Ahead of Budget, armed forces asked to return Rs 4,000 cr

As in the past, this time too, ahead of the Union Budget 2012-13, the armed forces have been asked to surrender funds amounting to around Rs 4,000 crore.

Normally this is the unspent amount from the capital account, usually from the army.

Former Defence Secretary Ajay Prasad said: “In my time, around this time of the year, I used to get a call from the Finance Minister saying: ‘we want Rs 5000 crore’."

The armed forces have long complained that this practice of getting unspent money to balance the Finance Ministry’s books makes nonsense of the procurement plans of the services typically with long gestation periods.

The surrender amounts to roughly Rs 3,000 crore from the Army and Rs 1,300 crore by the Air Force.

When asked, top sources in both the Army and Air Force denied any funds were being surrendered. The Army says it has readjusted the unspent amount partly through the Capital component under the Revenue head (war stores). But only the Navy seems to have managed to balance its books by December 2011.

Highlighting the need for funds, the Army made a presentation to Defence Minister A K Antony last month indicating the ‘hollowness in critical fighting equipment’ like shortages in war wastage rate (WWR) of ammunition, thermal imaging equipment in T72 and T90, no purchases of air defence or artillery and slow modernization of the infantry.

In the last decade more than Rs 45,000 crore has been returned either because it is unused or because the government needed the money to balance its books.

Of the three services, the Army is the worst hit on account of modernisation mainly because of inhouse problems. Blacklisting of  six firms last week— four foreign and two Indian companies were— all affected the Army’s modernisation.

Instructions have been given not to conclude any contracts before 31 March. Affected are the Medium Multi Role Combat Aircraft (MMRCA), the basic trainer aircraft Pilatus and possibly the Multi Role Tanker Transport aircraft. In the case of the Army, it is the American Light Howitzer gun, the light helicopter and other smaller projects.