February 4, 2016

Rs 37,000 crore of defence ministry’s modernisation budget remains unutilised; army worst spender

Even though several major defence purchases are in their advanced stages, the defence ministry is struggling to exhaust its modernisation funds with almost 40% of the capital budget unspent as the financial year enters its last quarter.
Latest expenditure data with ET show that over Rs 37,000 crore of the defence ministry’s modernisation budget remainsunutilised as of December-end, with the Army struggling the most, having spent only 45% of its capital allocation. In 2014-15 too, the ministry could not spend 22% of the initially allocatedRs 80,545-crore capital budget for the three armed forces.
Eventually, the balance Rs 18,200 crore under the capital head was used mainly for revenue expenses. Of the three forces, the army seems to be the laggard, having failed to exhaust half its modernisation budget.The ministry now faces a situation where a part of its funds earmarked for new purchases and upgrades are likely to be shifted either to the revenue head or returned to the central kitty, in what would be a dent to modernisation efforts.
Official spending numbers obtained by ET indicate that the defence ministry could fall short of its target of signing deals worth over Rs 1 lakh crore. The air force has been able to spend funds at a good pace, with 73% of its Rs 33,657-crore capital budget exhausted.DRDO, meanwhile, has spent 64% of its Rs 7,788-crore allocation. Officials believe the air force may end up overshooting its budget and could pull in funds earmarked for the army and navy.
With several major projects stuck — the M777 howitzer purchase and selfpropelled howitzers, for example — the army is at the bottom of the spending list. Only 45% of its Rs 27,227-crore capital budget has been exhausted till the end of December. The Navy fares slightly better, having spent 57% of its Rs 25,003-crore allocation.
The numbers also reflect an increasing concern on the part of the private sector over the government’s ability to go ahead with major ‘Make in India’ projects that require firm orders.
While there have been several policy changes which have been welcomed by the industry, the lack of substantial orders has been a spoiler.


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