DEFENCE BUDGET: HIGH IN RHETORIC BUT WEAK IN MODERNISATION
Colonel PK Vasudeva, PhD (Retd)*
It is a matter of grave concern that India has not paid sufficient attention towards its defence and security needs that is why it has serious problems on its Line of Control (LoC) in Jammu and Kashmir against Pakistan and Line of Actual Control (LAC) along the McMahon Line bordering China and its occupation of Aksai Chin under Pakistan Occupied Kashmir.
The neglect of security concerns of the country further confirms when India’s defence expenditure right from its becoming a Republic has been kept between 1.7 per cent to 2.3 per cent of its GDP except after the Chinese debacle of 1962 and Kargil operations 1999 when it was raised from 2.1 per cent to 4.5 per cent of GDP and from 1.8 per cent to 2.9 per cent of GDP respectively keeping in view the threat perception from our adversaries China and Pakistan. It has to be about 3 per cent of the GDP to face two prongs offensive from both China and Pakistan.
Faced with deteriorating finances, acute fiscal distress, huge shortfall in tax collection and disinvestment, as well as miscalculation of subsidies, the government had decided on an unusual step: cutting the defence budget for this fiscal. The Centre had proposed a cut of "a few thousand crores" in the defence budget of 2011-12. The Centre has never cut budget allocation for the military in recent years, even though the defence ministry had surrendered unspent money to the government several times in the past. Resultantly, the Ministry of Defence (MoD) ordered the three services to surrender Rs 3052 crore unspent money in March 2012.
Alarmed by this unprecedented warning of the MoD, Chief of the Army Staff (COAS) immediately wrote a letter to Defence Minister AK Antony saying that the war-waging capability of the Army has been “seriously degraded” with the government dragging its feet on critical procurements and policy measures. The detailed letter sent last month points out 10 critical issues that the Army has been pushing for the past two years, which need to be addressed urgently to regain the combat edge of the force.1
He showed concern and brought out the depleting ammunition reserves and the slow pace of modernisation, especially in areas like artillery and air defence pending for over five years. The Army has urged the ministry to grant permission for setting up of new cyber battalions of the Territorial Army (TA) to rope in young talent from the private sector pending for the last two years. Little progress had been made in the establishment of a National Counterinsurgency School (NCIS) to train and raise specialized troops to take on insurgents. While land had been earmarked in areas affected by the Naxal problem, there has been little progress in setting up of the school that would train paramilitary forces as well as Army troops for counter-insurgency operations pending for the last two years. The slow procurement process to replace the 125 mm smoothbore barrels for its 1,600 T 72 tanks fleet, which is the backbone of the Army’s armoured might, has seriously degraded combat capability pending for the last decade.
As a result of COAS letter, the Defence Minister, AK Antony immediately convened a defence review committee meeting in early March 2012 where the three service chiefs, defence secretary and the National Security Advisor were present. All the three service chiefs re-emphasised the importance of modernisation of the armed forces keeping in view of the lurking threat perception and replacement of depleted age-old defence equipment.
Resultantly, to give a further push to its rapid military modernization, India on 15 March 2012 hiked its military spending by over 17.63 per cent to Rs 1, 93,407 crore (over $42 billion/Rs 1.93 trillion). In real terms, this increase amounts to Rs 28, 992 crore ($6.5 billion) in the total outlay for defence for 2012-13 compared to Rs 1,64,415 crore ($36 billion) for the previous year (2011-12).
Finance Minister Pranab Mukherjee, presenting the general budget for this fiscal in the Lok Sabha, said this allocation was based on the present needs projected by the defence ministry and that further needs for national security would be met. He also announced a raise in the capital expenditure of the armed forces to Rs 79, 579 crore ($17.5 billion), a 15.7 per cent hike from last year’s capital allocation of Rs 69, 199 crore ($15 billion).
