PROGRAMME

Inaugural Session: (9.30-10.00 AM)

• Opening Remarks: Sh NS Sisodia, DG, IDSA
• Address: Sh VK Misra, Distinguished Fellow, IDSA
• Key Note Address: Smt Nita Kapoor, Secretary, Defence Finance, Ministry of Defence

Tea (10.00-10.30 AM)

Session-I: (10.30-12.00)

• Chair: Sh AK Ghosh
• Speaker: Sh. TK Pandey, JS ( Admn./SP) & Adviser(FR), Planning Commission – Conceptual Framework and Experience Sharing on ZBB by Planning Commission
• Speaker: Dr Sanjeev Mishra, Chief Controller of Accounts, Ministry of Home Affairs - Experience sharing & How to go about Formulation of Outcome Budgeting in the Context of Defence

Session-II: (12.00-1.30 PM)

• Chair: Sh Amit Cowshish
• Speaker: Sh SK Jain, Office of DG MAP - Experience Sharing in Outcome Budget Preparation in MAP
• Speaker: Sh R Pandit, Dir (Fin), HQ DG (NCC)- Experience Sharing in Outcome Budget Preparation in NCC
• Speaker: Capt Gaurav Gautam & Lt Cdr KA Sureshan- Experience Sharing in Outcome Budget Preparation in Naval Dockyards

Lunch: 1.30-2.15 PM)

Session-III (2.15-3.15PM)

• Chair: Sh. VK Misra
• Speaker: Gp Capt LK Chawla, Dir (PP), Air HQ - Outcome Budget in the Context of Manpower
• Speaker: Air Cmde SK Mairal, Fin Plan, HQ IDS - Outcome Budget in the Context of Stores/Projects

Session-IV (3.15-4.00 PM)

Panel Discussion: Actionable Points for MoD/Services
Participants: Sh VK Misra, Sh Amit Cowshish, Reps of Fin Plan Dir of Services

Tea: 4.00 PM

CONCEPT NOTE

The present defence budgeting in India largely follows the input/incremental approach, where allocation to various services and departments are made on the basis of previous year’s allocation with minor incremental adjustments. This incremental system is however not an efficient one as it has the potential to lead to unrealistic allocation of resources, without going into cost-benefit analysis of each programme for which resources are made available. It also does not link the allocation of resources with outcome it aims to achieve. Various oversight agencies, particularly the Standing Committee on Defence has emphasised the need for more effective methods of budgeting, especially Zero Based Budgeting (ZBB) and Outcome Budgeting.

Zero Based Budgeting, which was first introduced in early 1960s in the US Department of Agriculture, is a tool which facilitates “identification and sharpening of objectives, examination of various alternative of performing identified tasks, cost-benefit analysis, prioritisation of objectives and activities, identification and elimination of redundant activities and designing and ranking of decision packages.” In other words, the ZBB facilitates elimination of redundant expenditure, removing duplication of expenditure, finds a better way of spending money to achieve the objectives and optimises expenditure by making it productive and efficient. Although the 1960s experiment was not so successful due to the erroneous assumption (that all programmes were necessary) and lack of time for preparation, it later became a successful tool When President Carter introduced it for the whole US Federal Government in the year 1979.

The success of ZBB however lies in adoption of a sound methodology, which focuses on the following four key processes: 1.identification of decision unit; 2. formulation and development of decision packages; 3. evaluation and ranking of decision packages in order of priority; and 4. preparation of budget by allocation of resources to activities or decision packages by utilisation of hierarchical funding cut-off levels.

Recognising the importance of ZBB, the Ministry of Finance introduced it in all the Ministries and Departments via a letter dated 10th July 1986. The said letter required them to adopt ZBB, although a separate document for presentation to Parliament was not envisaged. The intention was to avoid the lengthy process of paper work involved in ZBB. It was envisaged however that the result of the ZBB exercise can be reflected in the Performance Budget so as to increase its usefulness.

