The main threat to Mexico comes from illegal privately-operated aircraft which are heavily involved in smuggling. The inability of the Mexican Air Force to guarantee the integrity of its own airspace is therefore a matter of concern.
In September 2016, it was reported that the Mexican Air Force (Fuerza Aerea Mexicana – FAM) has retired the last of its tiny force of F-5E fighters.1 While these reports may be exaggerated, it is quite clear that unless necessary steps are taken and sufficient funds allocated FAM’s combat capabilities will continue to suffer.2 This is the latest in a series of seemingly insurmountable challenge that have over the decades stymied FAM’s effort to develop a viable combat capability.
However, FAM still has fleets of robust and well-equipped transport aircraft and helicopters. The former has a mix of C-130, C-295 and C-27 tactical transports with a substantial force of Boeing jets for VIP transport. The latter operates a large fleet of over a hundred helicopters including no fewer than 32 UH-60L/M “Blackhawks”, 27 Mil Mi-8/-17s, 31 Bell 412/212 and 66 Bell 206s with 20 MD 500F “Defenders” providing a potent attack element.3 In contrast to these modern and capable assets, FAM’s combat fleet is in poor shape and in dire need of rejuvenation.
The FAM has a proud combat history, contributing a 25-aircraft squadron of P-47 “Thunderbolt” to fight in the Pacific during 1945. The 201st “Aztec Eagles” too had fought with distinction in the skies over the Philippines and Okinawa and had conducted numerous close-support and escort missions – clocking over 2800 hours and dropping nearly 1500 1000lb and 500lb bombs - against a determined Japanese opposition.4
The P-47s along with other vintage aircraft such as A-24 “Dauntless” dive-bombers, AT-6 “Texan” armed trainers, and B-25 “Mitchell” bombers formed a potent combat force in Central America during the early 1950s. These were augmented by armed T-28 “Trojan” trainers in 1958. The FAM nearly found itself in action against neighboring Guatemala after latter’s P-51 “Mustangs” attacked Mexican fishing boats killing three Mexican nationals. In this operation, worth y of deeper study, a strike package of AT-6 and T-28s (armed with rockets, machine gun pods and reportedly napalm bombs) was prepared with three P-47s flying top-cover and a C-47 transport serving as an airborne command post. This force, which penetrated Guatemalan airspace before being ordered to abort the mission, represents a relatively rare example of coordinated air operations in 1950s Central America.5
The P-47s thus formed the core of the FAM’s fighter fleet until 1961 when Mexico took delivery of the first of 15 “Vampire” F.Mk.3s. These were used to equip the 200th Jet Fighter Squadron and were later joined by two “Vampire” T.11 trainers.6 The distinctive ovoid shape of the Vampire’s forward fuselage led to the type being known as the “Flying Avocado” – a name only enhanced by the dark green night camouflage they initially wore before being repainted in all-aluminum scheme in 1964. The “Vampire” was not a popular aircraft in FAM service and was phased out in 1967.
In 1961, Mexico also began taking delivery of Lockheed AT-33A-1 trainers under the United States Military Assistance Programme (MAP).7 The first three aircraft, delivered in September 1961, were precursors to deliveries totaling no fewer than 58 aircraft between 1961 and 1987. Known as the “Tetra” in FAM service, the AT-33 and T-33 variants of this aircraft formed the core of two air groups – the 7th Jet Fighter Group (AT-33A-1s serving with the 202nd Jet Fighter Squadron and the 200th Jet Fighter Squadron with “Vampires”) and the 10th Air Group (with the 210th, 211th and 212th Fighter Squadrons) formed in the 1980s when 40 additional “Tetras” were delivered.8 By 1998, only 24 “Tetras” remained and these were combined into the new 402nd Air Squadron and deployed extensively in the interception of illegal flights. For this purpose, the two nose-mounted 0.50-cal M2 machine guns were augmented with 7.62mm MAG machine-gun pods and LAU-32 or MA2A rocket launchers.9 After serving the FAM with distinction for 45 years, the last 12 “Tetras” were retired from service in 2007.
By 1977, the FAM was looking for a new tactical fighter aircraft and considered several options – the F-5E, the Dassault Mirage F.1, the F-4 Phantom-II and the IAI Kfir C.2 were among the leading contenders. An initial request for 30 F-5Es and 6 F-5Fs, to equip three fighter squadrons, was rejected by the US Congress.10 Efforts were then made to acquire two dozen Kfir C.2/TC.2 fighter/fighter trainers with interest being expressed in establishing a local production line.11 However, the United States once again vetoed the sale of these aircraft to Mexico citing concerns over the export of the GE J79 engine. It was only in 1982 that the United States relented and authorised the sale of a dozen F-5s – 10 F-5Es and 2 F-5Fs to Mexico.12 This force of 12 was destined to be the FAM’s first purpose built combat aircraft since the “Vampire”.
Between August and September 1982, under a US$ 110 million Foreign Military Sales (FMS) deal – called “Peace Aztec” – the delivery of 12 F-5Es, ground support equipment, training, AIM-9B “Sidewinder” air-to-air missiles, LAU-3 rocket pods with associated rockets and Mk.82 and Mk.83 General Purpose bombs took place.13 These aircraft were formed into the 401st Air Defence Squadron and the nine survivors continue to nominally serve with this formation. A modest upgrade was undertaken with AN/APQ-159V (5) radars and GPS systems being fitted to the F-5Es in place of the obsolete AN/APQ-139 during a major overhaul in the early 2000s.14 In retrospect, at some US$ nine million per aircraft, the “Peace Aztec” programme represented good value for money but the number of aircraft acquired was woefully inadequate.
While Mexico can neither afford to obtain nor sustain air defence assets capable of deterring an attack from its northern neighbor, threat from the latter is anyway considered virtually non-existent. Rather, the main threat to Mexico comes from illegal privately-operated aircraft which are heavily involved in smuggling. Mexico’s assets are incapable of dealing with this threat – especially with the retirement of the “Tetras”. This was graphically demonstrated 2000 onwards when, using newly acquired Airborne Early Warning (AEW) platforms in the form of the EMB-145SA/RS and the C-26B “Merlin”, the FAM made determined efforts to intercept illegal flights – often suspected of narcotics trafficking. With only 10 aircraft – two of which were trainers – the 401st Squadron was unable to make more than four to five aircraft available for national deployments – two aircraft being retained for the defence of Mexico City at all times.15
By 2016, however, only three aircraft were operational and Mexico had resorted to cannibalising two of the aircraft for spares. Efforts to keep the fleet airworthy continue with the engines of three aircraft being dispatched to RUAG Aviation of Switzerland for overhaul.16 However, it is questionable whether these efforts will be able to sustain the F-5s for much longer. Mexico has mooted the idea of augmenting its combat fleet with 14 to 24 ex-Swiss Air Force F-5Es but no order has been forthcoming to date. An American offer in 2004 of 10 ex-USAF F-16A and two F-16B Block 15 MLU with spares, training and armament was turned down, as the price of US$ 1.2 billion was deemed excessive for ‘old’ aircraft.17
The bulk of the FAM’s ‘combat’ force consists of armed turboprop trainers. Mexico was the largest customer for the Pilatus PC-7 trainer with 88 delivered 1979 onwards. Even today, 65 remain in service and these have re-equipped many of the old “Tetra” squadrons and the famed 201st “Aztec Eagles” squadron.
