The Defence Ministry is expected to return Rs 12,500 crore from its 2024-25 budget due to not fully using the funds allocated for capital acquisition. This comes as the ministry’s budget for 2025-26 rises to Rs 6.81 lakh crore, marking a 9.53 per cent increase from the previous year.
The main reason for the underutilisation of funds is the slow and complex defence procurement process, which causes delays.
Out of the Rs 6.81 lakh crore allocated for 2025–26, Rs 1.8 lakh crore is set aside for capital expenditure, including Rs 1.48 lakh crore for modernising and acquiring essential defence equipment. However, the modest 4.65 per cent increase in capital allocation has raised concerns due to inflation and currency fluctuations.
The remaining Rs 31,277 crore is allocated for Research & Development and infrastructure development, with Rs 1.12 lakh crore earmarked for procurement from domestic industries under the Atmanirbhar Bharat initiative.
Two major deals worth over $10 billion are likely to be concluded by the end of the fiscal year, which includes the procurement of 26 Rafale-M fighter jets and three additional Scorpene-class submarines from France. These deals are expected to coincide with Prime Minister Narendra Modi’s upcoming visit to Paris in February 2025.
The Rafale-M jets are critical for bolstering India’s naval capabilities. Additionally, the Army is set to finalise the procurement of 307 Advanced Towed Artillery Gun Systems (ATAGS) valued at Rs 8,000 crore.
While the armed forces grapple with procurement delays, the Indian Coast Guard (ICG) has received a significant boost in its allocation. The ICG’s budget has increased by 26.5 per cent, with a sharp 43 per cent rise in its capital outlay, which now stands at Rs 5,000 crore.
The additional funds will be used to acquire Advanced Light Helicopters, Dornier aircraft, fast patrol vessels, training ships, and interceptor boats, enabling the ICG to enhance coastal security and respond more effectively to emergencies, according to officials.
To streamline procurement, the government has started consolidating capital expenditures for the three armed services under a single framework. This unified approach aims to cut down on redundancies and boost efficiency in acquiring critical assets like land, aircraft, aero-engines, and heavy vehicles.
However, the ongoing issue of unspent funds raises concerns about the procurement process’s effectiveness. Delays in acquisitions are often caused by bureaucratic obstacles, complex procedures, and long negotiations.
With important deals and reforms ahead, the Ministry of Defence faces the challenge of tackling delays while ensuring the effective use of the increased funds to strengthen India’s defence capabilities in a rapidly changing security landscape.
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