To move towards a visible and outcome-oriented budgeting, the Ministry of Finance (MoF) since 2005 has issued guidelines, emphasizing the linkage between financial budgets, and actual and targeted performance of outlays. The guidelines task the central Ministries/Departments to articulate, among others, a list of major programmes/schemes and the goals and policy framework guiding them. The main objective of the exercise is to “establish one-to-one correspondence between (financial) budget … and Outcome Budget…” However, the Ministry of Defence (MoD), along with 30 Ministries/Departments has been exempted from preparing outcome budget. The exempted Ministries/Departments are however advised to prepare outcome budget for internal use and voluntarily decide the extent to which the general public can have access to it.

In the above context, the MoD has taken some initiatives, by way of formulating Defence Services Estimates, Vol. II, and making it mandatory for some of its institutions to prepare the outcome budget. The DSE Vol. II, which at present is meant for “internal use” falls short of the parameters laid down by the MoF, for preparing the outcome budget. It merely expands the item- or head-wise allocations made in DSE and, in addition, provides “Budget holder-wise summary sheets.” It does not link the financial outlays with the intended outcomes.

In the above background, the proposed Workshop on Zero Based Budgeting and Outcome Budgeting proposes to provide a platform to discuss and debate issues pertaining to ZBB and Outcome Budgeting. The Workshop would address the key areas of concern and bridge the knowledge gap on the subject. It will bring together policy makers, practitioners, Armed Forces, and experts for a brainstorming day-long discussion.

Lecture delivered by: Professor Sunil Khilnani

Topic: The Great Power Game: India in the New World

Speakers: Cdr. S.S. Parmar, Mr. R.D. Pradhan, Mr. N.S. Sisodia, Mr. K. Subrahmanyam

IDSA in collaboration with Yashwantrao Chavan Pratishthan (Mumbai) hosted the inaugural lecture in memory of Mr. Y. B. Chavan on 22 November 2010. Professor Sunil Khilnani delivered the special lecture on The Great Power Game: India in the New World. The Institute was privileged on the occasion by the presence of Mr. K. Subrahmanyam, Mr. R. D. Pradhan, and Mr. Ajit Nimbalkar from the Yashwantrao Chavan Pratishthan at the inaugural Y. B. Chavan Memorial Lecture.
The Y.B. Chavan memorial lecture has special significance for the Institute keeping in view that Mr. Chavan was the founding President and patron of IDSA.

Brief Overview

Mr. Y.B. Chavan was born in the state of Maharashtra on March 12, 1913. He spent many years in jail as a freedom fighter and played a major role in the 1942 Quit India movement. Following India’s independence, he was appointed Parliamentary Secretary in 1946 and rose to become Chief Minister of the bi-lingual State of Bombay. In 1960, he became the first Chief Minister of the newly created state of Maharashtra. He was requested by the then Prime Minister Mr. Jawaharlal Nehru to become the Defence Minister in 1962. Subsequently, he held the offices of Union Home Minister from 1966 to 1970, Union Finance Minister from 1970 and Foreign Minister from 1974 to 1977. He was also the Chairman of the 8th Finance Commission. In memory of Mr. Chavan, the Yashwantrao Chavan Pratishtan has given a corpus to the IDSA to hold an annual eminent persons’ lecture series.

Inaugural Remarks by Mr. N.S. Sisodia

Mr. N.S. Sisodia, Director General IDSA, in his opening remarks pointed out that Mr. K. Subrahmanyam’s perseverance to honour Mr. Y. B. Chavan led to the Trust granting an endowment enabling IDSA to institute the eminent persons’ lecture series, with significant support from Mr. R. D. Pradhan and Mr. Ajit Nimbalkar who is on the Trust Board. Mr. Chavan is remembered as a multifaceted personality, who was not only an eminent freedom fighter but also a visionary defence minister and an intellectual of a certain merit and repute. Most importantly, the Director General observed that Mr. Chavan, along with others who were closely associated with the founding of the Institute, was remarkable in his awareness of the value of promoting independent thinking within a government funded institution; the primary objective of the functioning of such an institution should be to provide an alternative or critical view, in order that the government’s policy making process is enriched and informed. A large part of the reputation that the IDSA holds today can be traced back to Mr. Chavan’s championing of the autonomy of the institute in its formative years.