These aircraft were delivered with hardpoints for 0.50-cal machine guns and 2.75-inch rocket pods and in this configuration, they were deployed on strike missions during the Chiapas insurgency of 1994-95. This had the unfortunate effect of Switzerland declining to sell 48 of the newer PC-9 type when Mexico insisted that these be fitted with hardpoints.18 Mexico did eventually acquire two PC-9Ms in 2006 but these were deemed unsuitable and one was sold to Ireland as an attrition replacement for the Irish Air Corps.19 The FAM eventually purchased a dozen T-6C “Texan-II” trainer/ light-attack aircraft in two batches of six from the United States – the first of perhaps as many as 48 – to begin the replacement of the ageing PC-7s in both the training and attack roles.20
With the F-5Es of the 401st Air Defence Squadron barely serviceable and of limited availability, Mexico’s air defence rests on the dubious capability of its PC-7s and T-6Cs. These aircraft while undoubtedly very useful for light strike operations and excellent for training, offer very limited air-intercept capabilities. While these may be adequate for intercepting slow and low-flying propeller-driven aircraft, they are incapable of reaching or catching higher flying executive jets and ex-airliners that are more commonly used by the narcotics smugglers.21 The PC-7 and T-6C are barely capable of catching more modern turboprop civilian aircraft such as the Beechcraft King Air, which are also widely employed by smugglers.
The degradation of the FAM’s combat fleet comes at a time when drug cartels have battled the Mexican state for over a decade. The lucrative narcotics smuggling routes to the United States and even to Europe have made extensive use of aircraft to move their product. The inability of Mexico to guarantee the integrity of its own airspace is therefore a matter of concern. Unfortunately, to date, Mexico has been unable to muster either the will or the wherewithal to undertake the acquisition of even a modest number of combat aircraft needed for the task.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
There is a strong case for abandoning the present approach of looking at the defence budget through the narrow prism of allocation and utilisation, and instead focus on outcomes.
It may sound harsh but the changes made in the structure of the defence budget for the second year running appear quite aimless. In the process, however, these disruptive changes have raised two questions.
The first question concerns the very definition of the defence budget. The practice followed till 2015-16 was to refer to the sum total of the net revenue and capital allocation for the three services (including Joint Staff), Defence Research & Development Organisation (DRDO), and Ordnance Factories (OFs) as the ‘defence budget’.
When the finance minister announced an allocation of Rs. 2,46,727 crore for the armed forces in his 2015 budget speech, he did not include the allocation made for meeting the requirements of the ministry’s own secretariat and of a number of other organisations such as the Coast Guard and the Armed Forces Tribunal. But while presenting the union budget for 2017-18, he included these elements and announced a total allocation of Rs. 2,74,114 crore for defence expenditure.
Of course, in 2017-18, as in 2015-16 and earlier years, the figures mentioned by the finance minister did not include the outlay on defence pensions. (In the budget speech for 2016-17, there was no mention of the allocation made for defence or pensions.)
So, what is India’s defence budget? It could be any of the following:
Gross or net allocation made for revenue and capital expenditure of the three services, including Joint Staff.
Allocation referred to at (a) above plus the revenue and capital budget of DRDO and OFs.
Allocation referred to at (b) above plus revenue and capital expenditure of the ministry’s secretariat and all (or a few) other organisations under its administrative control.
Allocation referred to at (a), (b) or (c) plus the corresponding outlay on defence pensions.
This is important because the defence budget would look more reasonable if it were to be defined as the sum total of all allocations, including defence pensions, than if it were to be defined only as the sum of allocations made for revenue and capital expenditure of the armed forces.
To illustrate: The allocation for defence, excluding defence pensions, for 2017-18 would work out to 1.6 per cent of GDP. But if defence pensions are also considered as a part of the defence budget, the total allocation would be 2.1 per cent of GDP.
The way defence expenditure is defined by the Stockholm International Peace Research Institute (SIPRI) would require the inclusion of expenditure for which provision is made in all the four demands for grant of the Ministry of Defence (MoD), including the demand for defence pension.
This issue has to be also looked at in the light of the fact that changes were made in 2016 with a view to providing “a holistic picture of budgetary allocations and effective expenditure monitoring.”1 Despite all the changes made since then, expenditure related to J&K Light Infantry – a regular infantry regiment of the Army – continues to be outside the Army’s budget. So much for providing ‘a holistic’ picture of budgetary allocations.
It would be possible to take a holistic view only if the entire expenditure on defence, including the expenditure on defence pensions, is taken into account. This issue needs to be settled to infuse an element of realism in the discourse on India’s defence budget.
The second question concerns the objective of the exercise. What purpose has been served by restructuring of the demands for grant? Tucked away in the budget documents last year was a statement that the exercise “to rationalize Plan and Non-Plan schemes of all Ministries and Departments (had) been undertaken” for “effective outcome oriented monitoring of implementation of programmes and schemes/projects and to ensure optimum utilization of resources.” The document went on to say that the “existing programmes and schemes (had) been reorganized into outcome-based Umbrella programmes and schemes” and that this “process would be carried forward in the coming years.”
That none of that is true of the revamped demands for grant of the ministry of defence is another matter. The demands for grant of the ministry continue to be bereft of any outcome-orientation.
There is a strong case for abandoning the present approach of looking at the defence budget through the narrow prism of allocation and utilisation. What matters more is not ensuring utilisation of the budget but focussing on the outcomes. For ensuring outcome-oriented monitoring of the defence budget it is necessary to revisit the structure of the demands for grant and reformulate them, to the extent it is possible to do so, in terms of specific programmes, schemes and projects.