The break-up of the allocation shows that the Army gets Rs 78,114.36 crore against the budget estimate of Rs 64,251.55 crore in 2011-12 and Rs 71,479.27 crore under the revised estimate. The allocation for the Navy is at Rs 12,548.02 crore which compares well with the budget estimate of Rs 10,859.66 crore, but is not so favourable when juxtaposed with the revised estimate of Rs 12,146.93 crore. The IAF is being allocated Rs 17,705.81 crore, which is above the Rs 16,137.38 crore allocation under the revised estimate for 2011-12 against Rs 15,927.95 crore under the budget estimate.2
Also evident from the figures is that inflation and the slide in the value of the rupee has caused the military’s modernisation budget to be effectively reduced for the first time in decades. More worryingly, India’s dependence on foreign weaponry could continue with R&D (research and development) expenditure slashed in real terms. On an average, more than two-thirds of any year’s capital budget is pre-committed towards annual instalments for defence contracts concluded earlier. Weapons platforms are often paid for over a decade or so. Just about 30 per cent of any year’s capital budget goes towards new contracts.3
The biggest worry is the Army’s slowdown in modernisation. The Army has always been a manpower-intensive force. But its fighting capability will be seriously eroded if modernisation is choked. The Army badly needs new artillery, the helicopter fleet is obsolescent, there are hardly any serviceable attack helicopters, and night fighting capability remains a gaping hole. However, the Army has got the lowest share of the capital budget – Rs 18,228 crore – for modernisation. While the Army heavily overspent on purchases of aircrafts and aero-engines and heavy vehicles last fiscal, almost Rs 2000 crore earmarked for ‘other projects’ like artillery purchases could not be utilised. Several artillery purchases for its army are also due. In particular, the proposal to buy 145 ultra light howitzers from the US under a government-to-government sale is also progressing. Purchase of 1,600 T-72 tanks 125mm smooth barrels has been pending for the last two years.
The Navy has also got a significant amount of Rs 13,617 crore for modernisation of its fleet with several new warship acquisitions in the pipeline. The Navy is budgeting for the impending contract for Project 17A frigates that will be built in Mazagon Dock Ltd, Mumbai (MDL) and Garden Reach Shipbuilders & Engineers Kolkata (GRSE). It is also making annual payments for several ongoing warship programmes: Project 28 anti-submarine corvettes being built by GRSE; and Project 75 Scorpene submarines, and Project 15A and 15B destroyers being built at MDL. In addition, it is paying Boeing for the P8I Poseidon multi-mission maritime aircraft (MMA) that are being built in the US.
The Navy has also been allocated Rs 5,303 crore to purchase new maritime role helicopters as well as surveillance aircraft. The budget for the modernisation of shipyards – a major thrust area for the ministry that is hoping to develop the Hindustan Shipyard into a world-class facility – has also been doubled to Rs 1,039 crore from the last year’s Rs 508 crore. It also has 49 warships on order with several shipyards, of which 40 are with Indian shipyards for which funds are yet to be allocated.
Inexplicably neglected, the Navy, the fulcrum of the country's maritime influence from Hormuz to Malacca Straits, has just 132 warships with 14 ageing submarines. Around Rs 3 lakh crore are to be invested over 15 years to transform it into a new 'multi-dimensional navy'. The accent is on reviving submarine Project 75 India in tandem with the French Project 75. On the horizon are three aircraft carriers, the Russian nuclear-powered submarine Chakra II and the indigenous nuclear-powered submarine.
The IAF will get over Rs 29,853 crore for modernisation this year. India is on the verge of signing a whopping $20 billion contract for 126 Rafael medium multirole combat aircraft, which will come into service by 2016 in tandem with 250 fifth generation fighters jointly produced with Russia joining by 2018 apart from a $600 million deal for 75 Pilatus PC-7 basic trainer for its Air Force. It is also making annual payments for the earlier contracts for the American C-130J Super Hercules and C-17 Globemaster III transport aircraft and upgrade of 51 Mirage-2000 combat jets. A contract could also be signed this year for 197 light utility helicopters, and for urgently needed trainer aircraft for rookie IAF pilots.4
The Rashtriya Rifles which is deployed in Jammu and Kashmir is also set for a major modernisation drive with the government earmarking an almost 25-fold hike in capital funds. Its capital budget has gone up from Rs 10.43 crore to Rs 252 crore.