Remarks by Mr. R. D. Pradhan

Mr. R. D. Pradhan shared with the guests his interactions with Mr. Chavan and how the birth of the IDSA was initiated. He expressed his delight at the journey that IDSA has made over the past 45 years. He conveyed his best wishes to all the Trustees, including the Chairman, Mr. Sharad Pawar, and also his gratitude to IDSA for organizing the lecture. He expressed the hope that IDSA would continue the tradition of holding this lecture annually, and his appreciation to Professor Khilnani for delivering the lecture and to all those who were in attendance at this event.

Y.B. Chavan Memorial Lecture: Professor Sunil Khilnani

Professor Sunil Khilnani, Starr Foundation Professor, Director of the South Asia Studies Program at the Paul H. Nitze School of Advanced International Studies, the Johns Hopkins University, and author of the widely acclaimed book The Idea of India, delivered the inaugural Y. B. Chavan memorial lecture at the IDSA on The Great Power Game: India in the New World. The primary question that Professor Khilnani proposed to address in the lecture centred on his views on a realistic future for India – Is India likely to become a major power in the next few decades? What kind of role should India aspire to in the changing power game of a globalized world? What would India’s actions mean both for India and the world?

In the last two decades, India has been on a rapid economic rise, with its relative lack of dependence on exports and a highly regulated financial system moderating the effects of the global economic recession. Professor Khilnani noted that although India’s business and political elites see economic performance as forming the core of the country’s global identity, this growth has unevenly affected Indian society, causing widening social and regional inequalities, and creating political tensions. This newfound and growing self-confidence is pursuant to the fact that India’s international ambitions have always been exceptionally immodest, and derived not only from the nation’s vast human scale and civilizational depth, but also from a deeply held political vision that views India’s future as being shaped by the legitimacy of its choices and actions. In his analysis, modern India has viewed itself above all as a political project that struggled to realize itself through human skill and judgment, rather than assuring its future by entrusting itself to economic or military prowess, to an ideology or to historical providentialism. Tagore, Gandhi, and Nehru’s long-term vision for India, Professor Khilnani pointed out, embodied the German historian Reinhart Koselleck’s idea of ‘imagined futures’ – their sense of India’s present, and of the past causalities that had created the present, which in turn was shaped by what they believed India’s future would look like. Even if this vision of India’s future differs from the one imagined today, in Professor Khilnani’s belief, there would still be elements of past conceptions on India’s future that have force and relevance.

The United States, Europe and China as players in the Great Power Game

In analyzing the role of the United States (US) in this power game, Professor Khilnani noted that the increasing US attention to India is reflective more of an American realization of the fragility of Western power rather than American hopes for India. Indeed, much of the US’ current valuation of India relates mostly to the volatility of the issues faced by Pakistan, and to China’s rise to superpower status. India is thus seen as a counter-China; being a democratic, educated, technologically smart and entrepreneurial country with an English speaking elite, India is seen by the US as the more persuadable, more amenable partner. In the larger frame of the power game, America’s stance as a great power is unlike that of, for example, Britain at its imperial eminence – the US is dependent on less powerful states to sustain its economic prosperity; it imports goods, capital and people to maintain economic momentum. Of significance here is that this interdependence (that is increasingly becoming a characteristic of modern forms of power) hinges on mutual confidence, trust and consequently, legitimacy – in Professor Khilnani’s words, the capacity to sustain belief not just within but across borders. The US’ projects in Iraq and Afghanistan have forced it to delve into a damage-repair mode, but, he noted, the projection of great power, and the urge to dominate that it requires, continues to form the core of America’s global identity.

