In Para 86 of Finance Minister Arun Jaitley of his 17,997-word-long speech, he stated that “Defence of every square inch of our motherland comes before anything else. So far, we have been overdependent on imports, with its attendant unwelcome spin-offs. Our government has already permitted FDI in defence so that the Indian-controlled entities also become manufacturers of defence equipments, not only for us, but for export. We are thus pursuing the ‘Make in India’ policy to achieve greater self-sufficiency in the area of defence equipment, including aircraft. Members of this august House would have noted that we have been both transparent and quick in making defence equipment related purchase decisions, thus keeping our defence forces ready for any eventuality. This year too, I have provided adequately for the needs of the armed forces. As against likely expenditure of this year of 2,22,370 crore (about $36.5 billion) the budget allocation for 2015-16 is 2,46,727 crore ($40.4 billion).”

In his about 1,500 words shorter speech in 2014 Arun Jaitley had expressed similar sentiments like there will be no compromise on defence of the nation and also mentioned one rank one pension (OROP), modernisation, war memorial and a 100 crore allocation to set up a Technology Development Fund to support R&D by private institutions and companies. In the current speech the focus has been ‘Make in India’ however a ‘action taken’ report has been also been tabled in which progress on OROP, modernisation, war memorial, defence production including Technology Development Fund has been given as ‘work in progress’.

Number Crunching

Overall allotment. The allotment for 2015-16 is 2,46,727 crore ($40.4 billion) as against 2,29,000 crore (about $37.5 billion) last year and the expenditure was only 2,22,370 crore (about $36.5 billion) thus the allotment is about an increase of 10 per cent but still remains under 2 per cent of the GDP. It is understood that the additional funds have been given for OROP and for any contingency.

Revenue Budget

Army. Demand number 23 gives out the revenue budget for the Army. An allotment of 1,04,158.95 crore (about $16.79 billion) has been made as against the revised estimates of 98,310.79 crore (about $16.1 billion) of last year. Army gets the largest share due to its size.

Navy. Demand number 24 gives out the revenue budget for the Navy. An allotment of 15,525.64 crore (about $2.5 billion) has been made against the revised estimates of 13,935.79 crore (about $2.28 billion) of last year. There has been a marginal increase in the allotment.

Air Force. Demand number 25 gives out the revenue budget for the Air Force. An allotment of 23,000.09 crore (about $3.7 billion) has been made against the revised estimates of 20,185.86 crore (about $3.3 billion) of last year.

Demands for Ordnance Factories and DRDO are included in demand numbers 26 and 27. Indian Coast Guard is included in the MoD demand number 21 which also includes both revenue and capital for other organisations which are part of the Ministry of Defence (MoD).

Capital Budget. Demand number 28 gives out the capital budget which is utilised for modernisation. The overall allotment is 94,588 crore (about $15.5, billion) as against the revised estimates of 81,965.24 crore (about $13.4 billion) of last year. A marginal increase of about $2 billion which does not amount much when seen in the light of that a similar amount of 12,622 crore (about $2 billion) was unspent last year. The capital allocation also includes funds for land and construction apart of other expenditure. Details are give in succeeding paragraphs.

Army. For aircraft & aero-engine 2,365.35 crore as against the revised estimates of 2,323.55 crore of last year. For heavy and medium vehicles 1,783.83 crore against revised estimates of 1,783.61 crore of last year. For other equipment 17,335.22 crore as against the revised estimates of 12,548.84 crore of last year.

Air Force. For aircraft & aero-engine 18,866.01 crore as against the revised estimates of 21,461.39 crore of last year. For heavy and medium vehicles 233.42 crore as against revised estimates of 67 crore of last year. For other equipment 12,382.09 crore as against the revised estimates of 10,289.50 crore of last year.

Navy. For aircraft & aero-engine 3,466.08 crore as against revised estimates of 3,310.72 of last year; which is a marginal increase. For heavy and medium vehicles 11 crore as against revised estimates of 8 crore of last year (in any case Navy does not need many such vehicles). For other equipment `2,558.64 crore as against revised estimates of 3,696.92 crore; a decrease of about 1,100 crore. The major share for modernisation budget goes for the naval fleet with an allocation of 16,049.87 crore (about $2.58 billion) as against the revised estimates of 9,398.34 crore of last year. This is a major increase by about 70 per cent which will be used for part payments of past and future modernisation schemes. Details are covered elsewhere in this article. For Naval Dockyards 12,75.31 crore as against the revised estimates of 661.26 crore of last year. The allocation has almost doubled this year and is utilised for the upkeep and modernisation of naval dockyards.

