The allocated capital budget for defence has been fully utilised since 2016-17, reversing the previous trends of surrender of funds, according to the Economic Survey 2020-21.
“The trend of underutilisation of defence budget has also been reversed from financial year 2016-17,” the Survey stated. The allocation of defence budget. including civil estimates and pensions for 2020-21, was ₹4,71,378.00 crore, which was ₹40,367.71 crore over the budget estimates of 2019-20.
Due to the long procurement process and delays in finalising deals in time in the past, unused funds had been returned at the end of the financial year.
Last year, the armed forces went for a series of emergency procurements since the stand-off with China in May along the Line of Actual Control (LAC) in Eastern Ladakh. At the Army Day address on January 15, Army Chief Gen. Manoj Naravane said that last year, 38 deals were made through ‘emergency and fast track’ route worth about ₹5000 crore and in addition, capital procurements worth ₹13,000 crore were concluded.
Talking of efforts to boost indigenisation of weapons systems, the Economic Survey said the Defence Public Sector Undertakings (DPSU) and Ordnance Factories (OFs) were striving to increase the indigenous content of the equipment and products manufactured by them. “The indigenous content [Degree of Indigenisation] as on March 31, 2020 was 74.56%,” it noted.
On efforts to boost private sector participation in domestic manufacturing, it said that as a policy, the DPSUs and OFs have been outsourcing many of their requirements and “the value of outsourcing in terms of value of production for the FY 2019-20 stands at 41.70%.”
Wide vendor base
Further, over the years, a wide vendor base had been developed that included a large number of medium and small scale enterprises and large industries. Exports from the Ordnance Factory Board (OFB), the DPSUs and the private sector [based on authorisation issued by the Department of Defence Production (DDP)] had increased from ₹4,682 crore in 2017-18 to ₹9116 crore in 2019-20, the Survey said.
Since the opening of defence sector to private participation in 2001, so far 44 Foreign Direct Investment (FDI) proposals and Joint Ventures have been approved for manufacture of various equipment, both in the public and the private sectors. Also, the Department for Promotion of Industry and Internal Trade (DPIIT) had issued 496 industrial licences to private companies till September 2020 for manufacture of a wide range of items, it added.