No longer the central arena of the great power game, Europe is seen as confused and uncommitted on questions of security. With its inward-focused, conservative and protectionist stance, Professor Khilnani predicts that, Europe will be hampered from playing as important a role as it could have otherwise. It has been slow in realizing the changing nature of power in the rest of the world, and how the ‘theatre of the great power game’ has moved away from Europe, and into Asia.

This shift has been ensured by China’s economic rise. Professor Khilnani noted that this rise has been based on profound economic integration with the rest of the world, and particularly with the US. Also possessing the largest military in the world, and the second largest defence budget, China poses a deep conundrum for the world, especially for America. But even as the US works to maintain its engagement with China, the American defence establishment has been attempting to coax India into acting as a buffer against China. He pointed out that with Japan’s stagnation and inability to give its enormous wealth any real meaning in the global arena, India has acquired new importance for the US. India shares America’s uncertainty about China on the economic and military fronts; moreover, China is also spreading its influence among India’s neighbours. Dr. Khilnani emphasized that even as India’s relationship with the US strengthens, it is crucial for the country to ensure its capacity for independent political judgment – a feat China has already demonstrated. A possible prescription for Indian policy makers, that Professor Khilnani identified, is that the pattern of aligning temporarily according to shifting global and regional interests rather than forming stable and permanent alliances is likely to persist; his belief is that it would not be in India’s interests to be drafted into US contingency plans against China.

India and its neighbours in the Great Power Game

Professor Khilnani also pointed out that India’s geographical location places it in the middle of the world’s most menacing regional environment. Internal conflicts in countries like Nepal, Sri Lanka, Burma and Bangladesh pervade India’s own domestic security, threatening its political and social peace, in addition to its economic prospects. Most importantly, in imagining its own future, he believes that India needs to consider Pakistan’s future as well. The results of the American response to Pakistan’s instability has been disastrous not just for Pakistan but for India as well. Professor Khilnani proposes that India will need to devise a more creative approach to engaging with Pakistan on its own terms; the alternative for India would be to suffer the vagaries of other powers’ policies.

Afghanistan is the other front on which India needs to adopt independent action. This becomes a pressing need when taken into account that neither the US nor the Europeans have clear or deliverable plans for an exit strategy for Afghanistan. Regional stability is crucial for India to maintain its growth path; a return to the 1990s when Afghanistan became a marshalling ground for violence against India would spell an exacerbation of wider regional insecurity for India. Professor Khilnani suggested that the depth of the crises in these neighbouring societies impedes Indian intervention in resolving the crises, but it will not be able to take a disengaged stance either (as it did, for example, during the power games of the Cold War). India’s mitigation of these battles will determine its own national course.

India’s stakes in the Great Power Game

Professor Khilnani pointed out that India has more options now than it once had to decide what kind of power to pursue. In the years following India’s independence, India devised an alternative definition of power – a negative conception, in Nehru’s words. This definition was a stance of resistance based on Gandhi’s conviction that apparent weakness could transmute into strength. Nehru turned this strategy (with which India fought down the world’s largest empire) into a principle for international policy. Professor Khilnani believes that Nehru’s strategy was not purely idealistic (or ineffective), but was rooted in a realistic assessment of India’s weakness; indeed, it enabled India to achieve a degree of autonomy and of audibility that was considerable relative to both its own meagre resources, and to the constrained circumstances of a polarized world. Although India now has the opportunity to enhance its military power (drawing from its rising economic profile), he suggested that India will not be able to mimic conventional Western power in military or economic terms. India neither can nor should allow the type of military power it will need to secure itself regionally, nor its rising economic profile, to determine the larger power it seeks.

