Union Budget 2019-20: No change in defence allocation

Import of defence equipment not made in India exempted from basic customs duty

July 05, 2019 10:24 pm | Updated 10:24 pm IST - NEW DELHI

The allocation for defence in the Union Budget presented on Friday remained unchanged from the interim Budget. The defence budget for 2019-20 stands at ₹3.19 lakh crore, excluding defence pensions which stood at ₹1.12 lakh crore.

In the only mention of defence in her maiden Budget speech, Finance Minister Nirmala Sitharaman said defence had an immediate requirement of modernisation and upgradation. “This is a national priority,” she said and added: “For this purpose, import of defence equipment that are not being manufactured in India are being exempted from the basic customs duty.”

The customs duty exemption is a small relief for the Services which have approached the government over the customs and Goods and Services Tax (GST) that add a significant cost to defence imports. “This will have an impact of augmenting the defence budget by approximately ₹25,000 crore on account of savings in expenditure on customs duty over the next five years,” the Defence Ministry said in a statement.

This is the first time the defence budget of the country has crossed the ₹3 lakh crore mark, which is only a logical progression. The total defence allocation of ₹4,31,010.79 crore, including defence pensions, accounts for 15.47% of the total Central government expenditure for the 2019-20. This year’s allocation is 6.87% higher than the revised estimates of last year which stood at ₹2.95 lakh crore excluding pensions. However, it is a meagre hike, considering the mega defence tenders lined up as part of military modernisation. Also, this doesn’t even cover the revenue expenditure and committed liabilities in some cases.

‘Shows stasis’

Commenting on the budgetary allocation, Commodore C. Uday Bhaskar (retd.), Director of Society for Policy Studies, said the Budget represents “stasis” and does not auger well to make the changes of modernisation and acquisition for all the three armed forces.

“It is doubly ironic that Modi 2.0 got elected on the plank of national security and that in the run-up to the 20th anniversary of the Kargil conflict there is no substantive attempt to improve national security not even rhetorical commitment, given this is the first time the defence allocation was not even mentioned in the Minister’s speech,” he stated.

In real terms the hike is meagre after factoring in inflation and currency fluctuation. This is a worrisome scenario for the much-needed military modernisation as India has signed big ticket defence deals with several countries in the last few years and the current capital allocation doesn’t even cater for payments to the committed liabilities. There would be barely any money left for new procurements that have been lined up and it is a major worry for the Services.

The Air Force got 38% of the ₹1.03 lakh crore capital component which comes to ₹39,303 crore. On the other hand, the Navy has a healthy balance between the revenue and capital heads, while the 1.3 million Army has it skewed towards the revenue side.

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