There will be no shortage of capital funds for the Indian Air Force (IAF) because of consolidation of the demand of three Services in the defence budget for 2024-25, the IAF said. It added that the funds sought for 2024-25 had already been allotted to the Services.
Prior to February 2024, capital funds had been allocated separately to the Army, the Navy and the Air Force.
“The Integrated Capability Development Programme, which is a 10-year plan, would be finalised by headquarters Integrated Defence Staff (IDS) and approved by the government. This would be prepared after taking inputs from the service headquarters. The Chief of Defence Staff would provide further inputs to the government after consulting the Service Chiefs,” the IAF said in a written reply to questions from The Hindu.
In the interim budget presented in February, the government decided to consolidate the capital allocation for the three Services based on similar items of expenditure such as land, aircraft and aeroengines, heavy and medium vehicles among others. This mechanism will also expedite decision-making and ensure better utilisation of the capital budget, the Ministry of Defence (MoD) had stated earlier.
Flexibility in fund allocation
The government has consolidated the demand of the three Services in the defence budget to bring flexibility in financial management by enabling the MoD to reappropriate funds amongst the Services, keeping in view the inter-services priority, the IAF said.
The total allocation for defence stands at ₹6.2 lakh crore for 2024-25 of which the capital allocation, which is for new procurements, stands at ₹1.72 lakh crore. Of the ₹6.2 lakh crore, 27.67% went to capital, 14.82% for revenue expenditure on sustenance and operational preparedness, 30.68% for pay and allowances, 22.72% for defence pensions and 4.11% for civil organisations under the MoD.
Prioritisation of defence procurements, before they are put before the MoD for approval, is with the CDS, and after approval from the Defence Acquisition Council, the procurement process kicks in. The procurement is overseen by the Defence Secretary.
The capital component includes funds for new procurements as well as committed liabilities, which are payments to be made during a financial year for contracts concluded in previous years. Unlike the Army, the Navy and the IAF – being significantly more technology intensive – have a major chunk of committed liabilities, which on occasions in the recent past had exceeded the entire capital allocation. To offset this, the services have been forced to defer payments of committed liabilities to the defence public sector undertakings (DPSU), so that they could pay foreign companies as any delay would lead to ‘default situation’ on contractual obligations. The Navy got a significant hike in allocation in the last few years to cover the shortfall.
Officials noted that the consolidation of the capital budget would help better address this issue.
Committee’s concern
The Parliamentary Standing Committee on Defence has in the past expressed concern at the widening gap between projections and allocations in the defence budget impacting defence modernisation. It had then recommended a dedicated fund for committed liabilities and new procurements.
Planned modernisation of existing Su-30 fleet along with procurement of 12 more aircraft, acquisition of new engines for MiG-29 jets, C-295 transport aircraft under induction, and missile systems will be funded out of the budget being allocated, the MoD had stated. “Apart from this, to take the initiative of ‘Make in India’ further, the Light Combat Aircraft (LCA) MK–I IOC/FOC configuration will be additionally funded to ensure state-of-the-art technology in domestic production. The Indian Navy projects such as acquisition of deck-based fighter aircraft, submarines, next-generation survey vessels etc. will all materialise through this allocation,” the MoD said after the interim budget.