Professor Khilnani takes the view that India will be an unusual, awkwardly shaped global actor – it will have a relatively wealthy state but that state will preside over a predominantly poor citizenry. He noted that in the past, poor populations generally had poor states, whose claims could be dismissed by richer, more powerful states; with the emergence now of China and India, very large populations are becoming significant world actors, through their representatives (although selected in diametrically opposite ways). Professor Khilnani pointed out at least two areas where India can leverage its growing global clout – one is to inject the interests of the poor into international negotiations, and the second, in matters of international trade, access to natural resources, and the environmental effects of economic growth, to attempt to work out a more inclusive globalization. In this respect, India is now well positioned to disrupt the status quo. Professor Khilnani’s emphasis lies on his belief that the old approach – the negative power, of refusal – will no longer do. The global climate change negotiations at Copenhagen was a chance, in his view, to demonstrate India’s ‘most prudent future formulation of power’; though India will not be a superpower very soon in terms of military or economic bulk, its legitimacy in the eyes of the world is a form of power in itself. He stressed that if India desires to have an impact on the international system, it must take advantage of the mixed character of its own power, in order to combine force and legitimacy into a new conception. Does the India of today have to exert to even stay relevant, owing to its search for historical signposts to becoming a global power? In addressing such a question, Professor Khilnani observed that there are no examples of the kind of role India can play, but by drawing on its experiences, India could invent a role for itself; part of what it takes to be a great power is the capacity to redefine what power and greatness are (as Gandhi did for another era), rather than only conforming to existing definitions.

Professor Khilnani’s assessment is that confronting all the challenges facing India will require the country to develop complicated positions and flexible practices. On contemporary issues and debates, India would find itself well placed to be a ‘bridging’ power. For example, its position between the US and China would allow it to play not a balancing-power role but a bridging one. Also, in addressing increasing security issues as a result of multiple terrorist attacks, although this is a concern India shares with Western states, it has refused to see the rhetoric of Islam as an existential threat – this is a significant position to bridge the so-called “clash of civilizations”, helping to connect Muslim and non-Muslim societies. Most significantly, Professor Khilnani noted that India sees democracy not as the ‘providential destiny of all human history’, but as a complicated, fragile experiment, that can possibly act as a bridge through which other societies can figure out their freedom and move towards it. He hoped that the conception he left from this address is a realistic recognition of the persistence of division and conflict, while also adopting a realist assessment of the limits to the utility of force or of economic progress in itself to resolve these; above all, this conception trusts in human political skills, wit and judgment.

Remarks by Mr. K. Subrahmanyam

In his closing remarks, Mr. Subrahmanyam stated that he saw this event as a thanksgiving to Mr. Y.B. Chavan. He pointed out Mr. Chavan’s role in developing the think tank culture in India, in addition to contributing not only to the founding of the institute, but also in defending the autonomy of the IDSA. Mr. Subrahmanyam also elaborated on the significance of Professor Khilnani’s ideas, particularly in their application to issues that contemporary India faces. He emphasized that if India would only eliminate its poverty and its illiteracy, and if the two legislations that are under consideration in India – the right to education and the right to food security – were implemented, he could imagine an India that would be an example of incomparable quality to the world. He also proposed the significance of establishing strategic partnerships with countries that are of importance to India, with Indonesia being a key example - it is the largest Islamic state which is pluralistic and secular. In pointing out that there is a need to think through strategic issues using different paradigms, Mr. Subrahmanyam noted that the threat posed by China’s rise to the United States for example would come not from the Chinese army but from China’s growing science and technology sector. He also noted that the only reservoir of talent that the United States can realistically tap into would be the English-speaking, democratic India; thus, the power that lies in an educated and food-secure population cannot be overemphasized.

Vote of Thanks

Cdr. S.S. Parmar concluded this stimulating discussion by thanking all the speakers for this opportunity to share their ideas and thoughts.

Report prepared by Princy Marin George, Research Assistant at IDSA.

LIFE AND ORDINARY MEMBERS ONLY
Venue: Auditorium, IDSA Campus

Summary

The main aim of this paper is to bring out very clearly the “rationale for constructing transnational pipelines in the South Asian region, why pipeline projects are riddled with problems and finally whether anything can be done to address the issues that would make these projects less troublesome.”

