Non-lapsable modernisation fund for defence, internal security mooted

It will bridge gap between projected budgetary requirements and allocation, says Finance Commission

February 01, 2021 07:12 pm | Updated 07:14 pm IST - NEW DELHI

Finance Commision of India.

Finance Commision of India.

The 15th Finance Commission has recommended constitution of a dedicated non-lapsable Modernisation Fund for Defence and Internal Security (MFDIS) to bridge the gap between projected budgetary requirements and allocation for defence and internal security.

The indicative size of the MFDIS for 2021-26 is ₹2,38,354 crore and the maximum recommended is ₹51,000 crore per annum, the Commission said in its report.

However, the unutilised amount from the normal budgetary allocations to the Ministry of Defence (MoD) and the Ministry of Home Affairs (MHA) for capital expenditure shall not be part of the Fund. The Defence Ministry has for long been demanding a non-lapsable fund keeping in view the long trajectory of military modernisation.

Proposal accepted “in-principle”: govt.

In the action-taken report tabled in Parliament along with the Commission report, the government said it has “in-principle” accepted the creation of the fund in the Public Account of India. “Sources of funding and modalities will be examined in due course.”

The Commission said the fund will have four specific sources of incremental funding which include transfers from the Consolidated Fund of India, disinvestment proceeds of defence public sector undertakings (DPSUs), proceeds from the monetisation of surplus defence land, including realisation of arrears of payment for defence land used by State governments and for public projects and cost recovered of encroached land and proceeds of receipts from defence land likely to be transferred to them and for public projects in future.

As per the Commission, the proceeds will be utilised for capital investment for modernisation of defence services, capital investment for the Central Armed Police Forces (CAPF) and modernisation of State police forces as projected by the MHA and a small component as welfare fund for soldiers and para-military personnel. “The MoD would have exclusive rights over the use of the amounts deposited in the Fund from the specified sources of revenue. The MHA will only be permitted to use that is earmarked for it from the source of revenue,” the Commission said.

The amount proposed for capital expenditure towards internal security for the five years is ₹50,000 crore of which the MHA will allocate ₹500 crore for redeveloping and improving the residential facilities for police personnel in Delhi. This would be augmented by ₹100 crore per annum for improved communication systems and technology upgradation of the police personnel.

Allocation for welfare of families

The Commission said the fund may be operated by a high-powered committee notified by the Union government and may be headed by the Cabinet Secretary with the Secretaries of Defence, Home and Expenditure and the Chief of Defence Staff as members. It would also allocate ₹1,000 crore per annum for the welfare of families of the defence and CAPF personnel who sacrifice their lives in frontline duties.

Due to overall fiscal constraints, the Commission recommended that the MoD should also take “immediate measures to innovatively bring down the salaries and pension liabilities” and reduce dependence on defence imports with a specific roadmap.

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