The Hindu : Defence funds under-utilised, says committee

Online edition of India's National Newspaper
Wednesday, Apr 23, 2003

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National

Defence funds under-utilised, says committee

By Our Special Correspondent

NEW DELHI APRIL 22. Notwithstanding the trauma of Kargil and other assaults on national security, the defence sector has continued to suffer at the hands of the Central Government.

Defence expenditure as a proportion to the Central Government expenditure as well as gross domestic product (GDP) has fallen over the years. If the falling share of defence outlay, despite increasing challenges to national security was not enough, the Ministry failed to utilise a large portion of the amount earmarked every year for purchase of major defence equipment.

"The under-utilisation of funds earmarked for capital expenditure has weakened the process of modernisation of defence services with possibilities of ominous consequences in the prevailing international and national security environment,'' said a parliamentary committee in its report tabled today.

The panel said there was a strange paradox in the echelons of the Government dealing with national security.

On the one hand there was continued under-utilisation of funds and on the other steep projections were made by defence services with no proper planning.

It identified the weak monitoring system for spending allocated funds within the pre-fixed target dates and lack of effective system for identifying the causes of delay in decision-making and implementation stages as the main causes for under-utilisation of funds.

"Defence planning suffers from a serious flaw,'' it said, after pursuing the allocation and utilisation pattern on the capital account.

After dealing with one aspect of the paradox bedevilling the defence sector (under-utilisation of funds), the committee took up the other — unrealistic projection of requirement of funds. For the year 2003-04, for instance, the Defence Ministry had sought Rs. 90,000 crores even though it failed to utilise a hefty amount of much smaller allocation for the previous fiscal.

The committee discovered that the demand was made without careful planning. The Tenth Defence Plan (2002-07) had not even been finalised though the first two years were already over.

"This is a repetition of earlier mistakes in the defence planning process and is indicative of the ad hocism and the non-serious approach which still appears to prevail... the committee urges the Government not to repeat the earlier mistakes on this issue and focus on ensuring that the Tenth Defence Plan is finalised and put into effect without further loss of time.''

Another major issue taken up was the setting up of a non-lapsable fund. The Defence Ministry has championed the setting up of such a fund because acquisition proposals do not fructify in the same financial year for which allocation has been made.

The committee made a novel suggestion after the Finance Ministry made it clear that the proposal for non-lapsable fund was in violation of the current financial rules and will also add to fiscal deficit.

The committee said the five per cent surcharge levied on taxpayers in the name of national security in 2002-03 and the 10 per cent surcharge the next year on the higher income bracket, again after invoking national security, amounted to Rs. 4,253 crores and Rs. 2,800 crores, respectively.

Surprised that the funds collected for the specific purpose of national security was channelised into the general revenues stream, the committee recommended that this amount could be placed in a separate non-lapsable fund to be utilised by the Ministry of Defence for capital expenditure.

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