The government is to write to the Eleventh Finance Commission seeking relief in the wake of the Kargil conflict, which will force a hike in defence expenditure in the next three years.
Government officials said the Commission would be told that the Centre would have to absorb at least Rs 5,000 crore in additional expenditure on account of the developments in Kargil.
They said the Centre's plan, initiated last November, to restructure the defence expenditure would have to be recast in the light of Kargil. The plan was part of the government's strategy to induct improved technology and improve the vintage of the country's armaments inventory.
According to these officials, the neglect of defence spending in the past two decades had completely skewed the vintage of the armaments inventory towards outdated equipment, more than 30 years old on an average. "While internationally 30 per cent of the armaments are contemporary in nature, in India the percentage is just 15 per cent. The idea of restructuring the expenditures is to bring this on par with international standards. We propose to that over the next three years," an official said.
This will be achieved not merely by stepping up the expenditures, but will entail re-prioritising the present levels of spendings. "For instance, in the army we do not need a huge infantry. Instead, the need of the hour is more technological sophistication," the official added. The terms of reference of the Eleventh Finance Commission had been expanded to include, among other things:
* Restructuring of public finances to restore budgetary balance
* Plan revenue expenditure included in its purview
* Assess salary and retirement benefits of state government employees
* Measures to augment resource position of states to fund urban and rural local bodies
In the government's view, besides expenditure pressures arising out of the conflict, it was also worried on account of the question mark over the ambitious Rs 10,000 crore disinvestment target set for 1999-2000. With more than half the year lost due to political imbroglio, achieving this target seems difficult. In addition, the recently-cleared telecom package is expected to entail a loss of Rs 1,400 crore to the exchequer in the form of foregone licence fees.
