Parliamentary standing committee criticises government for inadequate allocation of funds to Army

The Parliamentary Standing Committee on defence has criticized the government for inadequate allocation of budget to the Army. According to the panel, the government does not meet the requirement of funds for increasing threat perceptions and modernisation to face a ‘two-front war’. The panel in its reports tabled in Parliament on Monday has also stated that the allocation under the capital budget for 2018-19 has fallen very short of the projections made by the defence ministry. It added that this allocation doesn’t even fulfill the ministry’s committed liabilities, which might lead to postponing payments to vendors.

This would lead to litigation and additional interest burden, adds the committee. It also said that the shortfall in funds provides no scope for modernisation of the defence services.

The committee also noted that there has been a 40 percent shortfall in the allocation for committed liabilities for the navy for the current fiscal year. The defence ministry has also pointed out to the committee that this shortfall has been there since the last three financial years.

For the army, the committee observed that during 2018-19, “against the projection of Rs 1,96,387,36 crore the allocation was Rs 1,53,875.22 crore”. “And the allocation was not commensurate with the requirements of funds for facing increasing threat perception and the need for modernisation programme of the army to face ‘two front war’,” it added.

The committee also felt that the funds for the army’s modernisation is inadequate to meet payments of Rs 29,033 crore, which have been earmarked for 125 on-going schemes, emergency procurements of weaponry for 10 days of intense war and Director General Ordnance Factories’ requirements.

Even for the army’s revenue budget, the committee stated that a “meager hike” in its allocation does not even offset the increase in rate of inflation. “Further additional burden of Rs. 5000 crore due to GST is also not factored into while allocating funds for 2018-19...Such meager allocations, the Committee believe, may deprive the Army of the much needed funds for other important plans which are funded from revenue expenditure,” it said.

The committee also said that the steep cuts in allocations for committee liabilities for the navy may have “an adverse impact on the modernisation and acquisition plans...resulting in consequent cost escalation”.

Moreover, the committee pointed out, “The Ministry of Defence projected requirement of Rs. 1,72,203.30 crore, which included Rs. 1,10,043.78 crore for committed liability and Rs. 31,434.88 crore for new schemes, under capital budget for Financial Year 2018-19. However, Rs. 93,982.13 crore only were allocated under Capital Budget for FY 2018-19...The Committee fails to understand the reasoning behind this allocation where the amount allocated under Capital Budget 2018-19 does not even fulfill the Ministry of Defence's obligations towards committed liabilities. The Committee apprehend that reduced allocation might lead to postponement of payments to its vendors for committed liabilities which in turn may result in litigation and additional interest burden.”

The committee also highlighted the “alarmingly” low level of order books of the defence PSUs such as Hindustan Aeronautics Limited (HAL) and Mazagon Docks Limited (MDL). It added that their current order books don’t sustain them beyond 2020-21. They are also not able to use full production capacity due to lack of orders.

 economictimes