Premvir Das: Defence's basic skew

Instead of a healthy 50:50 relationship between revenue and capital outlays, ours is heavily skewed in favour of revenue. This is despite the navy and the air force both bettering the desired ratio

The much awaited budget for 2014-15 is now in the public domain. Its several positives and negatives are being argued in the media by experts of varying hues - some raising or inverting their thumbs and flashing numbers on placards - but the focus of this column is on the defence budget, which impacts directly on the readiness of the country's armed forces to safeguard its territorial integrity. The news is mixed and sends out messages which merit serious consideration.

First, the finance minister has very correctly blown away the myth that for some reason sought to link defence expenditure to GDP. The hard reality is that expenditures have to depend on actual incomes that accrue to the government and can be viewed in that context alone. The expenditure allowed for defence by the FM is Rs 2.29 lakh crore, which is just 12.4 per cent over the Rs 2.03 lakh crore that was spent last year. Viewed differently, it is about 13.5 per cent of the overall revenues expected to be generated this year. Since that figure itself may be an overestimation, there is every likelihood of cuts near the close of the financial year.

With Rs 1.34 lakh crore, or nearly 60 per cent, earmarked for revenue expenditure - read maintenance - which gives no value-added to combat readiness, the allocation for capital outlay - read modernisation - is just under Rs 95,000 crore. This is Rs 5,000 crore more than what the previous FM earmarked in his interim Budget. However, this entire additional amount will go to border road infrastructure (Rs 1,000 crore) and research and development (Rs 4,000 crore). So, there is no change in allocations available for procurement of equipment. Since about 85 per cent of the capital budget goes towards hardware already contracted earlier, the money available for new additions is around Rs 10,000-12,000 crore; this may just about cover the contract signing payment necessary for the long-delayed Mirage aircraft deal. As explained earlier, this amount itself will also come under strain as we near the end of the year. By any standard, the picture is not rosy.

This brings me to the fundamental anomaly in India's defence structure. Instead of a healthy 50:50 relationship between revenue and capital outlays, ours is heavily skewed in favour of revenue; this despite the fact that the navy and the air force do much better, both bettering the desired ratio. It is the manpower-intensive army that tilts the scales to the disadvantage of combat capability.

The argument is not that the land forces do not need 'boots on the ground' as an essential prerequisite but the time has come to view the numbers more critically. The old and hackneyed concept of being able to fight a 'two-front war' was relevant some decades ago but requires reassessment today not only because the security environment is no longer just military but also because of the force-multiplier effects of modern weaponry, leave aside the strategic capabilities that are now in place. To remain prepared for border wars on either side, just as we have been all these years after 1962, is not a thesis that should be allowed to remain uncontested.

The country's security interests are more broad-spectrum and different aspects, not just focus on 'defending' the land borders, contribute to it. Our military preparedness must be structured to cope with the changing security environment and predominantly derived from indigenous capabilities. This requires greater emphasis on capital investment - and that means right-sizing the revenue element. It is not for this author to play around with numbers but a 10-15 per cent reduction in manpower over the next five years may do us no harm.

But the army chief can never be a party to any reduction of his force; in fact, he will always ask for more. There can be a blue-ribbon commission to look at all major issues concerning defence - the credible threats that we are likely to face, the kind of capabilities that we need to cope with them and the manner and timeframe in which these should be acquired. Firm political guidance and control is imperative if this body is to deliver meaningful results. This has been so in every major country where comprehensive modernisation and restructuring of the military has been achieved. War memorials and National Defence Universities et al are all to the good, but the bottomline is combat capability - and things are not in good shape here, with little prospect of significant change if the status quo is allowed to continue.

The FM has enhanced FDI in the defence sector from 26 per cent to 49 per cent. While in absolute terms this jump may appear impressive, in actual terms it is unlikely to serve much useful purpose. Companies do not invest their money or technology in ventures where the return on investment is not commensurate with their expectations. For this, they require managerial control. At the inter-governmental level, successes have been achieved in making things easier, such as removal of our research agencies from the Entities List of the US, or in getting clearances for many hardware systems not earlier cleared - and, indeed, in offers of joint development and production of high-technology platforms. But it is unrealistic to expect foreign manufacturers to bring in the desired know-how, much less know-why (a term dear to former President Kalam), without full involvement.

The annual Budget is, of course, the time to put forth a roadmap; it is also a time for introspection. Nowhere is this needed more than in determining the kind of military capabilities that India needs and the ways in which we should go about acquiring them, recognising quantifiable as well as non-quantifiable constraints. Looked at in procedural terms, the new FM's defence allocation is no different to that which his predecessor had proposed; looked at proactively, it should raise questions. The answers will determine where we are a decade hence.

The writer is a former director-general of the Defence Planning Staff