Army needs adequate capital budget to ensure deterrence: Parl panel

There was a gap between budget allocations and actual spending on the Army's modernisation and infra in four of five years from FY20 to FY24, noted the Parliamentary Standing Committee on Defence

The Indian Army's capital budget should be adequate to ensure a deterrent capacity against adversaries, the Parliamentary Standing Committee on Defence has recommended, asserting, "Our expenditure should be in proportion to the increase in defence spending of our neighbours." The Committee's report, released on Tuesday, highlighted a gap between budgetary allocations and actual expenditure for the Army's modernisation and infrastructure development in four of the five years from 2019-20 to 2023-24.

 

The Army spent Rs 28,613.45 crore on modernisation, force enhancement, and infrastructure development in financial year 2023-24 (FY24), falling short by Rs 4,798.71 crore from its Revised Estimate (RE) projection of Rs 33,412.16 crore under the Capital Head, despite no deductions in allocation. This was revealed in the 'Demands for Grants (2024-25)' report.

 

 

"Under capital head, in Budget Estimate (BE) for FY25, army's projection was Rs 35,664.95 crore and the same amount was allocated to it. There is no deduction allocation vis-a-vis demand, though it is less than BE FY24 projection of Rs 37,341.54 crore. In RE FY24, the projection of the army was Rs 33,412.16 crore and there was no deduction in allocation. However, the expenditure incurred during FY24 was only Rs 28,613.45 crore," said the report. It further stated that the capital budget component for the army includes expenditure on modernisation, force-level enhancement, and infrastructure development, among other purposes.

 

Between 2019-20 and 2023-24, the report observed disparities in the RE projection (demand by the army), RE allocation (amount allocated by government), and actual expenditure under the army's capital head.

 

In 2019-20, the RE projection was Rs 46,032.00 crore, but only Rs 29,666.90 crore was allocated, and Rs 29,000.88 crore spent, leaving a Rs 16,365.10 crore gap between projection and allocation and Rs 666.02 crore underspent.

 

In 2020-21, the RE Projection of Rs 39,019.17 crore saw a shortfall of Rs 5,735.89 crore in allocation, with only Rs 33,283.28 crore allocated and Rs 26,320.93 crore spent, underspending Rs 6,962.35 crore.

 

In 2021-22, against an RE Projection of Rs 38,344.90 crore, Rs 25,377.09 crore was allocated and Rs 25,130.94 crore spent, showing a Rs 12,967.81 crore gap between projection and allocation and Rs 246.15 crore underspent.

 

In 2022-23, there was no gap between RE Projection and allocation, both at Rs 32,598.49 crore, but the Army overspent Rs 4,017.70 crore, with Rs 36,616.19 crore spent.

 

In 2023-24, while allocations matched the RE Projection of Rs 33,412.16 crore, expenditure fell short by Rs 4,798.71 crore, with only Rs 28,613.45 crore spent.

 

These inconsistencies might indicate challenges in matching projections with allocations and in fully utilising allocated budgets.

 

The report explained that capital head expenditure in FY21 was lower than the RE due to "non-fructification of land acquisition cases, slippages in contracts, supply orders, indents placed on the Director General of Ordnance Factories, and underutilisation of funds due to COVID-19." Similarly, in FY24, expenditure was reduced due to booking deducts for defence land transfers, delays in planned land acquisitions, vendor slippages, non-settlement of pending court cases, non-conclusion of capital contracts, and limited progress of works on the ground.

 

However, the report underlined, "It may be added that the allocated funds were optimally utilised towards operational activities and it is ensured that urgent and critical capabilities are acquired without any compromise to operational preparedness of the defence services."

 

On allocation of the Budget, the representative of the army apprised the Committee: "Coming to the Indian Army budget for FY25... The Indian Army has been allocated Rs 2,28,698 crore (Rs 2.29 trillion), which is 3.8 per cent higher than the BE of FY24."

 

The representative also outlined the army's allocations for capital expenditure, stating that the capital budget is divided into two major components. Modernisation, which includes procurement of new equipment and weapon platforms, accounts for Rs 27,421 crore, or 77 per cent of the total allocation. The remaining Rs 8,227 crore, or 23 per cent, is earmarked for developing key infrastructure in FY25. The representative emphasised that the modernisation budget will be utilised for delivery-based payments for weapons, ammunition, and other warlike equipment, as well as payments for new acquisitions.

 

The report noted that in FY24, the army was allocated Rs 30,163.00 crore at the BE stage and Rs 26,500 crore at the RE stage under the "Capital Acquisition (Modernisation) Head". Against these allocations, the army incurred an expenditure of only Rs 23,079.39 crore. Additionally, Rs 3,955.33 crore was surrendered by the Army at the RE/Modified Appropriation (MA) stage.

 

It also noted that in the BE for 2024-25, Rs 27,421.33 crore was allocated to the army under the Capital Acquisition (Modernisation) Head. Of this, Rs 10,348.70 crore, or approximately 37.7 per cent of the allocation, had been spent as of September 2024.

 

"Our expenditure should be in proportion to the increase in defence spending of our neighbours. Therefore, the Committee feels that the capital budget of the army should be sufficient to have a deterrent capacity to ward off adversaries in case of any hostility," the report said in its recommendations. 

Indian Army Capital Budget