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Government

Parliamentary Standing Committee on Defence Adds Little Value to Knotty Financial Issues

The harsh reality is that no one in the government, least of all the SCoD, has a clue about how adequate revenues can be generated to meet the competing demands of the country’s defence and other sectors

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The three Action Taken Reports (ATR) tabled in Parliament by the Standing Committee on Defence (SCoD) last December reveal a dispiriting vacuity that is at odds with this over-arching body’s founding role of furthering military reforms.

These ATRs detail the ‘action taken’ by the Ministry of Defence (MoD) on the committee’s March 2021 reports, in which it had made several recommendations on overcoming the overall paucity of funds and related issues concerning planning, acquisition, and military modernisation.

Unsurprisingly, these vapid reports featured perfunctorily in the media, confirming, in a sense, their relative irrelevance. They were received with even lesser enthusiasm by the services and the MoD, further degrading their relevance. This is not at all surprising, as there was little that was new in the SCoD’s exhortations in its March 2021 reports that merited serious reflection on the MoD’s part.

This reflects the committee’s inability to effectively oversee the management of defence or make workable recommendations to overcome the financial problems faced by the services. The committee’s analysis, observations, exhortations, and recommendations, contained in various reports, are merely a regurgitation of what it had stated innumerable times earlier, with little or no impact. 

This incapacity is made all the more palpable by these reports appearing at a time when India faces serious territorial infringement by China, resulting in both countries’ respective nuclear-armed armies being locked in a face-off in Eastern Ladakh for over 22 months and their corresponding air forces and navies, too, remaining on high alert.

Much is expected of the SCoD as, along with the Comptroller and Auditor General (CAG), who periodically and critically assesses matters related with military preparedness, and the Public Accounts Committee (PAC), which audits defence expenditure, it completes the ‘oversight’ triad over the MoD’s performance in managing India’s defence.

Comprising 20 members of parliament (MPs) from the Lok Sabha and 10 from the Rajya Sabha, in addition to its chairman, the 31-strong SCoD was established in April, 1993 and was tasked with the responsibility of providing legislative oversight to the functioning of India’s military and other organisations under the ministry’s control, capability acquisition, defence policies, and related decision-making processes.

Also read: Defence Budget’s Arcane Format Makes It a Largely Unresolved Puzzle

Other than evaluating the MoD’s perennially problematic budgetary issues, the SCoD’s responsibilities also included appraising its annual report and the country’s long term military readiness.

It didn’t, however, take long for the SCoD to begin routinely following the practice of ‘examining’ the MoD’s demands for grants in a series of tension-filled sessions with the ministry’s civilian and military bureaucracy after the presentation of Union Budgets, and making run-of-the-mill observations and recommendations on those demands in hurriedly compiled and perplexing reports.

These poorly edited reports – submitted to Parliament, but rarely, if at all, discussed – also require the MoD to file ATRs on the SCoD’s recommendations. Once submitted, the MoD’s response is analysed, and another set of reports is presented by the committee to Parliament, detailing the recommendations ‘accepted’ by the government, jettisoned by the committee, and others awaiting the ministry’s final response.

In the four reports submitted by the SCoD in March, 2021, it had made a thumping 160 recommendations and observations. Of these, according to the ATRs, 153 were accepted by the MoD, while one recommendation was abandoned. The ministry furnished interim replies with respect to two other recommendations, leaving just four for which MoD feedback was unacceptable to the committee. 

These four recommendations relate to the creation of a corpus fund for Sainik Schools; prioritising road construction along India’s coastline; the need for an appraisal of the Indian Navy’s (IN’s) Long-Term Integrated Perspective Plan; and the bifurcation of capital outlay for materiel procurement into two distinct budget heads. Paradoxically, none of these recommendations are central to the enduring problem of a paucity of funds for executing operational activities, maintenance, and military modernisation.

One of the many sundry measures the SCoD has suggested over the past two decades to deal with this problem of inadequate defence budget outlays is, amazingly, to simply ask the MoD to request the Ministry of Finance to provide more funds, wrongly assuming that the genesis of the problem lay in the MoD under-pitching its requirements. Unsurprisingly, this has had little impact on budgetary outlays for defence. 

It is, by no means, a secret that the services’ financial woes have increased exponentially, with the gap between funds demanded by them and the eventual budget allocation widening from around Rs 23,000 crore in Financial Year (FY) 2000-01 to over Rs 1,25,000 crore in FY 2021-22.

Also read: The Myth of Atmanirbhar Bharat in Defence Manufacturing

Somewhere along the line, egged on by the country’s influential ‘strategic’ community comprising retired military officers and defence analysts, the committee began advocating for the establishment of a non-lapsable modernisation fund. It ignored the fundamental argument that eventually, finances, whether routed through the regular budget or this proposed embryonic fund, would need to be generated either through additional taxes, disinvestment or borrowings, all of which have consequent limitations and spinoffs in other arenas.

But now that the government has armed itself with the recommendation of the 15th Finance Commission in late 2020 to set up a non-lapsable modernisation fund, the SCoD has taken it upon itself to somehow make this work. This is despite the myriad of inherent obstacles in this endeavour, the biggest being the magnitude of the expected shortfall in the budgetary allocation.

The Finance Commission’s report indicated that the gap in the defence budget between the estimated requirement and allocation could be around Rs 2.81 lakh core in FY 2022-23, increasing to around Rs 3.54 lakh crore by FY 2025-26. The shortfall in the capital outlay alone, which caters for the expenditure on military modernisation, is expected to be over Rs 1.62 lakh crore in FY 2022-23, rising to Rs 1.76 crore in FY 2025-26.

The SCoD has suggested creating a corpus of Rs 2.38 lakh crore – including Rs 50,000 crore for internal security – over five years, ending in FY 2025-26, with magnanimous transfers from the Consolidated Fund of India. Despite, however, being aware of the magnitude of the problem, the SCoD chose not to examine how the proposed non-lapsable fund would help the MoD tide over the anticipated shortfall of Rs 15,24,100 crore between FY 2021 and 2026. 

Fanciful ideas propagated by the SCoD, often couched in arcane terminology, cannot resolve the fundamental and perennial financial resource crunch. In one instance, for example, the committee states that, “…in the present scenario of conflict with our neighbouring countries, especially at borders of our country, such situation is not conducive for preparation of the country to bring it at par with them or making it even better than theirs by possessing capital intensive modern machines which are imperative to tilt the result of war in our favour and also increase deterrence capabilities of our country (sic).”

Such obscure and bewildering declarations, which are repeated throughout the reports, remain unworthy of the country’s prestigious parliamentary defence committee. It is difficult to comprehend the laboured and, at times, highly abstruse verbosity in the committee’s reports. The harsh reality is that no one in the government, least of all the SCoD, has a clue about how adequate revenues can be generated to meet the competing demands of the country’s defence and other sectors. The SCoD seems to add little value to this knotty discourse on the defence budget.