Analysis of Navy’s Capital Budget

The total capital budget for modernisation (aircraft and aero-engines; heavy and medium vehicles; other equipment and naval fleet) comes to 22,084.72 crore (about $3.56 billion) which comes to just about 20 per cent of the overall capital budget.

Aircraft and Aero Engines. The main contender under this head will be Naval Multi-role Helicopter Sikorsky Seahawk S-70B for which the government has already cleared 16 helicopters. The process for the acquisition is likely to start soon on a fast track basis and the delivery would start three years after the contract is signed. The other requirement which has been hanging fire for long is for a amphibian aircraft for which US-2 ShinMaywa is a strong contender but it was reported that in the last Defence Acquisition Council (DAC) meeting, the issue was pended for further discussion. The requirement is for 18 aircraft and this may be one of the first ‘Make in India’ projects jointly with Japan. One of the ongoing projects is naval version of the Hawk advance jet trainer. The Navy has already acquired four of them and the total requirement is of 17. The aircraft are being built by the Hindustan Aeronautics Limited with transfer of technology from British Aerospace, UK. The other ongoing project is Multi-mission Maritime Aircraft P8I, final two out of a total of eight Boeing P8I, will be delivered this year and India has yet to decide on the requirement of additional four aircraft. India is also in need of eight medium-range maritime reconnaissance aircraft for which an RFP was floated in 2013. The other requirements are of additional multi-role helicopters and light utility helicopters, acquisition process of all these would probably follow in an progressive manner in successive budgets.

Naval Fleet. This head covers the modernisation of the key element of the Navy i.e. the Naval Fleet. As per the press conference given by the CNS for the Navy Day 2014, he stated that about 41 elements including ships, submarines, aircraft carrier and fast attack boats were presently under construction. At present the indigenous INS Vikrant is undergoing fitment and integration of various systems, and is planned to be delivered by end 2018. The Cabinet Committee on Security has approved the indigenous construction of seven stealth frigates and six nuclear-powered submarines at a cost of about $16 billion during February this year. This is a bold step towards building a blue water navy which will be able to look after India’s interest in the Indian Ocean region and wherever it is required in the future. The seven stealth frigates will be built under Project-17A. Four will be build at the Mazagon Dock in Mumbai and three at Garden Reach Shipbuilders and Engineers in Kolkata. Apart from this, the DAC has cleared 12 mine countermeasure vessel (MCMV) to be built at Goa Shipyard Limited (GSL). MCMV project is aimed at building specialised vessels for the Indian Navy as per ‘Make in India’ initiative. GSL will build the ships under transfer of technology with the foreign vendor in a deal worth about 32,000 crore (about $5 billion).

Indian Coast Guard. The Coast Guard has been allocated 1,200 crore ( 1,140 crore in the revised estimates last year) for the acquisition of ships like advanced offshore patrol vessels, inshore patrol vessels, fast patrol vessels, helicopters, aircraft etc. to bolster their coastal security capability.

Naval Dockyards. The allocation has been almost doubled this year to cater for their upkeep and modernisation.

Conclusion

The modernisation of the Navy is on a steady keel and way ahead of the Army and the Air Force. The successful conclusion of the 41 ships of all types including submarines, aircraft carrier and fast-attack vessels, which are under construction, the induction of P8I, finalisation of the 16 Sikorsky Seahawk S-70B helicopters, decision on US-2 ShinMaywa amphibian aircraft, initiating the process on stealth frigates, nuclear-powered submarines and MCMV, will itself require best practices in management skills, building of matching infrastructure and regular flow of funds. Navy will have to gear up its training and maintenance so that expensive and sensitive hardware of warships, submarines, aircraft carriers and aircraft are handled with dexterity, efficiently and safely to take its rightful role as one of the leading navies of the world.