters, helicopters and warships.

As reported by ET, there has been a consistent 25% shortfall between allocations and defence ministry projections. The total projection for both capital and revenue expenditure in 2017-20, according to the defence ministry’s calculations made after changes in the FC’s terms of reference, was a little over Rs 13.4 lakh crore. What it has actually got, taking into account the last three budgets, was about Rs 8.39 lakh crore. This is an approximate shortfall of Rs 5 lakh crore.

The annual committed liabilities for all three services and joint commands, based on capital acquisition contracts signed until April 1, 2019, work out to about a little over Rs 4.91 lakh crore over next five years until 2024. And, by defence ministry estimates, the defence plan projection, both revenue and capital, for 2020-25 would be around Rs 33.8 lakh crore, while the finance ministry’s medium-term expenditure framework caters for Rs 20-21 lakh crore.