Parrikar approves Rs 25,000-cr projects despite crunch

Defence Minister blames AK Antony for poor fiscal management

Parrikar approves Rs 25,000-cr projects despite crunch

Defence Minister Manohar Parrikar on Thursday approved military projects worth Rs 25,000 crore at a time when the ministry’s internal financial calculations suggest that there is little money to ink the commercial contracts.

In the last financial year, less than 10 per cent of the ministry’s capital budget was spent in buying new military hardware as 90 per cent of the money was spent on committed liabilities, which refers to payments made for deals inked in the past.

The Defence Ministry’s own assessment for 2014-15 shows that out of Rs 66,560 crore that the government spent on capital acquisition for the Army, Navy, Air Force and Joint Staff, just about Rs 5,400 crore was used to buy new wares whereas more than Rs 61,000 crore was spent on committed liabilities.

When procurement for other agencies like Defence Research and Development Organisation and ordnance factories are taken into account, the figures for committed liabilities went up by several thousand crores more.

The current trend of fund shortage for new projects was continuing for the last few years.
Parrikar is well aware of the problem. He blamed his predecessor A K Antony for poor fiscal management.

“In the past, whatever came in the Cabinet Committee of Security notes was approved without taking into account the financial implications,” the defence minister said in a recent interview. Parrikar claimed to have improved the system.

“At the end of five years, the committed liabilities would come down to around Rs 38,000 crore,” he said, making it clear that he would be having more money for signing new projects towards the latter half of his tenure.

Notwithstanding the financial difficulties, the Defence Acquisition Council (DAC) under Parrikar on Thursday approved projects worth approximately Rs 25,000 crore to purchase artillery guns from the US, transport aircraft from Europe, military choppers from Russia and more Brahmos missile systems for naval warships. In the last two months, the DAC cleared projects worth more than Rs 45,000 crore.

Those received approvals include a Rs 11,930-crore bid of a Tata-Airbus consortium to make transport aircraft for the IAF; acquisition of 145 of M777 ultra-light weight howitzers from the US under a government-to-government deal and manufacturing Russia’s Kamov Ka-226T helicopters in India. However, it may take years before commercial contracts are signed as each of these projects have to be approved by the CCS after negotiations are completed.

The DAC approval marks just the beginning of the dialogue process between the defence ministry and the vendors.

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