Disingenuous Narratives on Defence Pensions – by Govt and Analysts – Need to Be Tackled

Irrespective of the government's motivations behind the Agnipath scheme, the linkage between the rising pension expenditure and somewhat moderate outlays for operations and force modernisation is undeniable.

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One of many debates triggered by Agnipath, the Union government’s “ill-conceived” scheme to recruit soldiers, or Agniveers, for a four-year Tour of Duty in the armed forces, concerns its ‘sobering’ effect on the soaring defence pensions budget.

There are few takers for the official line that the induction plan is centred on imparting a youthful profile to the armed forces and concomitantly enhancing the employability of the demobilised youth thereafter in the Central Para Military Forces and the public and private sectors. The vehement official protestations that the Agnipath scheme was in no way motivated by financial considerations is, in a sense, nothing but smoke and mirrors.

However, whatever the motivation for the government taking this contentious step, the linkage between the rising expenditure on pensions, and somewhat moderate outlays for operations and force modernisation, each of which is separately budgeted, is undeniable.

Of these three major defence budget components, pensions are the first to catch the eye because of their spiral increase, some 16-fold, from a modest Rs 7,348.65 crore in the Financial Year (FY) 1999-2000 to Rs 1,19,696 crore in the current fiscal. This is likely to increase even more rapidly due to the pension enhancement of all retirees every five years under the one-rank-one-pension (OROP) scheme initiated by the BJP-led government that assumed power in 2014.

In the corresponding period, the capital budget, which caters for the acquisition of military equipment and platforms and all round capability upgrades, increased 12.5-fold from Rs 12,229.68 crore to Rs 1,52,369.61 crore. However, unlike the pension budget which has been steadily escalating to keep pace with the increasing pension pay outs, the capital outlay invariably falls short of the requirement. For the current fiscal it is Rs 63,328.38 crore less than what the services had demanded to enhance their operational capacities.

The gap between the money demanded by the services for their overall revenue and capital expenditure and the eventual budgetary allocation has persisted for long, increasing from Rs 23,104.43 crore in FY 2010-11 to Rs 1,01,678.19 crore this year. According to the 15th Finance Commission report of November 2020, the overall gap in capital outlay over the next three financial years could be a formidable Rs 9,87,470 crore.

The crisis surrounding the revenue budget, spent on salaries, maintenance of equipment and expanding overall infrastructure, and assorted procurements ranging from rations and clothing to ammunition and diverse ordnance, too is equally dire. 

The revenue allocation for the current year, for instance, is Rs 37,438.88 crore less than the requirement projected by the services; its cumulative shortfall over the next three years is expected to be around Rs 4,59,979 crore, a situation which portends serious consequences as the Indian military’s responsibilities multiply along its western and norther borders where it is locked in a standoff with the Chinese since May 2020.

In the face of such overwhelming hurdles caused by the successive governments’ inability in meeting the services’ fiscal requirements, it is somewhat disingenuous for the armed forces to maintain that money is of little or no consideration to them. In fact, Lieutenant General Anil Puri, officiating head of the Department of Military Affairs (DMA) had recently declared in a television interview with NDTV that it was the government’s  – and not the armed forces’ – responsibility to provide money for national security, forgetting that the DMA is now a part of the government. Hence, he stated that Agnipath had nothing whatsoever to do with any potential savings on pensions, which Lt General Puri’s late boss, Chief of Defence Staff General Bipin Rawat, had iterated could be diverted to meet the forces’ capital and revenue needs.

Department of Military Affairs additional secretary Lt General Anil Puri addresses a press conference regarding the Central government’s ‘Agnipath’ scheme, at South Block, Ministry of Defence, in New Delhi, June 19, 2022. Photo: PTI/Kamal Kishore

‘Bypass’ arguments disingenuous too

It is also equally disingenuous for senior retired veterans and defence analysts to argue that these financial challenges can be overcome or bypassed by simply shifting pensions out of the defence budget to the civilian pensions budget managed by the Ministry of Finance (MoF). 

They self-servingly assume that the amount allocated for defence pensions will continue to accrue to the armed forces to buttress their procurement and revenue budgets while their pension liability will be borne by the MoF from a separate kitty.

To cut the clutter, the expectation is that if such a course is pursued, the armed forces’ allocation will go up by 20-22% which presently averages the pension budget in the overall outlay of the Ministry of Defence (MoD). The officers advocating this line of action disregard the fact that whether the defence pensions are costed as part of the defence budget or the civilian budget, the money emanates from a common source: the Consolidated Fund of India (CFI) or more prosaically, the national kitty.

The CFI is the principal account into which flow all receipts from taxes, borrowing and disinvestment, amongst others, and from which all governmental expenditure is met. Therefore, it is obvious that unless taxes and other incomings increase, the government remains helpless in allocating additional funds, not just for defence, but for multiple other sectors too, like health, education, infrastructure development, employment generation, and agriculture and several others, which are critical factors in the overall national defence.

The age-old problem of supply and demand is the fundamental crux of the problems.

Also Read: With Focus on ‘Self-Reliance’ in Defence, Budget Provides 68% Allocation To Domestic Industry

And though it is true that the armed forces, like all the other organs of the state, are not responsible for solving India’s economic conundrum, it is futile for veterans and armchair warriors to offer inane solutions via television news channels and newspaper columns to a complex problem. Fundamentally, only overall economic development and increased revenue can boost the government’s ability to allocate larger sums to the MoD.

The financial crunch faced by the armed forces is not only due to their pension liability; expenditure on salaries of servicemen and defence civilians too merits attention as it accounts for a large proportion of the revenue outflow, accounting for around 66.94% in the FY 2022-23. Going by some veterans’ logic of de-linking pensions from the defence budget, servicemen salaries too should be similarly hived off to a separate account.  

In recent years, dispassionate discourse over the MoD’s outlays has given way to acrimonious and outlandish accusations that civilians garner a major share not only of salaries but also of pensions. It will indeed come as a surprise that in FY 2022-23 all defence civilians working in shipyards, base workshops, repair depots and the like, who receive their remunerations from the armed forces’ budget account for no more than 9% of the total salary bill.   

As for pensions, it is difficult to explain how 6-odd lakh defence civilian pensioners accounted for a larger share of the pension’s budget than 27-odd lakh military pensioners. This sensational parable that has gained currency across social, electronic and print media needs dispelling and rectification.

Be that as it may, the talk about excluding pensions from the ambit of defence expenditure flies in the face of a globally accepted practice. According to the Stockholm International Peace Research Institute (SIPRI) military expenditures in most countries for which it compiles the data every year includes pension liabilities. In fact, in its computations, SIPRI also includes expenditure on ‘defence ministries and other government agencies engaged in defence projects’ and ‘paramilitary forces, when judged to be trained and equipped for military operations’.

Paradoxically, while Indian military veterans castigated the government for allocating merely 1.45% of the Gross Domestic Product (GDP) to the armed forces in the FY 20-21 budget, SIPRI placed New Delhi’s defence outlay for the corresponding year (2020) at 2.9% of the GDP. This made it just 0.1% shy of the desired 3% mark these veterans considered ideal for spending, and exactly double of local estimates.