The paper outlines the main constraints and challenges that hinder the growth and development of transnational pipelines, the chief among them being the fact that there is no overarching legal regime that can be used to resolve differences between nations and regulate activities and contracts. Also, the author points out that one needs to make a clear distinction between the oil and gas market because unlike the oil market, the gas market is more disaggregated and there are no benchmarks for gas and prices. For example, there is no talk about a world price for natural gas. This tends to encourage and rather allow host countries to make ad hoc changes in gas pricing, as was the case with the IPI project.

Conflicts and impediments in transcontinental projects are more often the result of politics due to or in the absence of legal and regulatory regimes. This is certainly the case in the Indian sub-continental context. The paper then goes on to illustrate the above claim by saying that in the face of India’s increased energy demands post liberalization, policy makers began looking at importing gas in the form of pipelines and LNG. Policy makers in neighbouring Pakistan too felt that increased demands would lead to an increase in imports despite its existing energy resources. These common demands by both nations led India to propose imports from Iran in the form of the IPI pipeline. But even after two decades of numerous negotiations, India’s participation seems unlikely for the time being. Various issues relating to pricing and the geo-politics of the pipeline in general has posed an impediment for India to sign the deal with Iran and Pakistan. To add to it, there is the American opposition to any deal that is to be signed with Iran and the fact that India is afraid that the gas supplies will be disrupted en route in Pakistan.

In the midst of various problems and issues that plague the development of pipelines in South Asia, the paper also very lucidly talks about the cooperation that can be possibly adopted to further cross-border energy trade in the region. A few suggestions include, the introduction and more importantly the implementation of the rules embedded in multilateral agreements in the 1994 General Agreements on Tariffs and Trade( GATT) under the World Trade Organization(WTO) or the Energy Charter Treaty (ECT), all of which could limit the repercussions of conflicting jurisdictions. However, the legal framework of the WTO has raised certain doubts regarding its export control regulations and whether they can address the members’ energy related concerns.

External Discussants: Dr. Bhupinder Kumar Singh & Mr. A. Karnatak

Dr. Karnatak focused on project monitoring in order to get over most hurdles that nations in the sub-continent encounter with regard to pipeline projects, as about 7 lakh crore pipelines projects are in the process of being materialized. He also said that Bangladesh need not be included in pipeline projects where India is also involved. Answering one of the questions that came from the floor as to why CNG is a preferred resource, he said that it is more feasible to have CNG beyond 3500 kilometres of a pipeline. He said that problems relating to terrain can be overcome but the geo-political situations across nations still pose a major hindrance in pipeline projects.

Dr. Singh was optimistic about the fact that in the long run the IPI pipeline would be a viable option as Pakistan will see the advantages in having Iran take responsibility for its part of the pipeline. Also, the view of having an active involvement of the ECT is a factor that needs to be taken into account and given due importance.

Internal Discussants: Dr. Meena Singh Roy & Dr. Smruti Pattanaik

One of the main points brought out by the internal discussants is that one needs to delve much more deeply into the internal politics of the countries as these are vital and critical in energy policy formulation. There is a need to put out a nation’s energy needs and calculate how much is being addressed and to look at whether trans-national pipelines can have international dimensions. The more recent problem of non-state actors also needs to be addressed in detail and the prospects of bilaterals and quadrilaterals and the level of their past successes and failures studied.

Discussion

The main issue focused upon by those commenting and asking questions from the floor was that of hindrance and interference of non-state actors. What are the remedial measures if and when pipelines are bombed and portions of them destroyed as has been seen in the past. This doubt was answered by the external discussants, who said that remedial measures have already been adopted and that damages can be taken care of in a matter of a few hours.

Prof. Sujit Dutta’s (the Chair) Summary

The chair concluded by saying that organizations like the ECT are very crucial and that one needs to always remember that India’s situation as compared to a power like China is very different when it comes to sheer ability to carry on energy trade agreements with other countries.

Report prepared by Shahana Joshi, Research Assistant, IDSA.