The present discourse on the defence budget revolves around concepts such as the modernisation budget, manpower costs, and allocation for ‘new schemes’ or other operational requirements. Interestingly, there are no specific budget heads which capture expenditure related to these concepts as they do not fit into the scheme of budgetary classification. For example, there is no formal budgetary classification relating to ‘modernisation’ (often also referred to as ‘capital acquisition’) in the budget documents, much less its bifurcation into ‘committed liabilities’ and ‘new schemes’. There are also no cut and dried budget heads for capturing allocation and expenditure on such critical operational requirements as procurement of ammunition or maintenance of in-use equipment, weapon systems and other platforms.
The sporadic and disjointed information available in the reports of the Standing Committee on Defence is invaluable, but it cannot make up for the dysfunctional system of budgetary classification. It is high time that serious thought is given to a thorough revamping of the system of budgetary classification so that information is captured in a manner that serves the objective of outcome monitoring.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
It is in the US interest not to encourage Israeli policies that could possibly lead to further radicalisation of Palestinians.
US President Donald Trump voiced mild criticism of the Israeli government’s expansion of Jewish settlements in the West Bank, at a dinner with a Jewish magnate on February 08, 2017. Thereafter on February 15, 2017, during Israeli Prime Minister Benjamin Netanyahu’s official visit to Washington, Trump mildly rebuked Israel for expanding its settlements and advised that a compromise was necessary. More significantly, while not ruling out a two-state solution, Trump declared that he would be happy with any solution (a one-state or a two-state) that was acceptable to both the Israelis and the Palestinians. Analysts note that this is the first time the US has not explicitly supported a two-state solution.
The Netanyahu Government however is proceeding ahead with the expansion of settlements in the West Bank. There are presently more than 125 such settlements and nearly 100 outposts with approximately 400,000 Israelis residing in these enclaves. If the settlements are to be subsumed within Israel as part of a future agreement, the Palestinians would be left with a diminished territory for fulfillment of their socio-economic and political aspirations.
The settlement policy has assumed a new dimension of late, because, it will be executed henceforth within the statutory framework of the Regulation Law recently enacted by Israel’s Knesset. Despite continuous efforts of the international community and even after the adoption of the United Nations Security Council (UNSC) Resolution 2334 in December 2016, enjoining on Israel to freeze and roll back its settlements, the Palestine Authority (PA) headed by Mahmoud Abbas has not been able to do much to stall their settlement drive. The Arab countries, excepting perhaps Jordan, have many pressing issues on hand involving their immediate security and economic concerns and are not in a position to actively engage in support of the Palestinian cause. Now, with Trump’s reformulation of the US policy on Palestinian statehood, imponderables arise on whether Israel’s settlement drive can be checked at all through international pressure.
The White House press secretary had observed on February 02, 2017 that the US Government does not believe that the existence of settlements is an impediment to peace, whereas the construction of new settlements or the expansion of existing settlements beyond the current border may not be helpful to achieving peace between Israel and Palestine. Trump’s advocacy of restraint on Israel’s settlement policy, prior to apparently abandoning the two-state approach on Palestine, seems to be in line with the above-cited White House press statement.
The Trump administration’s position appears to be similar to the stand taken by former President George W. Bush in 2004 when, as a consequence of the Bush-Sharon dialogue, Israel was to limit the growth of settlements and remove unauthorised settlements, but the latter was not obligated to return to borders drawn up as per the armistice of 1949. Nikki Haley, the US permanent representative to the UN, has however observed that there is no question of abandoning the two-state policy though attempts are on within her government for an out-of-the-box solution.
Netanyahu meanwhile is on a politically shaky ground domestically, owing to rumblings within his right wing Likud Party-led coalition government. Avigdor Liberman (present defence minister) and his Yisrael Beiteinu party joined the ruling coalition a few months back and mounted pressure for a more aggressive posture on Palestine. Netanyahu therefore cannot be seen to be abandoning or conceding on the present expansive settlement policy propagated by the hardliners within his political combine, particularly after the passing of the Regulation Law.
The Law incidentally enables the consolidation of settlements by obliterating the distinction between those that were aggressively set up like Itama — deep in the West Bank and Ma’ale Adumin — a commuter settlement on the suburb of Jerusalem. It therefore legitimises usurpation of territory not abutting the original state of Israel but far beyond. Netanyahu is also aware that the Law which sanctifies the settlement policy may not survive for long and may be overturned by the Israeli Supreme Court on grounds of inequity and on the premise that it is technically outside the Israeli constitutional ambit. He has to therefore derive the maximum mileage from the existing settlement policy and the Law within a short span of time. The Israeli premier has also perforce to extract the most favourable outcome from the Trump administration.
The Trump administration may not be oblivious to the possibility of escalation of tensions between the Israelis and the Palestinians as a result of continuing settlements policy.
It is possible that the US president will keep in view the broader US interests in West Asia — where negative repercussions of the US policies vis-à-vis Palestine cannot be ruled out. Unlike the Barack Obama administration, Trump will not allow any formal condemnation of Israel in international fora like the UNSC. His government is also likely to maintain and upgrade the US-Israel economic and defence ties. It is in the US interest however not to encourage Israeli policies that could possibly lead to further radicalisation of Palestinians in the West Bank and those in Gaza, by elements like the Islamic State of Iraq and Syria (ISIS) and other similar outfits.
Given the above, Trump may continue to exert some restraining influence on Israel’s settlement policy, at least in the short term. A significant check on Israel’s aggressive settlement policy in the near future may de facto arise from within its polity, i.e. from its legal institutions and moderate political and social groups. Reinforcing these efforts can only be possible if Trump realises the futility of promoting a single state of Israel with a restive Palestinian populace within. This would only increase the prospects of greater radicalisation of large segments of the latter and those in the peripheral regions, which would be against the US interests.
The author is a commentator on international affairs and a retired IDAS officer who has served in senior positions of Government of India and a State Government. The views expressed are the author’s own.
An Analysis of the Internal Security Budget 2017-18
Pushpita Das
February 21, 2017
For the financial year 2017-18, the Ministry of Home Affairs(MHA) has been allocated Rs. 83,823 crore, a hike of around 11.5 per cent over that of the previous year. Though the Union government has been providing substantial budget support to the MHA to aid its reform and modernisation programs, the ministry’s efforts to bring about desired reforms have shown mixed results so far.
Beginning with the spike in budgetary allocation to the Ministry of Home Affairs (MHA) in 2009-10 following the Mumbai terror attacks of November 2008, the MHA has been witnessing a steady increase in its allocations over the years. In the last three years too, allocations have increased from Rs. 61,401.78 crore in 2014-15 to 65,651.10 crore in 2015-16, and to 73,406.37 crore in 2016-17. For the upcoming financial year 2017-18 as well, this upward trend has persisted with allocations reaching Rs. 83,823 crore, a hike of around 11.5 per cent over that of the previous year.
