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Air Force, Navy stare at fund crunch next fiscal

The Indian Navy and the Indian Air Force will not have funds to pay for platforms and equipment they have agreed to buy (or have actually bought) in the past years in the coming financial year 2019-2020, unless the government allocates more money to them.

The Indian Army is better off, but in general the forces face a cash crunch, a senior defence ministry official, who did not want to be named, said.

The official’s assessment, corroborated by analysts and other experts HT spoke to, is based on the capital expenditure allocated to the forces in the interim budget 2019-2020, and their so-called committed liabilities towards capital purchases.



Defence minister Nirmala Sitharaman has already been briefed about this and has taken it up with the finance ministry, this person added.

A defence ministry spokesperson did not respond to a query seeking comment.

All told, the interim budget allocates Rs 1.03 lakh crore towards the capital expenditure of the three forces.

Of this, the Indian Navy has been allotted Rs 23,156.43 crore. The committed liabilities for capital acquisition of the Indian Navy is Rs 25,461 crore, a second senior official dealing with the budget allocation in the ministry of defence said on the condition of anonymity. Committed liabilities are instalments paid annually for ongoing capital projects such as building warships, aircraft, missile systems, etc.

“Either we are allocated more funds later in the year, or we need to cut down on expenditure elsewhere if we have to meet all liabilities that we have agreed on,” a senior naval officer said on the condition of anonymity.

The other option is to roll over the liability, a third defence ministry official said, asking not to be identified. According to Amit Cowshish, the former chief financial adviser to the ministry of defence, “rolling over committed liabilities happens, but is not a healthy practice. Importantly, it reflects poorly on the country.”

The situation isn’t very different for the Indian Air Force which has been allocated Rs 39,302.64 crore for capital expenditure, but which has committed to paying Rs 47,413 crore this year, a fourth senior defence ministry official, who did not want to be named, said. Among the big-ticket items IAF is paying for are the Rafale fighters from France.

The army is relatively better off. It has been allocated Rs 29,447.28 crore. It has a committed liability of Rs 21,600 crore.

The Indian Army is racing against time to stock up arms and ammunition to be prepared to fight an intense 10-day war. The process received a boost after the terror attack at the army encampment in Uri in 2016.

India is among the largest weapons importer in the world, according to think-tank Stockholm International Peace Research Institute (SIPIRI). Between 2013 -17, the country accounted for nearly 12% of all global imports of arms, SIPRI said in its report released last year. The falling rupee has only added to the difficulties imposed by the funds crunch.

Since April 1 last year, the rupee depreciated 9.4% against the US dollar.

Cowshish claimed that this may be the first time in recent years that this is happening.

“It is a very difficult position to be in. Not providing for committed liabilities didn’t happen in the past,” he said. HT couldn’t independently verify this.

“Importantly, allocation of extra funds is unlikely to go up later in the year,” he added.

Interestingly, the Indian Army is yet to get Rs 1,487 crore that was sanctioned for strengthening perimeter security of encampments and installations, such as the one in Uri, in Jammu and Kashmir and the north-east. This amount was promised after terrorists stormed the Sunjuwan camp, the base of the 36 Brigade, last February. As many as 11 soldiers and one civilian died in the attack apart from four terrorists who stormed the camp.

Interim budget 2018-19 allocates Rs 3.05 lakh crore to the forces, excluding pensions. Including pensions, the number is Rs 4.29 lakh crore. Of the total, capital expenditure accounts for 24% and pensions 26%.

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