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Defence budget increased by 9.8 percent, FM announces steps to speed up indigenisation

It is an increase of 9.8 percent but keeping the threat perceptions along the borders, the important capital outlay has been raised by more than 10 percent for the second consecutive year

Published: 01st February 2022 02:46 PM  |   Last Updated: 01st February 2022 03:50 PM   |  A+A-

Image used for representational purposes (Photo | AP)

Express News Service

NEW DELHI: The Defence Budget for the financial year 2022-23 is Rs 5,25,166 crore. This is an increase of Rs 46,970 crores over last year's Rs 4,78,196 crore and includes pensions too. It is an increase of 9.8 percent but keeping the threat perceptions along the borders, the important capital outlay has been raised by more than 10 percent for the second consecutive year.

The total defence budget minus the pensions pegged at Rs 119,696 crore stands at Rs 405,470 crore for the year 2022-23.

Keeping the push towards the modernisation of the armed forces this year saw an increase of more than 10 percent in the Capital Budget. The Capital Budget allocation has increased by Rs 17,309 crore to reach Rs 152,369 crore, an increase of 12.6% over the capital of Rs 1,35,060.72 crore for FY 2021-22 which was an increase of 18.75 per cent over FY 2020-21. The budget earmarked for 2020-21 was Rs 4,71,378 crore (US$ 66.9 billion) for the Ministry of Defence (MoD).

The Union Budget for the Financial Year 2021-22, presented on February 1, 2021 had given a major push to defence modernisation by increasing defence capital outlay by 18.75 per cent.

Defence allocation in the budget was Rs 4,78,195.62 crore for the Financial Year 2021-22. Excluding defence pensions, the total allocations for defence services and other organisations/departments under the Ministry of Defence for the FY 2021-22 was Rs 3,62,345.62 crore which was an increase of Rs 24,792.62 crore over the Financial Year 2020-21.

The allocation under capital expenditure relates to modernisation and infrastructure development of the Armed Forces.

The budget in 2020-21 was Rs 4,71,378 crore (growth of 9.4%). Excluding pensions, it came to 3,23,053 crore. In 2019-20, the total allocation was Rs 4,31,011 crore (growth of 6.6%) and it stood at Rs 3,05,296 crore without pensions. In the same period, the Capital Expenditure allocation was Rs 1,03,394 crore and Rs 1,13,734 crore respectively with an average increase of 10%.

That capital acquisition of the armed forces consists of two components: (i) committed liabilities, and (ii) new schemes. Committed liabilities are payments anticipated during a financial year in respect of contracts concluded in previous years (as acquisition is a complex process involving long gestation periods). New schemes include new projects which are at various stages of approval and are likely to be implemented in future.

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The Finance Minister announced steps to speed up indigenisation during her speech made in the Parliament.

Sitharaman said, “Our government is committed to reducing imports and promoting AtmaNirbharta in equipment for the Armed Forces. 68 per cent of the capital procurement budget will be earmarked for domestic industry in 2022-23.” This is up from 63 percent in 2021-22.

Defence R&D will be opened up for industry, startups and academia with 25 per cent of defence R&D budget earmarked. Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organizations through SPV (Special Purpose Vehicle) model. An independent nodal umbrella body will be set up for meeting wide ranging testing and certification requirements.

The Society for Indian Defence Manufacturers (SIDM), an industry body of Indian defence manufacturers, has welcomed the steps announced by the finance minister.

Calling the step to set aside the major portion of the capital outlay for domestic industries important with a long-term effect, SP Shukla, President SIDM, said, “SIDM welcomes the announcement of setting aside 68% of capital outlay of defence budget for domestic industries. This will sustain investments and attract fresh capacity creation.”

The creation of a nodal body for setting up testing and certification requirements of defence systems and platforms will help domestic industry through faster processes and cost-efficiency.

“Allocation of 25% of Defence R&D budget for startups, academia and private industry is a much-needed reform. We thank the Ministry of Defence and the Ministry of Finance for this major boost to research and innovation,” Shukla added.

Vice Adm Paras Nath (Retd.) Group President, Crown Defence Engineering Division, said, "It is heartening to see that part of the R&D budget has been allocated to the industry, startups and academia. This will be a positive move in particular for startups and MSMEs to have their inhouse R&D."

"Private industry will be encouraged to take up the design and development of military platforms and equipment in collaboration with DRDO and other organizations through SPV model," he added.

In order to improve steps for 'Make in India', Paras Nath suggested that a directive is necessary for PSUs to offer existing facilities with spare capacities to the industry in line with the GOCO (Government Owned and Company Operated) policy. "R&D support being provided to industry and startups should have minimum five years gestation period," he said.



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