Of the total allocations to the MHA, allocation made under the head ‘Police’ pertains to matters of internal security such as the central armed police forces (CAPFs), central police organisations (CPOs), border infrastructure, intelligence, disaster and emergency management, etc. The increased budgetary allocations under the ‘Police’ head over the years reflect the growing concerns over various internal security challenges plaguing the country as well as a firm intent to tackle them. The emphasis, has been to prioritise these threats and challenges and deal with them in a concerted and sustained manner through security interventions and development activities.
One of the serious internal security threats that the country has been grappling with for more than a decade is left wing extremism (LWE). At present, 106 districts in 10 states are affected by LWE.1 Although the primary responsibility of fighting LWE lies with the concerned states, the Union government assists them by providing battalions of central armed police forces to counter the subversive activities of left wing extremists and maintain public order. Given that the Central Reserve Police Force (CRPF) is the primary force deployed in the LWE-affected states, the Government of India had, in 2009, sanctioned funds for raising 39 additional battalions of the CRPF. As a result, the CRPF has been receiving the highest allocations in successive budgets since then. In the previous fiscal year, the force received Rs. 16,228. 18 crore, which has been increased by another 1635.35 crore to Rs. 17,868.53 crore for 2017-18. Of the sanctioned 39 battalions, 26 have been raised till 2016 and the remainder is to be raised by 2018-19.
Another way in which the Union government assists the LWE affected state governments is by providing funds for capacity building through various security related expenditure (SRE) schemes. Under these schemes, the Union government reimburses the expenditure incurred by LWE-affected states in training and operational requirements of the security forces, insurance of police personnel, ex gratia payments to the families of civilian or security forces personnel killed in LWE violence, compensation to surrendered left wing extremist cadres under the surrender and rehabilitation policy of the respective states, etc. In the last two financial years, i.e. 2015-16 and 2016-17 (until 15 November 2016), funds released to LWE states under these schemes were Rs. 258.65 crore and 111.49 crore, respectively. For the upcoming fiscal year, the budgetary allocation under SRE has been pegged at Rs. 1,222 crore, an increase of Rs. 380 crore from the previous year. Since SRE also comprises expenditures incurred by Jammu and Kashmir and insurgency affected states in the North East, the rise of almost 45 per cent under this head could be because of the deteriorating security situation and the expectation of a consequent rise in spending under SRE in these states.
Border management is the second area that has witnessed a substantial increase in budgetary allocations for the fiscal year 2017-18. The need to effectively secure the country’s international borders against infiltration, trafficking and irregular crossings has become even more pressing following a series of successful infiltration attempts by Pakistani terrorists through the India-Pakistan international border and subsequent attacks on strategic installations in the past couple of years. These attacks have raised serious concerns about the effectiveness of the present border management system in thwarting such border breaches and has compelled the Union government to undertake measures to fortify the India-Pakistan and India-Bangladesh borders in particular. Towards this end, the Union government had decided to enhance surveillance and detection by building ditch cum fence barriers, putting up laser walls along riverine stretches, employing sensors, cameras and tunnel detection gadgets, building roads and other infrastructures along the borders. The implementation of the comprehensive integrated border management systems (CIBMS) along the India-Pakistan border on a pilot basis is a step in this direction. Accordingly, Rs. 2,600 crore has been allocated for border infrastructure, of which 2,355 crore is for capital expenditure i.e., spending on fences, electronic surveillance gadgets, etc. This amount is, however, lower than the Rs. 2,490 crore provisioned for 2016-17. One of the reasons for the lower allocation could be the under or non-utilisation of funds due to various reasons, a fact revealed by the revised budget of 2016-17, where the expenditure under capital outlay has been reduced to Rs. 1,722.33 crore.
Similarly, budgetary allocations for the border guarding forces have been substantially increased to improve their strength and efficiency. Allocations under this sub-head are made for raising additional battalions, training, procurement of weapons and ammunition, administrative requirements, etc. The Border Security Force (BSF), which has responsibility for the India-Pakistan and India-Bangladesh borders, received the highest amount of Rs. 15,569.11 crore, an increase of Rs. 917 crores from the previous year. Furthermore, the Land Port Authority of India (LPAI), entrusted with the mandate to build and manage integrated check posts (ICPs), received Rs. 300 crore for 2017-18, an increase of 241 per cent from the previous year. This highlights the government’s commitment towards greater regional integration by ensuring the smooth and efficient cross border movement of people and goods. Likewise, the Border Area Development Programme (BADP), a scheme to meet the infrastructural requirements of the border people, received an enhanced allocation of Rs. 1100 crore, an increase of 11 per cent from 2016-17.
The third segment which received a substantial increase in allocations is police modernisation and infrastructure. Under police modernisation, Rs. 800 crore has been allocated for modernisation of the state police forces. This sum includes grants by the Union government to states to strengthen police infrastructure in terms of training, weaponry, mobility and communication, and the establishment of secure police stations. Further, it also includes the establishment and upkeep of the crime and criminal network tracking system (CCTNS). Building projects, both residential and office, for CAPFs and COPs received Rs. 4008.06 crore, indicating the seriousness of the Union government to improve the living and working conditions of these police organisations.
The Intelligence Bureau (IB), which in recent years has been augmenting its strength, has also received an allocation of Rs. 1,577 crore, an increase of 11 per cent from the previous year. Most of the expenditure, however, will be revenue outlay indicating an increase in spending on salaries and perks of personnel. In the past, the IB was functioning at a reduced strength with a shortfall of around 2000 agents, but in the aftermath of the Mumbai terror attack, calls were made to strengthen the IB in a comprehensive manner through increased recruitments, among other things. The IB has been recruiting personnel since 2009 but this is yet to reflect accurately in the manpower strength since full induction of operatives would only happen after the completion of their training. Last but not the least, Delhi Police, the National Emergency Response System for crimes against women and national disaster schemes also received increased budgetary allocations for the fiscal year 2017-18.
