Defesce Budget 2022-23 | Verdict
An Alpha Defense Analysis
Ever since clashes with China, it seems the government is giving special attention towards modernization of armed forces, the same is being reflected in form of decent increment is defense capital budget outlay. we will try to analyze the defence budget in general and capital outlay in particular.
A glance at Defense Budget 2022-23
This year a total of Rs. 5,25,166.15 crores have been allocated to the Ministry of defense, up from Rs. 4,78,195.62 crores in FY 21-22 i.e. around 9.8%, this includes funds towards revenue expenditure, capital expenditure, and defense pensions. Of this MOD (civil) is allotted Rs. 12,050.01 crores as revenue outlay and Rs. 8,049.99 as a capital outlay. Defense pensions amount to Rs. 1,19,696 crores. Total Revenue allocation is Rs. 2,33,000.54 crores and Capital allocation excluding MOD civil is Rs. 1,52,369.61.
This year a total of Rs. 5,25,166.15 crores have been allocated to the Ministry of defense, up from Rs. 4,78,195.62 crores in FY 21-22 i.e. around 9.8%, this includes funds towards revenue expenditure, capital expenditure, and defense pensions. Of this MOD (civil) is allotted Rs. 12,050.01 crores as revenue outlay and Rs. 8,049.99 as a capital outlay. Defense pensions amount to Rs. 1,19,696 crores. Total Revenue allocation is Rs. 2,33,000.54 crores and Capital allocation excluding MOD civil is Rs. 1,52,369.61 crores.
This year’s defense capital outlay has seen a steep increment over the last year’s budgeted allocation as well as revised allocation. The Budget Estimate 2022-23 has been Rs. 1,52,369.61 crores, up from Budget Estimate 2021-22 of Rs. 1,35,060.72 crores and Revised Estimate 2021-22 of Rs. 1,38,850.9 crores. An increment of 12.82% and 9.74% respectively.
Navy for the last few years has not just utilized the total allocated budget but actually has overspent. In 2020-21 Navy was allocated Rs. 26,688.28 crores in BE, which was revised to Rs. 37,542.88 crores in RE, but they actually were able to spend Rs. 41,666.76 crores. Similarly, for FY 21-22 they were allotted Rs. 33,253.55 crores, which is increased to Rs. 46,021.54 crores in RE 21-22, it is to be seen what they have actually spent. Now BE22-23 allots an even higher number at Rs. 47,590.99 crores, this can actually be attributed to a high level of indigenization which the Indian Navy has achieved including joint ventures with foreign OEM. Also streamlining the requirement of the surface fleet has allowed overcoming delays. For example, Brahmos, AK-630, 72mm SRGM, RBU 6000 has become standard along with all platforms of IN. However navy still struggles to get new submarine-launched torpedoes, minesweepers, submarines, multirole as well as light helicopters, aircraft for its second carrier, LHD, etc. However comparatively Indian Navy is in a way better position than the other two forces.
Indian Air Force for quite some time has got the biggest chunk out of capital outlay. In BE 20-21, they got Rs. 43,281.91 crores which were revised to Rs. 55,055.41 crores, while they actually spend whooping 58,137.53 crores, however, BE 21-22 allotted them only Rs. 53,214.77 crores which have now been further revised down to Rs. 51,830.93 crores in RE 21-22. BE 22-23 do saw an increase to Rs. 55,586.65 crores, but it still is not near to the actual expenditure of FY 20-21. Still, IAF has been able to keep its ball rolling by signing some big-ticket projects over the years, these include deals like 123 Tejas, 36 Rafale, 18 batteries of MRSAM, 5 regiments of S400,56 C-295, etc. But now most of its major projects are nearing completion with only Tejas MK1A,6 A319 Netra MK-II, C295, etc going into considerable future. This should free up funds for future procurements this year, with MRFA on top of the list. IAF requirements include MRFA, VSHORAD, IJT, BTA, attack helicopters, upgradation of IL76, AN32, MRTT, AWACS(I) etc.
The Army seems to have been failing constantly to utilize its allocated budget. In BE 20-21 they were allocated Rs. 33,392.38 crores which were nominally revised downwards to Rs. 33,213.28 crores, however, the Army was only able to spend Rs. 26,285.43 crores. Still, BE 21-22 provided them Rs. 36,481.9 crores which in RE21-22, has to be heavily revised down to only Rs. 25,377.09 crores, which suggests the Army is again failing to utilize its portion of the defense budget. Even for FY 22-23 allocation is merely Rs. 32,015.26 crores which is even less the FY 20-21 budget allocation. Even after having the highest deficiencies of all 3 forces, the Army is constantly failing to utilize its portion defense budget. What are the reasons?, well it is up to the army to introspect, but it certainly has to do with quality control of OFBs, as well as, to an extent, the reluctance of the army to procure indigenous products.
