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March 3, 2012

Defence ministry asks armed forces to prioritize purchases

 ( Times of India) : Days of frenzied defence purchases by India may be over, at least for the immediate future.
According to sources, the committed liabilities -- money to be paid for contracts already signed -- of the Indian defence budget has reached almost 65-70% of the total capital outlay. As a result, the defence ministry has told the armed forces to "prioritize" their purchases.

India has been among the world's biggest defence buyers for the past many years, thanks to the regular hike in defence budgets and efforts to make up for the 'lost decade' of the 1990s, when defence modernization had come to a virtual standstill. Since the Kargil conflict of 1999, the military stepped up its shopping spree in the international market. Between 2006 and 2010, India bought 9% of all arms imported in the world, emerging as the largest weapon importer ahead of China.

However, serious financial issues have now cropped up to slow down this spending spree, say sources. An official pointed out that India's committed liabilities for purchases made in recent years is now hovering around 65-70% of the total capital outlay. Last year, the total capital outlay for the three services was Rs 69,198.81 crore. The total defence budget, which also includes revenue allocation, was Rs 1,64,415.49 crore.

Government sources said MoD has told the Army, Navy and IAF to "prioritize" their purchases. Instead of the frenzied push for every purchase, the three services will have to clearly prioritize what they want urgently, an official said. "The MoD has been telling them about the need to prioritize for some time," he said.

Officials said this also would call for taking a relook at future projections. "We will have to think of them, and rationalize so that we are able to buy them within the allocations," the official said.

Sources said the sudden induction of new systems could also cause trouble to the budget balance, especially between the capital and revenue outlay. They pointed out that the new inductions mean they would require higher revenue allocation for maintaining the systems.

The sobering realization comes at a time when the government has already moved to cut the defence budget by a few thousand crores to meet the rising fiscal deficit challenges. The unusual move to cut defence budget during a financial year will only further slow down military purchases.

Indications are that the defence budget for the coming year would rise by about 10% from the allocation for 2011-12, while the capital outlay would rise by about 15%. Other than catering for inflation, the hike would mean no significant increase. "So we may have at best about 35% of the capital budget for new purchases," a source said.

This situation has arisen because of major purchases, mostly by the Navy and the IAF, in recent years. The two forces, and the Army to a minor extent, have undertaken major purchases of ships, aircraft, helicopters, missiles and other systems.

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