The enhanced budgetary allocations for the MHA since 2009 reflect the efforts of the successive Union governments to comprehensively overhaul the internal security set up of the country through a series of measures such as capacity building of security and law enforcement organisations through strength augmentation, improved training, modern weaponry and other infrastructure, technical upgradation; enhancing intelligence gathering, analysis and dissemination; infrastructure development in violence affected areas as well as border regions; improving responses to natural disaster and other emergencies; etc. The budgetary allocations for the fiscal year 2017-18 is a continuation of this process. Though the Union government has been making substantial budget allocations to the MHA, the ministry’s efforts to bring about the desired reforms have, however, shown mixed results so far. While the revenue outlays have been increasing, the capital outlays have seen troughs and crests in the last four years. This indicates that while the concerned organisations have been successful in increasing manpower, they have been unable to build up the commensurate infrastructure required for capacity building such as training schools and laboratories, and procuring additional vehicles and boats, arms and ammunitions, computers and surveillance equipment, etc. Efforts, therefore, must be made to fully utilise the budgetary outlays provided to the MHA in order to achieve a comprehensive reform of the internal security system of the country.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
1. Left Wing Extremism (LWE) Division, Ministry of Home Affairs, Government of India, at http://mha.nic.in/naxal_new (Accessed on February 17, 2017)
Gorkhas of the Indian Army and India-Nepal Relations
Vikrant Deshpande
February 17, 2017
This commentary is inspired by the Annual Gorkha Brigade Conference held at New Delhi on 11 February 2017 and the unique relationship between India and Nepal that this military connection underpins.
This commentary is inspired by the Annual Gorkha Brigade Conference held at New Delhi on 11 February 2017 and the unique model of military diplomacy it fosters between India and Nepal. The Gorkha Brigade is an association representing approximately 40,000 Indian and Nepali Gorkha soldiers as well as about 90,000 Indian Army pensioners in Nepal. The Brigade comprises seven regiments, viz, First, Third, Fourth, Fifth, Eighth, Ninth and Eleventh Gorkha Rifles. The missing serials were allotted to the British Army on India’s independence. Each regiment is further organised into five or six infantry battalions, which is the basic, fully independent, and functional unit of the Indian Army. Thus 3/9 GR denotes the Third Battalion of the Ninth Gorkha Rifles, an exclusive classification which has baffled many within and outside the armed forces fraternity. The Gorkha Brigade also encompasses the Defence Wing of the Embassy of India in Nepal and the Gorkha Recruiting Depots of Gorakhpur and Ghoom (Darjeeling). The President of the Gorkha Brigade is always the senior most serving officer from amongst the seven regiments; presently, the Chief of Army Staff, General Bipin Rawat, a second generation officer of the Eleventh Gorkha Rifles, has that honour.
This year the Gorkha Brigade is also celebrating the bicentenary of one of its oldest regiments, the Ninth Gorkha Rifles. The First Battalion of the Ninth Gorkhas was raised by the British in 1817 as the ‘Fatehgarh Levy’. Contrary to popular belief that the British were the first to recruit Gorkhas, it was in fact Maharaja Ranjit Singh, who, impressed by the bravery and valour of these big hearted little men from the hills, raised a battalion of Gorkhas to serve in the Sikh Army in 1809. As a result, all soldiers serving in the Indian Army are still called ‘Lahorey’ in Nepal, i.e., those who serve in Lahore – the capital of Ranjit Singh’s empire. The celebrations of the bicentenary commenced with a Motorcycle Rally of 1/9 GR flagged off by General Rawat on 30 January from Delhi. The motorcyclists drove through the traditional recruiting areas of the Regiment in Western Nepal honouring many ex-servicemen en route. Their arrival in Pokhra in Nepal on 4 February coincided with a massive rally where almost 3,500 ex-servicemen and widows had gathered to celebrate the bicentenary of the Regiment. The event was attended by General Rajendra Chhetri, Chief of Army Staff, Nepal Army, Shri Ranjit Rae, Ambassador of India to Nepal, and Lt. Gen. AK Bhatt, Colonel of the Regiment of the Ninth Gorkhas. India and Nepal share a unique tradition wherein their respective Chiefs of Army Staff are anointed as Honorary Generals of the other’s forces. General Rajendra Chettri is already an Honorary General of the Indian Army and General Bipin Rawat is likely to be conferred the reciprocal honour on his first visit to Nepal.
Ex-servicemen welfare is a state subject in India, with the Indian Army and the Ministry of Defence having only a limited role in it. However, Nepal being a Sovereign Nation, the welfare of Nepal-domiciled ex-servicemen of the Indian Armed Forces and pensioners of the Central or State Government including para-military forces is the responsibility of the Embassy of India in Nepal. The Government of India owes a debt to these citizens of Nepal for having dedicated their lives in service of our nation and the Defence Wing of the Embassy carries out this onerous task, a model without parallel in the world, with exemplary efficiency. Here, it would be pertinent to explain the range of its activities.
The Defence Wing of the Embassy has three Pension Paying Offices at Kathmandu, Pokhara and Dharan, each handled by a serving officer of the Indian Army under the Defence Attaché. Approximately 1,27,000 pensioners (90,000 of the Indian Army and 37,000 of the Central and State Governments as well as para-military) draw pensions from these offices. About 30,000 of these pensioners are paid pensions directly in their respective bank accounts. The rest reside in areas yet to be covered by banking infrastructure and draw their pensions in cash. The Pension Paying Offices carry out 36 payment camps every year in various remote locations, some accessible only on foot, to disburse these pensions. It is to the credit of this organisation that it has completed the payment of One Rank One Pension arrears to all pensioners in Nepal. The total amount disbursed as pensions and arrears in this financial year is likely to exceed INR 2,500 crore or Nepali Rupee (NR) 4,000 crore, and possibly reach INR 3000 crore or NR 4,800 crore per annum by 2018/19.1 At a conservative estimate, the 32,000 Nepal domiciled serving soldiers remit approximately INR 1,000 crore equivalent to NR 1,600 crore per year.2 This total at approximately NR 6,400 crore is almost equivalent of 63 per cent of the total foreign grant in aid received by the Government of Nepal from all donor countries for the year 2016/17at NR 10,689.64 crores and greater than its own allocation for Defence at NR 3601.80 crore.3 Further, this figure does not include remuneration received by Nepali citizens as other employees of the Indian Government; there is no definitive figure available for the numbers of such personnel. The pensioner’s ratio does offer some basis for extrapolation wherein these pensioners form approximately 21 per cent of the total pensioners of the Indian Government. It can therefore be assumed that a similar ratio is in service at any given point of time with the Government of India and, if their remittances were to be added, the figures would further increase.
