View: Defence budget and the way forward

On the face of it, defence allocations in the Union Budget (2021-22) have more or less been on the beaten track. There has not been any significant increase in the total allocation, including pensions, which stood at ₹47,8165 crore compared to ₹47,1378 crore in 2020-21. While allocation for pension has been reduced by ₹18,000 crore because of the exclusion of arrears it is heartening that capital allocation, critical for modernisation and capability-building has been increased by 19% to ₹13,5061 crore. One only hopes that this increase is a recognition of the need to accelerate capability-building which calls for long-term vision and planning backed up by firm financial commitment with at least a 15-year perspective.It is a fact that defence capital allocations have been steadily increasing over the past five years. In 2020-21, this was at an all-time high of ₹11,3734 crore. What leads to uncertainties is the sudden budget cut in the last quarter which the ministry of finance (MoF) does as a matter of course.To the armed forces, availability of adequate funds to meet the committed liabilities fully is very critical. So, the increase in capital allocations, while it helps the services to meet its liabilities may not instil sufficient confidence in them to ebark on long-term capability-building which needs systematic planning and assured availability of funds. Long-term capability-building is a dynamic exercise based on threat assessments embedded in a national defence strategy. Formulating the national defence strategy may be work in progress but the earlier it is formulated the better, as the time we lose in enhancing our military capabilities may prove costly.Capability-building, especially in the ‘Aatmanirbhar’ context calls for a quantum leap in technology development. Such leap frogging necessitates decentralising defence research and development by roping in the best research institutions and private industry in the country as partners, reducing the monopoly of the DRDO. The growing number of defence startups could unleash a spurt of innovation. Supporting them with incubation and venture capital needs to be pushed. DRDO needs to don the mantle of a promoter of research by substantially enhancing its Technology Development Fund (TDF) and streamlining its procedures.The ministry of defence (MoD) should start a technology mission directly monitored by the PM targeting at least 10-15 cutting-edge technologies. The procurement system of the MoD needs to be thoroughly revamped to make defence procurement an engine of growth for the domestic industry.For all this to happen, the MoF should shed its adhocism in defence allocations and make some bold moves which will create an air of certainty for the services. Their struggle to meet committed liabilities and the inability to launch a well co-ordinated capability mission for want of financial commitment could be traced to this adhocism.The MoD should be enabled to formulate a cogent 10-15 year tri-service rolling plan under the leadership of the chief of defence staff (CDS) with clear milestones and annual financial projections which should be approved in advance with an assurance that the annual requirement of funds would be provided in the capital budget. The capital funds need to be made non-lapsable by creating an autonomous special purpose vehicle (SPV) to administer the fund continuously. This SPV could take the shape of a defence acquisition organisation (DAO) which will report to the Defence Acquisition Council (DAC) as its implementing arm. The DAO should be professionally managed, having the freedom to work pro-actively with the industry as do the acquisition systems of advanced countries.Indications are that the MoF may be inclined to accept the recommendation of the 15th Finance Commission favouring the creation of a non-lapsable fund for defence. This will be a major move considering the fact that such a dispensation will deviate from time-honoured financial canons of the MoF. But such a progressive decision, if and when made, needs to be matched by equally progressive decisions from the MoD. While the creation of a non-lapsable fund will ensure certainty in the availability of funds, everything possible has to be done to spend the funds speedily to prevent accumulation of huge unspent balances which will defeat the very raison d’etre of a non -lapsable fund.Efficiencies in expenditure can be achieved only if the integrated tri-service plan is executed with a strict timeline –– be it technology development, product development or mere procurement from the market. This is not going to be achieved unless there is structural reform in the acquisition process by creating an autonomous DAO to deal with the entire gamut of functions such as offset management, technology transfer, product development, building strategic partnerships, nurturing of the defence industry ecosystem and life cycle management under the same umbrella. This deep structural change has to be accompanied by transfer of full ownership of the acquisition system to the services to be led by officers of impeccable integrity and not by the bureaucracy of the MoD.The writer is a former defence secretary. Views are personal

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