India’s defence purchase worth Rs 86,741 crore budgeted for 2013-14 fiscal will remain unaffected by the central government’s austerity measures and the 10 per cent budget cuts in non-Plan expenses announced for all departments and ministries on Wednesday. A day after the Finance Ministry issued an office memorandum on the budget cuts, under which air travel and conference in five-star hotels have been frowned upon, Defence Ministry officials said here that the intimation had clearly exempted “defence capital” expenditure, apart from salaries and pensions under the revenue expenditure.
The government had announced Rs 2.04 lakh crore as defence budget for 2013-14 of which Rs 86,741 crore was earmarked for capital expenditure. However, of the Rs 1.93 lakh crore defence budget for 2012-13, the Finance Ministry had in December last announced Rs 15,000 crore cut, of which Rs 10,000 crore cut was in the defence capital expenditure.
This decision of the government not to cut the capital expenditure of the Defence Ministry for this year, at least for the time being, may help the armed forces to firm up some of the deals for their immediate requirements, sources said.
But, key deals such the Rs 1 lakh crore combat aircraft deal with French firm Dassault Aviation for 126 of its Rafale planes may not come through this fiscal, primarily in view of the protracted contract negotiations that is in progress since March 2012.
If the combat planes deal is signed with Dasault Aviation, India, will have to shell out 15 per cent of the total amount as down payment which may come close to Rs 15,000 crore or even more. However, the government has asked the armed forces to prioritise their modernisation and procurement plans for this fiscal as they are on the verge of placing big ticket orders -- apart from the ‘mother of all deals’ for the combat planes -- such as 22 attack helicopters for Rs 7,000 crore and 15 heavy lift helicopters for Rs 5,000 crore (both from US firm Boeing), six C-130J planes for Rs 4,000 crore from US firm Lockheed Martin, and 145 M777 ultra light howitzers for Rs 3,500 crore from US-based BAE Systems, and six Airbus MRTT midair refuellers worth Rs 10,000 crore.
Last week, the Defence Acquisition Council (DAC) headed by Defence Minister A K Antony had approved the proposal to buy the six C-130Js from the US, apart from a nod to issue a Rs 50,000 crore tender for buying and building of six new hi-tech submarines. Except for the C-130J deal, none of the other contracts that are under negotiation seem to be anywhere near completion before the next general elections scheduled for April-May 2014 and hence the Defence Ministry may have to return a huge amount from its capital expenditure allocations at the end of this fiscal, or face a cut during the revised estimates in December this year.