The Indian Ex-servicemen Welfare Organisation in Nepal (IEWON) is an independent organisation chaired by the Ambassador of India with representation from senior officials from the Governments of Nepal and India. It functions under the aegis of the Defence Wing of the Embassy and is responsible for the welfare of the Nepal-domiciled pensioners of the Government of India. In an exceptional decision, the Government of India chose to execute its social welfare activities through its ex-servicemen residing in Nepal. These ex-servicemen have shown exemplary zeal, honesty and determination in executing these social welfare projects, most of which are drinking water projects in remote hilly areas where drinking water is an acute problem. This has not only empowered these ex-servicemen and enhanced their status in society but also created more than one lakh ambassadors for Brand India and the values that it stands for. The IEWON also carries out other welfare activities including the provision of educational scholarships and vocational training for the wards of pensioners through 22 District Soldier Boards manned by Ex-servicemen it employs all over Nepal. The total annual budget of these welfare schemes is approximately INR 5.5 to 6 crore.4
The Government of India also provides opportunity to any citizen of Nepal to serve as an officer in the Indian Armed Forces, a fact that goes unnoticed in the haze and smoke surrounding Indo-Nepal relations. Some Nepali citizens have already risen to the rank of Major/Lieutenant General or equivalent. This displays the amount of trust and faith that India has on the citizens of Nepal. A Nepali youth has twin opportunities compared to his Indian counterpart; he can either join the Nepal Army or the Indian Armed Forces. No country in the world has opened its armed forces to a neighbour in this manner besides the other aspects of this special relationship like the open border. Different studies estimate the number of Nepalis working or residing in India to be between one and 1.6 million. The Indo-Nepal Trade Treaty of 2009 provides special treatment to industrial products of Nepal to promote development of industry in that nation on a non-reciprocal basis.5 Many Indian industries like Dabur have shifted production to Nepal as it is cheaper to produce in Nepal and distribute in India. There have been occasions when this special arrangement has been questioned by myopic interests on either side: Indians questioning the need to recruit Gorkhas when an ample recruitable population exists in the country; and Nepalis objecting to the impropriety of sovereign citizens of Nepal serving another country. This petty squabbling ignores the geo-political reality of a land locked Nepal hemmed in by the Himalayas to the North and India to the South as well as India’s moral obligations therein. It also ignores the fact that Nepal does not have the wherewithal, infrastructure and industry to provide employment for its bulging youth population. India provides the only viable option for their gainful employment and for the remittances therein.
A comparison with the British Gurkhas6 is inevitable here as even Great Britain maintains this special bond. The British have reduced their four Gurkha regiments existing in 1947 to one and this has two infantry battalions. Though the exact strength of British Gurkhas has not been mentioned on their website, an approximation, given the units and subunits mentioned, would be about 3,500 men.7 The number of British Gurkha pensioners residing in Nepal is dwindling as the majority choose to settle down in Britain after the British parliament voted to offer British Gurkhas the right to settle in the UK in 2009.8 The contrasts with the Indian relationship are glaring if only because of the sheer numbers involved.
This author had the opportunity to meet several pensioners from Nepal at a regimental reunion at Ranchi.9 Each one was immensely proud of his service in the Indian Army and grateful for the pensions and welfare activities being provided to them. They were especially happy with the recent extension of the Ex-servicemen Contributory Health Scheme (ECHS) to private hospitals in Nepal as also the extension of canteen facilities to pensioners in Nepal. Similarly, every senior Indian Army officer of the Gorkhas at the Gorkha Brigade Conference spoke of the exemplary qualities of the Gorkha soldiers. One of the Generals said that the Nation was grateful to these citizens of Nepal for their service and no amount of pensions or welfare activities can truly repay the debt that India owes these brave warriors. This unique bond is the core of Indo-Nepal friendship. Irrespective of the noise and clutter that surrounds this relationship, both governments need to nurture this core and build on the foundation it offers so that the association contributes to the Comprehensive National Security of both nations.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
1. The 2016 issue of Bhu Puu, the annual journal of the Indian Ex-servicemen Welfare organization in Nepal, states that INR 1,974 crore were disbursed in FY 2015/16. Extrapolating an increase of 10 per cent, which is the average increase of dearness allowance every year, would put that figure for FY 2017/18 at approximately INR 2,400 crore. This does not include the arrears being paid for One Rank One Pension and Seventh Pay Commission, which would exceed Rs. 100 crore even by a conservative estimate of Rs. 10,000 per head and could reach 1,000 crore if the arrears were to the tune of 100,000 per head. The final figure disbursed is likely to rest at approximately INR 3,000 crores if not in FY 2017/2018 then definitely in FY 2018/2019.
2. The average Indian Soldier draws approximately INR 33,000 per month, out of which he remits approximately 25,000 per month.
HAL’s Gamble – Will the “Advanced Hawk” break into the Export market?
Sanjay Badri-Maharaj
February 13, 2017
On 5 February 2017, a version of the Hawk Advanced Jet Trainer (AJT) was unveiled. The aptly-named “Advanced Hawk” is a joint-venture between BAE Systems and Hindustan Aeronautics Limited (HAL). It has been developed using internal funds on an equal risk basis and offers significant enhancement of the capabilities of the basic Hawk AJT.
On 5 February 2017, a version of the Hawk Advanced Jet Trainer (AJT) was unveiled. The aptly-named “Advanced Hawk” is a joint-venture between BAE Systems and Hindustan Aeronautics Limited (HAL). It has been developed using internal funds on an equal risk basis and offers significant enhancement of the capabilities of the basic Hawk AJT.1 The aircraft, besides being offered as an enhanced capability trainer to larger air arms – India with 123 Hawks in service being a prime candidate – is also being marketed as an affordable light-combat aircraft choice to smaller air forces. While the Hawk AJT was a global success story in the export market, the “Advanced Hawk” enters the market at a time when China has made significant inroads into the light combat aircraft market and would be a direct competitor to the “Advanced Hawk”.2
In choosing to create a new aircraft that goes beyond an upgrade of the existing Hawk AJT, HAL and BAE have gambled on being able to break into the export market. Indeed, the Indian Air Force (IAF) is reputedly not keen to order the “Advanced Hawk” as a combat aircraft and is at best lukewarm at this stage about its necessity for enhanced training.3 However, an examination of previous exports of the Hawk as well as an evaluation of possible customers suggests that sales of the “Advanced Hawk” may not be easily forthcoming due to a combination of fiscal and political constraints in addition to cost-effective competition from Chinese platforms.
The potential export market for the “Advanced Hawk” has to be divided into two segments – customers that want a capability enhanced trainer and those that want a cost-effective light combat aircraft-cum-trainer. It is submitted that the demand for the former is going to be less forthcoming than the latter as larger air forces may opt for upgrades of their Hawks’ avionics to meet future training requirements rather than purchase new aircraft. In fact, BAE Systems and HAL have already taken cognizance of this and are offering upgrade options to existing Hawk customers with various modules from the “Advanced Hawk”.4 However, in respect of the latter requirement for cost-effective combat aircraft, the “Advanced Hawk” may be on firmer ground but will nonetheless face severe challenges in finding markets.
