Modernization of the Armed Forces is a continuous process based on threat perception, operational necessity, technological changes but the capital allocation has been inadequate to address the needs of the Armed Forces.

Although the Indian defence services have drawn up elaborate plans for modernizing and upgrading their capabilities, however, the pace of modernization has been slow. The reason for this laid-back approach to military modernization is majorly because of the shortage of funds on the capital account for major new defence procurements. While other reasons include, inability to spend even the allotted funds, slow decision making and the lack of a robust indigenous Defence Industrial Base (DIB). In this context, a recently submitted report to the Parliamentary Standing Committee bringing out the fact that the Indian Armed Forces - primarily the Indian Army and Coast Guard - are lacking adequate money to buy even operationally critical equipments/weaponries substantiates this fact. This is due to the fact that the hike in the modernization budget allocated to defence services in 2015 is very low and will be able to cover maintenance and salaries and committed liabilities for past purchases only.

At present, India's defence budget is pegged at 1.75 percent of its GDP with the bulk of the expenditure is spent on the revenue account which basically includes pay and allowances, rations, fuel, oil and lubricants, ammunition, and vehicles and rest is spent on capital acquisitions. Each year, equipment modernization is blunted by predictable events; the same patterns dealing double and triple whammies to capital spending. Firstly, contracts concluded during preceding years build up installments that must be paid, and which are known in advance. But capital allocations have ignored this trend, leaving less and less each year for new weaponry. Taking into account the amount allocated every year for capital budget and deducting an amount (around 20 percent) to be utilized on other-than-capital acquisition and another amount (around 80 percent) to be utilized for 'committed liabilities', hardly much (around 10 percent) is left in the capital account to be spent on modernization/new acquisitions. This is primarily the reason why India's military modernization has been languishing. In the year 2014-15, there were committed liabilities of nearly Rs 70,000 crores, which left only Rs 5,400 crores for new acquisitions. As for the 2015-16, considering the cut in the capital budget this year, it is understood that not much amount will be left for new procurements. Rather the current fiscal's allocation is not even sufficient enough for the already contracted defence deals.

Further, the Parliamentary Standing Committee on defence in its report presented to Parliament last April stated that there has been a “steady decline” in the number of defence contracts signed during the 11th five-year plan period. However, an increase was witnessed in the fiscal 2014-15 with the Government signing about 83 contracts for capital procurement of defence equipment for the three services. But these were not major deals or big ticket items procured but only small contracts. Since over 90 per cent of the capital allocation is pre-committed towards committed liabilities, thus, there was not substantial funding left for big-ticket purchases. Consequently, till date, several crucial procurement proposals are languishing through the labyrinthine procurement procedures and are waiting to be inked. Refer Table and Graph.



Over a decade the Indian Army's efforts to modernize have been put on hold due to lack of adequate budgetary support and timely decision making. Army acquisitions are focused on building new capabilities as well as making up deficiencies in the inventory. While the Army has drawn up elaborate plans for modernization and qualitative upgradation of its capabilities, the pace of modernization has been rather slow due to the lack of adequate funding support coupled with a large portion of the funds allotted on the capital account is surrendered year after year due to bureaucratic red tape and timely decision making. Spending on modernization (new schemes) is as little as 25-30% of total capital expenditure.

The army has identified a list of at least 20 critical projects that it wants to ink which are at an advanced stage of procurement like 2 x Pinaka Regiments, BrahMos 4th Regiment, Weapon Locating Radar, Milan 2T Missiles, 3rd Generation Anti Tank Guided Missiles, Hand Held Thermal Imager with Laser Range Finder, Ammunition for 84mm Rocket Launchers Mark-III, Medium Range Surface to Air Missiles, Advanced Light Helicopters, Maintenance Reserve and Strike Off Wastage (MR&SOW), 155mm/52 Calibre Tracked Self Propelled Guns, Close Quarter Battle Carbines, etc.. However, none of these are expected to fructify with such a paltry allocation; further hampering the modernization attempts of the Army which is in dire need of new weaponries.