Most Army’s procurement has been either under emergency authorization from foreign vendors or repeat orders for platforms like T-90, BMP2, Pinaka, Dhruv, Rudra etc. But is it ok to call the Army import-oriented? our opinion is NO! Army in recent years have ordered quite a good number of indigenous products like Akash SAM, Pinaka MBRL, ballistic helmets, Bulltet proof vests, ASLV, Dhanush, Sharang, Dhruv, Rudra, Arjun MK1A, Swati WLR, BSFR etc. However, delays in procurement of some indigenous projects is not justified since they have funds unutilized. They practically lack on many fronts like 155mm artillery guns, long-range MBRLs, Tank destroyers like NAMICA, attack helicopters, SPAAGs, QRSAM, Wheeled APC/IFV, tracked IFV, small arms, Armor overhaul and what not. It’s actually concerning as to why army has not been able to spend its allocated portion of the defense budget.
R&D and TDF
This is another sector which is showing a level of disappointment. In BE 20-21 a total of RS. 10,532.87 crores were allocated towards defense R&D, the same was reduced to Rs. 7,957.87 crores in RE 20-21, while actual spending stood only at Rs. 7,724.30 crores. This is when there is constant demand among defense circles to increase the defense R&D budget. However this low level of activity by DRDO and associated labs can be attributed to COVID 19 and impending lockdown for FY 20-21, but the same story can be seen repeating in FY21-22. i.e. BE 21-22 had Rs. 11,375.5 crores allocated to them which is toned down to Rs. 9,875.5 crores in RE 21-22. However, we did see a sharp increase in allotment towards DRDO’s TDF scheme, which involves funding by DRDO to eligible defense startups. A total of Rs. 1,383.84 crores is allocated in RE21-22 up from 50cr in be21-22, which do take total allocation to Rs. 11,259.34 crores, but is still short of budget estimates. In BE 22-23 Rs. 11,981.81 crores are allocated to R&D and another Rs. 1,364.9 crores are being allocated to TDF, which is a welcome step.
OFB converted into DPSU
A good portion of capital outlay in RE 21-22, as well as BE 22-23 has been allocated to newly formed DPSUs out of erstwhile OFB. Rs.2,500 crores each has been allotted towards emergency authorization for DPSUs in RE21-22 and BE 23-23, while Rs. 1,643. crores in RE21-22 and Rs. 1,310 crores in BE 22-23 has been allocated towards investments in these enterprises.
Out of the Rs. 8,049.99 Crores allotted to MOD civil under capital outlay, Rs. 4,246.37 crores have been allotted to Indian Coast Guards, while the rest has gone towards construction and renovation of infrastructure like residential buildings, offices etc of all forces. Just like The Navy, Coast guards have seen decent growth in terms of both spendings as well as allocations. In BE 20-21 coast guard was allocated Rs. 2,500 crores, which they were able to exhaust completely, incurring a total expenditure of Rs. 2,503.31 crores in FY20-21. Similarly, in BE 21-22 they were allotted Rs. 2,650 crores which has now been revised to Rs. 3,236.46 crores in RE 21-22. Allocation in BE 22-23 shows a further increase to Rs. 4,246.37 crores. This upward trend should allow coast guards to achieve their targeted strength of 200 vessels and 80 aircrafts at the earliest.
Border Roads Organisation
Even though allocation to Border Roads Organisation (BRO) comes from revenue outlay of MOD civil budget, it can still be seen as a capital investment towards infrastructure. BRO was allocated Rs. 2,536.23 in BE 20-21, while they actually spend Rs. 2,775.39 crores in FY 20-21. BE21-22 allocated Rs. 2,654.08 crores which has now been revised to Rs. 3,037.42 crores and a further Rs. 3,327.36 crores have been allocated in BE 22-23. This shows the intent of the current government towards developing road infrastructure in border areas especially around the Chinese border.
The overall budget has seen decent growth in the last couple of years, especially in light of Chinese incursions. When the economy is overburdened and is only in recovery mode because of COVID 19 and its after-effects, this upwards trend in the overall defense budget, as well as capital expenditure is a welcome step.
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