The Hawk AJT has been sold to every continent except South America. While most of these aircraft are used in their training role, the Air Force of Zimbabwe (AFZ) made extensive use of the Hawk T.Mk.60 as a light-strike aircraft during the 1998-2001 Second Congo War. Armed with a combination of 30mm Aden cannon (in a pod mounted on a centreline pylon), unguided rockets and bombs, the AFZ Hawks proved to be one of the most effective strike aircraft of that conflict and proved popular in service – even acting as an interceptor armed with Chinese made PL-7 air-to-air missiles.5 This combat pedigree should augur well for the “Advanced Hawk” as it offers a considerable increase in those combat capabilities with provision for Brimstone air-to-ground missiles and ASRAAM air-to-air missiles.6 BAE Systems’ attempts to market dedicated combat versions of the Hawk – in the form of the Hawk 200 series – found only three customers (Malaysia, Indonesia and Oman) for a total of 62 aircraft. However, this does not in any way negate the potential of a new dual-purpose platform – good for training as well as light combat roles.
What is of much greater importance is the fact that the “Advanced Hawk” will be subject to the export control rules of both the United Kingdom and India, with export clearances being needed from the governments of both countries.7 This could adversely affect sales as at least three Hawk operators – Indonesia, Kenya and Zimbabwe – found themselves facing spares embargoes from the United Kingdom. This led to a major fall in serviceability and eventually resulted in the latter two countries withdrawing the type from service.8 The AFZ in particular viewed the sanctions imposed by the UK as being crippling to its defence preparedness.9
This experience has had two consequences. The first is a wariness on the part of some African and Asian countries about buying aircraft subject to UK export clearances. The second has been to open the market to Chinese aircraft to countries that would not have usually chosen such an option. Nowhere is this clearer than in the case of Zimbabwe where the much less capable Chinese JL-8/K-8 trainer replaced the T.Mk.60 Hawk in the light-attack role with the AFZ’s No.2 squadron which had earned an enviable reputation during the Second Congo War.10
Mexico and the Latin American region may also be wary of UK export controls owing to that country’s close political proximity to the United States. It is unlikely that Argentina would ever be allowed to purchase British combat capable aircraft while any attempt on the part of Mexico to make such a purchase could face additional complications should the United States object. Anticipating and working to circumvent these potential political pitfalls in advance could enhance the “Advanced Hawk’s” prospects for sales.
Despite these concerns, there is a large potential market for the “Advanced Hawk”. Countries that need to replace ageing Cessna A-37 attack aircraft (such as Colombia, Uruguay and even Peru) may be tempted by the capability enhancement that the “Advanced Hawk” offers, while countries seeking to supplement or supplant equally geriatric MiG-21s and F-5s may find the cost-effectiveness of operating the “Advanced Hawk” appealing. The need for replacements for these aircraft – particularly the A-37s and F-5s – is acute, as spares are now in relatively short supply while the extreme age of many airframes will be a cause for concern. If some African and Latin American air forces eschew the “prestige” of supersonic aircraft, the “Advanced Hawk” could be an attractive option.
However, even while readily realizing that this potential market exists, the cost of the “Advanced Hawk” may be a significant deterrent factor. It is as yet unknown what the aircraft will cost. But given the level of sophistication that the type undoubtedly has, it is an open question whether countries that might see the “Advanced Hawk” as a viable aircraft choice can afford to purchase it. This factor cannot be understated as many potential customers are now unable to afford replacement aircraft or even to maintain those in service. Uruguay, for example, can only keep its A-37s flying for two or three more years and has already grounded its IA.58 Pucaras. In this respect, China is well placed, with its JL-8 and its more advanced L-15 trainer/light-strike aircraft being attractively priced.
Yet, it must be acknowledged that the “Advanced Hawk” aircraft is potentially HAL’s opportunity to break into the export market. With the support of BAE Systems, the aircraft has the potential to become a “Make in India” success story. The extent of the success will be dependent upon gauging the market honestly and targeting the product appropriately having regard to all the possible constraints. This is an opportunity that should be grasped by HAL to establish itself as a viable exporter of aircraft and it should use its partnership with BAE Systems to ensure that this project succeeds.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
10 Questions the Standing Committee on Defence needs to ask MoD
Amit Cowshish
February 13, 2017
The objective of asking these question should be to elicit information that generates a well-informed debate on, and facilitates the result-oriented monitoring of, the MoD’s handling of matters related to the defence budget.
Restructuring of the demands for grant of various ministries, including the Ministry of Defence (MoD) last year, and further tinkering with the MoD’s demands this year is inexplicable, to say the least. These changes neither present “a holistic picture of budgetary allocations” nor facilitate “effective expenditure monitoring”. Such an outcome-oriented monitoring was the stated objective of the exercise in the first place.1 Following up on this, the Standing Committee on Defence (SCoD) had also recommended last year a switching over to outcome-oriented budgeting for specific projects, programmes and schemes for capital acquisitions.2
The way MoD’s demands for grant for the next fiscal are structured is unlikely to facilitate outcome-oriented monitoring in the manner suggested by SCoD. If, for example, allocations continue to be made under budget heads like ‘Aircraft and Aero-engine’ and ‘Other Equipments’, as is the case this year also, there will be no clarity at the end of the year as to which specific acquisition contracts the MoD intended to sign during the year and what was the budgetary provision made for them. Consequently, the focus of the ministry will continue to be on ensuring utilisation of funds whichever way it can be done rather than on specific projects. In fact, expenditure on several other objects, such as procurement of ammunition, maintenance of in-use equipment and infrastructure development must also be brought under the purview of outcome-oriented monitoring.
This then is the first question that needs to be asked: how close is the MoD to adopting outcome-oriented monitoring of expenditure on revenue and capital procurements which account for nearly one-third of the defence budget? Only such a monitoring will bring in greater efficiency in the management of budgetary outlays. But this is not the only question that needs to be asked. There are at least nine other questions that have a direct bearing on the efficacious utilisation of the defence outlay in general and for the next fiscal in particular.
To begin with, it is not clear what has been achieved by restructuring the ministry’s demands last year and by the further tinkering with it this year? While the benefit of the exercise is yet to manifest itself, it has led to a strange situation where, for example, the outlay for the National Cadet Corps (NCC) forms a part of the Army’s demand for grant while the outlay for Jammu & Kashmir Light Infantry (JAKLI) – an infantry regiment of the Army – continues to figure in the demand for MoD (Miscellaneous).
