Problems of defence forces

How budget allocations fail to provide remedies
Harwant Singh

Finance Minister Jaswant Singh in his hour-long budget speech did not make a mention of the security scene in the region or the rationale for the financial allocations for defence. In his book, “Defending India”, he records, “National security is acknowledged as the first charge on the treasury.” Elsewhere he notes, “It is self-evident that resource inelasticity affects all government spending, including expenditure on defence. But it stands equally established that the armed forces cannot be permitted to degrade by denying them the monies to modernise and to keep them in fighting shape. That would be to court grave national danger.” 

True to his beliefs, the Finance Minister raised the allocations for defence to 3.1 per cent of the GDP from the average of 2.3 per cent of the last many years. Undeniably, the meagre financial support to the armed forces during the last decade and a half has resulted in their degradation. To correct this adverse situation, sustained allocation of 3.5 to 4 per cent of the GDP will need to be allocated to defence in the coming decade. This level of financial support for the defence budget is affordable and sustainable.

The re-organisation of the MoD and its merger with the defence headquarters was aimed at streamlining the procedures, cut out duplication and triplication of work, bring about substantial savings, speed up the decision-making process, etc. Similarly, the formation of a Defence Procurement Board (DPB) under the Defence Secretary with a Special Secretary, Acquisitions, and separate land, maritime, air and systems divisions, besides a separate finance division as part of this set-up, was expected to reduce the time taken for new acquisitions of weapons and equipment. This has not happened and consequently, as during the previous years, more than Rs 900 crore as an unutilised amount from the capital expenditure head, allotted during the financial year 2002-2003, was surrendered. This, in spite of the fact that Special Secretary, Acquisitions, had considerable experience in the field of defence acquisitions.

It is generally perceived that the value of a rupee spent on defence is about the same as that of a rupee spent on social services/development. In reality, this is not so. While a large percentage of monies spent on social services/development are siphoned off into private pockets, those spent on defence are more focused and result-oriented. This is due to greater discipline and accountability in the defence services. Also a good part of the defence budget is spent on infrastructure such as housing, roads, hospitals and clinics which eventually adds up to social services and national assets.
In another area, the defence services do not get the full worth of the funds made available to them. There are a great many reasons for this unhappy situation. Not the least of these being the archaic and bureaucratic procedures of the MoD, its recent reorganisation notwithstanding, where decisions are delayed for years resulting in higher costs and continued lower defence capabilities.

Almost the entire range of major defence equipment is imported, often at inflated costs. This in spite of the setting up of Defence Science Organisation soon after Independence with the sole purpose of making the country self-reliant in defence technologies and equipment. This organisation has grown manifold and is now called the Defence Research and Development Organisation (DRDO) with a network of 52 laboratories/establishments. It is a full-fledged department of the MoD and takes up approximately 5 to 6 per cent of the defence budget. Its mandate has been the development of emerging technologies required for defence weapons and equipment for future programmes. In this basic task the DRDO has singularly failed with the result that almost every piece of major weapon systems and equipment (in many cases even minor equipment such as items of snow clothing, etc) has to be imported at a high cost.

In countries where defence equipment is indigenously produced, it creates jobs and develops technologies, which find use in civil application and boosts the overall economy of the country. This obviously does not happen in India where, by importing thousands of crores of equipment every year, we merely add to another country’s economy and employment. The constant depreciating value of the rupee, too, has been resulting in our getting less for more money. In this sad situation there has been no individual or organisational accountability. Above all, it has made us totally dependent on one source for the supply of defence equipment and spares, etc, which, in the event of drying up of that source, as it happened on the break-up of the USSR, can result in serious voids in weapons and equipment serviceability and re-supply.

Most of the other requirements of the defence services are met by the Ordinance Factories, which since World War II have worked on the philosophy of “cost plus”. With the defence services as the captive customers and the virtual elimination of the private sector (competition), the defence budget has been compelled to bear the entire burden of wasteful expenditure, overheads, over-staffing, outdated production techniques and technologies and idle labour of the defence PSUs. Through a skewed system of pricing, the defence PSUs not only fix the prices on their own but also the MoD allows them to charge an additional 10 per cent to the self-determined cost.

Consequently, the defence services have been paying much more than the fair price of the goods received from the defence PSUs. Often the goods are shabby and substandard. Thus, in this area too the defence services have been short-changed and the defence rupee is made to travel less. The current move to open up defence industry to the private sector is less likely to meet much success, because private enterprise requires substantial investments and this can happen only if firm long-term projections of requirements are made.

On the one hand, long-term planning by the services has never found favour with the MoD, and on the other, financial allocations on a long-term basis have never been forecast or assured. This situation is less likely to be set right in the near future. Consequently, not much involvement and investment from the private sector can be expected in this area. In fact, most of the defence PSUs need to be privatised and that by itself will bring in competition with all the attendant benefits. Only very limited areas of defence production have security implications, and in their case it is possible to introduce certain safeguards.

Of the funds made available for the maintenance of buildings and other assets, 60 to 70 per cent of these are used up towards the pay and allowances of the Military Engineering Services staff (MES). Therefore, out of the meagre allocations made for the upkeep and maintenance of buildings and other infrastructure, the bulk is eaten up by this surplus staff of the MES, resulting in the continued deterioration of these assets. Here again the defence services are able to extract less mileage out of the sums allotted.

Much too frequently the defence forces are called out in aid of the civil administration. The expenditure thus incurred is required to be reimbursed to the defence services. But often this does not happen and such expenditure, which is substantial in financial terms, is eventually borne by the defence sector and this results as an additional burden on its budget.

The sub-allocation of the defence budget to the three services is often an ad hoc exercise based on lobbying and bears little relevance to the building of desired capabilities to meet the emerging threats to national security in the medium and long term. The correction can be applied only if the security scene in the region is accurately assessed, its implications in the light of national interest determined, and the best force combination worked out. 

Such an assessment and evaluation could take place only when a full-fledged Chief of Defence Staff, with appropriate authority, is installed. Till then the MoD will continue to play one service against the other and resort to adhocism in resolving urgent defence issues. 

Such whimsical distribution of financial resources can only result in lop-sided force structuring, devoid of balance and rationale. Short-and-medium-term security concerns of the country relate to cross-border terrorism, proxy wars and the building of viable deterrence capabilities. Therefore, our equipping policy, force structuring and consequently service-wise financial allocations should correspond to our likely responses, and eventually and yet gradually get tailored into long-term security needs.

The writer, a retired Lieut-General, is a former Deputy Chief of Army Staff.


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