A possible slash in additional budget allocation for Defence in the country appears to be on the horizon even as the Services have been pushing the envelope for funds to ensure smooth continuation of long-term plans for acquisitions.
Sources in the Defence Ministry said while nearly 67 per cent of the allocated funds for capital expenditure Rs. 69,199 crore in the budget has been spent by December last year, the possibility of more funds coming its way may not materialise.
The Ministry said that during the last financial year it not only spent Rs. 60,000 crore allocation for capital expenditure but an additional Rs 3,000 crore for the purpose thus reversing the trend of surrendering allocations and expected additional grants this year.
Recently, Service Chiefs including the Chief of Naval Staff Admiral Nirmal Verma took up the issue with the Defence Minister. Informed sources said while the Navy received capital allocation of Rs. 13,149 crore in the 2011-12 budget, it was actually 7.62 per cent less than the revised capital expenditure of Rs. 14,234 crore, a point that was underlined even by the Parliamentary Standing Committee in its report, which said such negative growth was undesirable since the Navy is a capital intensive wing
The sources said for instance the Navy has sought some Rs. 6,000 crore to its 2011-12 allocation but indications are that the actual allocation could be cut down by half. While there may not be any immediate impact on acquisitions but the apprehension is that ongoing payment schedules against existing contracts may have to be carried forward to the next financial year.
A glimpse of how capital intensive is Navy acquisition can be seen from the fact that during 2010-11, 35 contracts worth Rs. 36,200 crore were concluded towards capability enhancement and modernisation of the force.
Over 30 ships and submarines are under construction in India, while INS Vikramaditya (Adm. Gorshkov) and Frigates of Talwar Class are being built in Russia.
The three Services, Navy has been able to spend slightly over cent per cent of its budget allocation by December last year while the other two are lagging behind, according to the sources.
As per spending norms, capital expenditure funds remain with the Ministry that keeps allocating it to the respective Service depending on how the plans move during the year. By December, the Ministry is expected to spend about 67 per cent of the allocated budget, and not more than 33 per cent should be left for spending over the last three months of the financial year with not more than 15 per cent for March, the last month.