One of the reasons that can be attributed to this current situation is that there has been a continuous and huge gap between the projected requirement of the Army and the allocations made to it. Details regarding the projections by the Army, allocations, for capital budget are as follows:-


The Ministry in the past has been claiming that all is well with the Army with regards to its procurement process, however this seems to hold no ground with the Army in need of acquiring several most critical procurement schemes to contribute for enhancement of their combat power in fast track mode. In 2012, the Indian Army shortlisted around 680 projects worth Rs 2,00,000 crores to materialize in the 12th plan. Out of these, around 30 were identified as critical which included Wheeled Guns, Tanks, Missiles, Artillery Ammunition, Assault Rifles, Night Vision Devices, and Bullet Proof Jackets. However, till date these contracts remain urgent with no major deal getting inked owing to meager allocation year on year. On the backdrop of this insufficient allocation trend, the buying of equipments by Army till date are relatively low in priority like electro-optic systems, simulators, missile warning systems. While, on the other hand, the priority based defence items/weaponries programmes still till date remains to see the light of the day. The requirement is to seriously look into this aspect and provide sufficient allocation at the time of revised estimate stage under capital head and new schemes.

Though some major contracts has been concluded during the 11th Plan and first two years of the 12th Plan, nevertheless, this is just a small beginning keeping in view the obsolete weaponry with Army.

  • UAV Heron
  • BRAHMOS Missile Systems
  • Project Shakti
  • Additional T-90 tanks
  • Advanced Light Helicopters
  • KONKURS Missiles
  • Radio Sets STARS V 25W
  • BLT T-72 Tanks Chassis
  • T-90S/SK Tanks
  • 3D TC Radar
  • Akash Missile Systems
  • Automated Battlefield Surveillance System (Project SANJAY Ph-II)
  • Armoured Recovery Vehicle
  • 3 UBK Invar Missiles
  • 125mm APFFDS AMK for T-90
  • Night Vision for T-72

Statistics show that very little amount was allocated to the Army for modernization during the years 2007-08 till 2013-14 respectively and that too for the last two years it is on the decrease. Another aspect that needs to be considered that has hampered the acquisition process of Army is that during all these years the modernization budget of the Army has remained under-utilized in a row except for the year 2007-08. But this is due to the fact that the Ministry has not planned spending of the Army properly otherwise surrendering of the funds could have been avoided. A thorough review of LTIPP, SCAP and AAP should be undertaken for optimal utilization of funds. Higher allocations should be provided for modernization of Army so as to make it a force to reckon with. Details of outlay allocated and spent for modernization of the Army during the Eleventh Plan and Twelfth Plan and the underutilized amount are as given below:



The modernization similarly is likely to get adversely impacted. For the coast guard, the lack of funds this year is going to effect to such an extent that the budget allocated will go only in payments of commitments made last year. This is likely to impact the deals in pipeline, such as 16 Sea Shore based Helicopters and 14 Twin Engine Heavy choppers, 5 Offshore Patrol Vessels and 5 fact patrol vessels. All these deals are expected to cost around 5000 crores. With the current allocation of this year budget which is Rs 1200 crores the ICG can hardly ink any major contract.

Previously the allocation of budget to Coast Guard, under Capital head has been insufficient to carry out the planned acquisition of Aircraft, Vessels, Costal Stations, Chain of Statics Sensors, Land & Berthing facilities. Projection and allocation of budget for the last five years is as follows:


The need of the hour is long-term planning for modernization and to supplement it with committed funding. In mid eighties the defence plan with matching resource allocation were formulated, resultantly achievement of planned targets was to the desired level. Since then the five-year plans had no assured funding but allocations based on annual budgets, due to long lead times in projects from concept to delivery and most failed to fructify in time. If the plans continue to be made on the basis of unrealistic assumptions about the resources likely to be available for defence and little attention is paid to financial management in defence, the country will forever remain entwine in a simple equation mismatch between projection and allocation.

Kavita Nagpal

Kavita Nagpal

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