"Strategic importance no excuse for inefficiency"

Delivering a tough message to inefficient defence public sector undertakings (PSUs) and loss-making ordnance factories, Finance Minister P Chidambaram today said their "strategic importance" could not be the reason for perpetuating inefficiency.

Chidambaram also mooted a defence financial management system that could facilitate optimum allocation and utilisation of resources. Warning that there could be no cost or time overruns in financial management, he asked the ministry of defence to reduce bunching of expenditures towards the end of the financial year and eliminate wastage and inefficiency.

Chidamabaram was speaking at an international seminar on defence finance and economics.

At a time when procurement has slowed down for fear that allegations of kickbacks might be levelled, Chidambaram said there was no reason why defence accounts should not conform to international accounting standards. While conceding that the disclosure norms applicable to the civil expenditure were different from defence expenditure, he said "all commitments and contingent liabilities must be explicitly recognised, monitored and reported upon so that they are taken into consideration in a dynamic way in deciding on new priorities."

Referring to cantonment and land management, he said defence services owned large physical assets. "They must be appropriately evaluated and monitored through updated asset registers."

Chidambaram said at a time when the government was on the path of fiscal consolidation, there was need to invite greater private sector participation in defence production, R&D and maintenance. "The role of the private sector is changing from that of a supplier of inputs, raw materials, parts and components to a manufacturer and systems integrator of complete systems and platforms for the defence services. This partnership has to be strengthened and taken to a higher level with greater outsourcing by the armed services, PSEs, ordnance factories and R&D labs. The spin-offs could see defence emerging as one of the key growth drivers in the economy," he said.

Updated at 1330 hrs: FM mantra: Cut expenses for more growth

After indicating moderation of tax rates and a hard look at tax exemptions, Finance Minister P Chidambaram today favoured tough measures to cut expenditures for containing fiscal deficit.

"Soft options for reducing expenditures or increasing revenues are getting exhausted. We now have to take hard decisions to restructure certain expenditures," Chidambaram told a global seminar on defence finance and economics.

Asserting that India was progressing on fiscal consolidation, which has been accompanied by similar consolidation by state governments, Chidambaram said: "The government needs to stay steadfast on the path of fiscal consolidation and achieve the FRBM target."

The virtuous cycle of savings, investments and growth has enabled us to sustain above 8% growth rate for four consecutive years, Chidambaram said adding," we are now at the take-off stage for even higher growth. For it to happen, more fiscal consolidation is required. Government dissavings have to be fully reversed so that funds were available at affordable cost for investment in key sectors," he said.

After the services sector boom, Chidambaram said the country was poised to become a manufacturing hub with industry recording double digit growth. "To ensure that high growth in services and manufacturing is sustained, there has to be macroeconomic stability and fiscal consolidation is of utmost importance," he added.