Defence funds remain unused as scams cast a shadow

New Delhi: Modernisation of the Indian armed forces suffered as Rs 21,000 core remained unspent in the past five years with procurement deals slowed down by past controversies about defence kickbacks.

Defence contracts in the pipeline have also been held up as returned funds lapse from the Defence Budget at the fiscal end and fresh proposals are required, officials and defence analysts say.

A senior Defence Procurement Department official admitted there are "slippages" in finalizing contracts and acquisition plans which in turn lead to surrender of funds.

"Sometimes we face the problem of spacing out expenditure because of time needed for finalizing procurement procedures," he said.

Former Army chief General VP Malik said unspent money returning to the Ministry of Finance after March 31 "has been happening for a long time. A wide gap exists between project planning and execution because of which defence forces are suffering."

Sometimes the procurement procedure got delayed because of "fear of being accused of accepting kickbacks", former Institute of Defence Studies and Analysis director Jasjit Singh said.

The report of the Parliamentary Standing Committee on defence this year says despite introduction of the Defence Procurement Policy in 2006 to bring transparency and lay down parameters for speedy clearance of defence proposals, the Ministry of Defence has not been able to increase the pace of expenditure.

"Large-scale surrender of funds at the end of the year has eroded their credibility and ability to utilise allocated funds which were badly required for modernisation upgradation of defence forces," the report said.

It said Rs 1,300 crore remained unspent in 2005-06, Rs 3,000 crore in 2003-04 and Rs 9,000 crore 2002-03 while the sum was Rs 21,000 crore for the 10th five-year plan period of 2002-07.

As per the Fiscal Responsibility and Budget Management Act, money repaid to the Finance Ministry is removed from the next year's budget, Singh said adding this does not happen in the United States.

He said the funds earmarked for the Rs 17,000 crore Eurocopter agreement with France-based European Aeronautic Defence and Space may also lapse due to scrapping of the deal.

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The previous NDA government had decided to create a non-lapsable fund of Rs 25,000 crore "but it did not materialise," he said.

On whether the acquisition procedure was to blame, Malik said "that is part of the problem", which the government had attempted to address by formulating DPP.

Singh said the money earmarked for the Rs 17,000 crore Eurocopter deal with France-based European Aeronautic Defence and Space may also lapse due to scrapping of the deal.

As per official figures, the amount provided in the Budget Estimate has been reduced at Revised Estimate stage since 2002-03 except in 2004-05, seriously affecting the modernisation plan. There is a further shortfall from revised expenditure to actual expenditure.

In, 2006-07 the initial defence budget of Rs 89,000 crore was reduced to Rs 86,000 crore in revised expenditure (2006-07) thereby showing a reduction of Rs. 3,000 crore.

The 2007-08 budgets has been set at Rs 96,000 crore, an increase of 11 per cent over 2006-07.

The parliamentary committee has strongly recommended that MoD should complete all procedural formalities for procurement before the month of September to avoid cuts in the capital acquisition budget at the revised expenditure stage.