A major defence purchase often takes years to complete, but the budget allocation lapses at the end of the financial year. As a result, the Ministry of Defence is often forced to return money meant for capital acquisition.
To overcome this, the MoD has sent a proposal to the Ministry of Finance proposing the setting up of a ‘Non-lapsable Capital Fund Account’. The Parliamentary Standing Committee on Defence notes in its latest report that the MoD proposal is with the Finance Ministry for its ‘in-principle’ approval.
Review of stand
The committee observed in its report, tabled in the Lok Sabha on Thursday, that it is “glad to note that the Ministry of Defence has now reviewed its stated position and has admitted that the utility of creation of a non-lapsable, rollover fund for capital cannot be completely negated as the same would help in eliminating the prevailing uncertainty in providing adequate funds for various defence capability development and infrastructure projects.”
The report noted that a proposal for obtaining ‘in-principle’ approval of the Finance Ministry on creation of the account has been sent on February 2 by the Defence Ministry after obtaining approval of the Defence Minister, and a “response from the Ministry of Finance is awaited.”
However, the Finance Ministry is still not in favour of creating a ‘Non-lapsable Defence Capital Fund Account’ to which the committee expressed its “disappointment” and pointed to the Non-lapsable Central Pool of Resources for the North Eastern region, which was constituted with the approval of Parliament in 1998-99.
Ccomplicated process
The committee observed that defence procurement and acquisition is a complicated process, involving long gestation periods and funds allocated for capital acquisition in a particular financial year are not necessarily consumed in that year and ultimately have to be surrendered by the Defence Ministry. The committee stated that it “would like the Ministry of Finance to look at the matter afresh” and work out the modalities for creation of the account.
