Poor funding could hit country’s global image: House panel
Milestone payments for new acquisitions have to be made from time to time. We have to have enough money to do that. A TOP MILITARY OFFICIAL
NEWDELHI: A Parliamentary panel has warned that insufficient money allocated to the armed forces in the defence budget for committed liabilities —weapons and systems India has already contracted to purchase — could lead to default on contractual obligations and hit the country’s image globally.
The report of the Parliamentary standing committee on defence, tabled in Parliament two weeks ago, comes at a time when the military had ordered and is in midst of inducting defence equipment worth billions of dollars such as Rafale fighter jets, S-400 Triumf air defence missile systems, M777 ultra-light howitzers, Apache AH-64E attack helicopters and Chinook CH-47F heavylift copters.
“Milestone payments for new acquisitions have to be made from time to time. We have to have enough money to do that,” said a top military official, asking not to be named. Milestone payments refer to a certain percentage of the total deal amount that has to be paid at different stages of the execution of a contract.
Citing the data supplied by the defence ministry, the panel highlighted the worrying disparity in the funds sought by the military and the corresponding allocation.
“The Committee notes that in 2016-17, instead of ~75,553 crore, only ~62,619 crore was allocated. Similarly in 2017-18, instead of ~91,382 crore, only ~68,965 crore was allocated. In 2018-19, instead of ~1, 10,044 crore, only ~73,883 crore was allocated. In 2019-2020, instead of ~1, 13,667 crore, only ~80,959 crore was allocated,” the panel said in its report, describing the shortfall as “baffling.”
The panel flagged concerns about the country’s image being hit internationally if it defaulted in making payments for equipment it has contracted to purchase.
Experts agreed that India could not afford to default on payments and the government should provide sufficient funds for committed liabilities.
“Committed liabilities are a legal responsibility of the government. India cannot afford to be seen to be defaulting on payments as it would hit the country’s image. This may affect the numerous high-value contracts we are pursuing,” said Air Vice Marshal Manmohan Bahadur (retd), additional director general, Centre for Air Power Studies.
The ministry told the panel that it has raised its case for allocation of additional money for committed liabilities with the finance ministry .
As reported by Hindustan Times on December 24, the committee has asked the defence ministry to “strongly press” for additional funds from the finance ministry to enable the military to buy new equipment and also pay for committed liabilities, at a time when the armed forces have projected a combined requirement of almost ~1 lakh crore more in their capital budget for 2019-20.
The committee pointed to the huge gap in the service-wise projections made by the military and the money allocated under the capital head in 2019-20.
It said the Indian Air Force sought ~74,894 crore, but got only ~39,347 crore, the army demanded ~44,690 crore and was given only ~29,511 crore; the navy projected a requirement of ~35,713, but had to settle for ~22,227 crore.