The Hindu : Defence Ministry proposes major changes in allocation

Online edition of India's National Newspaper
Thursday, Feb 27, 2003

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Defence Ministry proposes major changes in allocation

By Sandeep Dikshit

NEW DELHI FEB. 26. The Defence Ministry has proposed major changes in the manner in which the defence part of the general budget will be presented on Friday. The aim behind providing separate heads for large equipment purchases and the Defence Research and Development Organisation (DRDO) is to provide transparency and accountability.

A separate accounting head for purchase of capital equipment may even become the precursor for the setting up of a "rolling fund" over the next two to three years. This fund will allow South Block to carry forward the unused amount allocated for equipment purchases in one financial year to the next. It will help solve the chronic problem of non-utilisation of funds which were returned unspent to the Finance Ministry.

In the absence of a rolling fund arrangement, the Defence Ministry returned Rs. 3,000 crores from the capital expenditure account. A recurrence is forecast for the current fiscal.

In case the Finance Minister, Jaswant Singh, accedes to the proposal which was firmed up after a stiff fight between status-quoists and reformists, this will be the first major instance of changes in defence services estimates in recent history, especially since military activism became a defining feature of the country's security policy.

The last such effort was made in the late eighties when some of the equipment which was shown under the head of stores was shown in capital expenditure. That was the time when some amount of obfuscation also took place. Pensions were removed from defence estimates and put under general finances.

The current move might appear insignificant compared to the openness ostensibly displayed in the defence budgets of several Western countries. India still accounts for army roads in the Ministry of Roads and National Highways. But the effort to segregate revenue and capital expenditures would rank as a commendable exercise in this part of the sub-continent where other countries in the neighbourhood make a one-line defence expenditure statement.

A separate head for capital expenditure would make the arms acquisition process more visible but much ground remains to be covered. It is true that the Government would be encouraged to ring in changes in rules and procedures to facilitate the setting up of a rolling fund. But observers feel that before this, capital expenditure should be made more transparent by reflecting the repayment aspects of equipment purchased from time to time. This was attempted once by the last Congress Government during a mid-term appraisal. Nothing more was heard since.

Most revolutionary of the changes have been proposed for DRDO which forms three to four per cent of the defence budget and the allocation is slated to go up sharply in the coming days due to its involvement in several critical but capital-intensive projects. Currently, DRDO's revenue budget is included in the estimates for the army while the capital expenditure is distributed among the three services.

This makes estimation of DRDO's allocation nearly impossible for the outside world.

The steps are being proposed at a time when an eight to 10 per cent annual increase is being accepted as a ground rule in the changed security situation and the need is to ensure full allocation of the amount to realise the objectives set out in the post-Kargil review of national security.

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