The Defence R&D Organisation (DRDO), India’s main source of indigenous defence systems, must also make do with less. In rupee terms, the R&D allocation of Rs 4,640 crore for 2012-13 just about matches last year’s R&D spend of Rs 4,628 crore. But, given inflation and the falling rupee, and the high percentage of foreign parts in DRDO-built weaponry, the DRDO’s spending power will be significantly eroded in the coming year. From the point of view of self-reliance in defence production, there is a surprising reduction in allocation to R&D from Rs 10,539 crore in 2011-12 to Rs 5,995.56 crore.
In fact, China, which used to be the largest importer of arms during the last decade, has built admirable indigenous capability by heavily investing in R&D within the country and even poaching scientist from Russia. In our case the Services seem to have won the day; instead of working closely for instance to make a success of the indigenously developed Tejas LCA and Arjun (Main Battle Tank) despite good showing in trials they seem to have taken a greater slice of the pie for procurement from abroad.
An encouraging news is the announcement of the approval for setting up joint venture by defence PSUs in public private partnership (PPP) mode to boost indigenous defence production particularly state-of-the-art equipment.5 But whether this is enough to interest weapon manufacturers of advance technologies in the West, or even countries such as South Korea without taking decision on FDI remains to be seen. Defence readiness suffers from lack of planning, jointness and political direction.
Earlier this month, China had announced that it would spend $106 billion (670 billion Yuan) on its military in 2013. Defence experts estimate that Beijing actually spends 50-100 per cent more than the declared figure. Like India, China too has steadily increased defence spending in line with its economic growth. China’s defence budgets every year have registered double-digit increases over the last two decades. This has facilitated China to emerge as the dominant military power in Asia and a contender capable of a serious challenge to United States global military predominance. China has achieved this posture by spending significant amounts on military expenditure facilitated by a booming economy.6
India in contrast also has a booming economy but it has been niggardly in its defence expenditures, as defence expenditure is made subservient to political-populist schemes. Capital acquisition of critical military hardware is delayed for decades due to political indecision, bureaucratic lethargy and other considerations, which view capital acquisitions of critical military equipment from abroad with extraneous perspectives.
Conclusively, India will not be able to militarily checkmate China. In 1962, China militarily humiliated India due to lack of Indian defence preparedness in the preceding two decades. In 2012, with existing mind-sets at the highest-level in India and the slippage that has taken place in defence outlays in the last two decades, India risks a serious dent to its military reputation, if not a military debacle resulting in a “strategic diminishment” on the global stage which India aspires to ascend.
End Notes
1. Army Chief writes to Antony over delay in key military matter”, India Today. 5 March 2012.
2. Defence budget, The Hindu. 16 March 2012.
3. Ajay Shukla, Army modernisation slow Navy & Air Force pushes ahead. Business Standard. 18 March 2012.
4. Defence outlay, Indian Express. 16 March 2012.
5. R Sundram, “R&D in Defence Neglected”, Business Line. 17 March, 2012.
6. Dr Subhash Kapila “China’s Defence Budget 2012: Implication’s For India’s Security – Analysis”, Eurasia Review. March 15, 2012.
Colonel PK Vasudeva, PhD (Retd)* was commissioned in 2/1 Gorkha Rifles in 1963 and retired as the Chief Instructor SFF Academy in 1990. He is a defence analyst cum commentator on strategic issues and has also authored a number of books on WTO and International Trade. He is a member of USI of India.
(Article uploaded on March 22, 2012)
Disclaimer : The views expressed are those of the author and do not necessarily represent the views of the organisation that he belongs to or of the USI.