FinMin looks to empower Antony on defence deals

Perturbed at the delays in defence acquisition that cause the surrender of large sums of money every year, the finance ministry has mooted a change in policy that will empower Defence Minister A K Antony to clear defence projects up to Rs 1,000 crore, bypassing the Cabinet Committee on Security (CCS).

A note from the finance ministry to this effect is likely to be sent for Cabinet clearance in a few days.

Currently, the defence minister is allowed by the Cabinet to clear projects up to Rs 200 crore without having to bring it to the Cabinet or CCS. For orders up to Rs 500 crore, the concurrence of the finance ministry is sufficient. Now, the finance ministry wants to raise the limit to Rs 1,000 crore to speed up the acquisition process by financially empowering the defence minister and giving him a larger measure of autonomy, in consultation with it.

 

A senior defence ministry official said: “If this proposal is accepted, it will solve the problem of delays in acquisition to a large extent.”

Because funds are not used by the defence ministry on time, the allocations lapse and have to be returned. In the 2010-11 Budget, the defence ministry returned nearly Rs 7,000 crore unutilised to the Consolidated Fund of India. In January this year, the Indian Air Force’s (IAF’s) plans to expand its capabilities suffered a blow when the defence ministry cancelled a tender worth around Rs 6,000 crore for procuring six air-to-air refuelling aircraft, after the finance ministry objected to the price of the aircraft chosen by the IAF. It took two years to negotiate the contract.

India needs 200 light, multi-role helicopters for the army and the air force and several hundred motorised and towed 155-mm 52-calibre artillery guns. Projects to buy 126 medium multi-role combat aircraft, 8,400 light specialist vehicles, 140 ultra-light 155-mm 39-calibre and tactical communication system are already in the pipeline.

Government managers say the defence minister should not be blamed for the delays. “Antony is conscious that he is dealing with public money. This is a sensitive ministry. And Antony is trying to keep it corruption-free. You can’t blame him for that,” said a senior minister of the United Progressive Alliance. With a spending cap enhanced to Rs 1,000 crore, it will be harder for the defence ministry to put off spending money.

In January, a high-powered committee constituted to look into the defence spending had recommended numerous reforms such as increasing the foreign direct investment limit in the defence sector to 49 per cent, divestment of defence public sector units and increasing the defence minister’s financial powers up to Rs 500 crore to telescope the arms acquisition process in the ministry.

The Defence Expenditure Review Committee was headed by former secretary (defence finance) V K Misra and had former senior officers of all three arms of the armed forces.

Not only had the committee recommended increasing the FDI limit in the defence sector to 49 per cent from 26 per cent but also called for a case-by-case waiver up to 74-100 per cent. It had called upon the private sector to take over foreign defence firms and establish a self-governing wealth fund to facilitate this activity.