Two, it would be useful to get the details of all capital acquisitions contracts the MoD had planned to sign during 2016-17 for which provision had been made, and those that did not go through. It is the latter which need closer examination to see why these contracts did not materialise, with a special focus on those which got stuck either because of paucity of funds or took an inordinately long time after the completion of contract negotiations.
Three, the Standing Committee should ask the ministry to provide information on the current status of all cases of acquisition in which Acceptance of Necessity (AoN)3 has been granted. This will help identify the stage(s) at which the procurement process often gets derailed and, more importantly, which cases are lagging behind the prescribed time frame.4 The committee needs to prod MoD to institute a system for having a detailed analysis carried out by an independent agency of the contracts planned, but not signed, during a given year as well as the progress made in respect of each case in which the AoN has been accorded. That should help pinpoint the problems, take corrective actions, and assign responsibility.
Four, the Committee could help clear the air about ‘Make in India’ in defence. There is lack of clarity on the current ‘policy’ and how it is different from the way things were being done earlier. Foreign companies and governments, in particular the United States, want to participate in ‘Make in India’ but cannot figure out how to do it. It would be interesting to ask where the strategic partnership model, defence technology fund5 and other such initiatives being contemplated by MoD fit into the scheme of things and what is the roadmap for reaping the benefits of ‘Make in India’ in defence.
Five, the ‘Make’ procedure adopted by MoD in 2006 for indigenous design, development and manufacture of prototypes of futuristic equipment with funding by the ministry has not yielded the desired result. Not a single development contract has been signed thus far. The Technology Perspective and Capability Roadmap, released by MoD in 2013,6 to enable private industry to gear up for meeting the future requirements of the armed forces has not helped. A new list of 23 projects has been released in 2016.7
The questions that need to be asked in this regard are: (a) why no development contract has been signed so far? (b) what has been the feedback from the industry regarding the usefulness of the new list of 23 projects; and (c) which ‘Make’ projects are planned to be processed in 2017-18? The last question assumes significance in view of the fact that only a sum of Rs 44.63 crore has been allocated for providing assistance for prototype development under the Make procedure for 2017-18, down from Rs 183.79 crore allocated in the revised estimates for 2016-17, creating the impression that MoD does not expect many projects to take off during 2017-18, as the ‘Make’ procedure entails reimbursement of a substantial part of the development cost.
Six, the Comptroller & Auditor General of India (C&AG) had highlighted a grim picture of the war wastage reserves (WWR) in a report submitted to parliament in 2015.8 The situation would certainly have improved since then but it will do no harm to get a progress report from MoD not just on the stock of ammunition but also in respect of other parameters related to defence preparedness such as the serviceability level of equipment, weapon systems and other platforms. This may take time as MoD will need to evolve a reportable matrix that reflects defence preparedness in terms of measurable outcomes, but it must be done. The ministry needs to be encouraged to evolve the matrix, if it does not already exist, and make it a standard practice to report the state of defence preparedness to the committee every year.
Seven, there is a view that defence planning is hamstrung because there is not even an indication of the likely allocation for defence in the coming years, much less any long-term assurance of funds. While it is true that there is no ‘assurance’ of funds, it would not be correct to say that there is not even an indication of funds likely to be available in the subsequent years. For instance, last year, the finance minister had indicated that the total defence expenditure, including the capital component, is estimated to be about 1.6 per cent of GDP in 2017-18 and 2018-19.
SCoD needs to ask whether the requirement projected by MoD to the Ministry of Finance was in accordance with this estimate and, if not, why. Such a question is necessary to infuse a sense of realism in the defence planning process. Plans based on unrealistic assumptions about the availability of funds are bound to run into difficulty. This issue is independent of the debate over the adequacy of defence outlays. While on the subject, one may also point out that there is a need to re-evaluate the methodology adopted by MoD for preparing the budget estimates.
Eight, the rising cost of manpower requires special attention. More than 50 per cent of the total defence outlay will be spent on pay and pensions in 2017-18. This has been the case in the past as well. The allocated amount may, in fact, prove to be quite inadequate next year. Unless the defence budget is increased substantially, rising manpower costs will choke funds for meeting operational requirements. It is of the utmost importance that the Standing Committee asks MoD what plan it has to deal with this situation.
Nine, systematic defence planning was adopted by MoD in the 1960s but it was only in 1980 that the defence plan was made co-terminus with the sixth national five-year plan (1980-85). Over the years, MoD has evolved a three-tiered system of planning. The 15-year Long Term Integrated Perspective Plan (2002-17) and the 12th Defence Five-year Plan (2012-17) expire on 31 March 2017 and are due for revision. The Annual Acquisition Plan will also need to be in place before the next fiscal begins. With the dismantling of central planning and the Niti Aayog indicating that it would also foray into defence,9 it is necessary to raise questions about the future of defence planning and the role Niti Aayog will play in it.
The objective of asking these question should be to elicit information that generates a wider and well-informed debate on, and facilitates the result-oriented monitoring of, the MoD’s handling of matters related to the defence budget. It would be counter-productive to use this exercise only to berate officials, summarily reject their viewpoint and dispense non-pragmatic prescriptions for the management of defence outlays.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
5. The strategic partnership model was recommended by the committee of experts set up by MoD in 2015. The report can be accessed at http://mod.nic.in/writereaddata/Reportddp.pdf. Chapter VII in DPP 2016 is reserved for setting out the scheme. As for the technology fund, it was announced by the finance minister in his budget speech in 2014 (para 143) but it is yet to become operational.
India’s Defence Budget 2017-18: Should Alarm Bells Ring?
Vinay Kaushal
February 10, 2017
The share of defence expenditure in 2016-17 has gone below the levels it was in 1955-56. In 2017-18 it will go down to 1.557 per cent of GDP.
Until 2015-16, the budgetary allocations of the Ministry of Defence (MoD) fell under eight Demands for Grants: the five revenue budgetary demands for the Army, Navy, Air Force, Ordnance Factories, Defence Research and Development Organisation (DRDO); the Capital Budget for all five demands put together; Civil Expenditure of the MoD Secretariat, Defence Accounts Department, Canteen Stores Department (CSD), Defence Estates Organisation (DEO), Coast Guard and Jammu & Kashmir Light Infantry (JAKLI); and, finally, Defence Pensions. While the first six demands comprising the revenue and capital allocations are commonly known as Defence Expenditure, the latter two (civil expenditure and defence pensions) are not formally included in the Defence Budget.
In the 2016-17 budget, these Demands for Grants were rationalised to four demands (Demand Nos. 20 to 23) with the stated aim of providing “a clear and consolidated depiction of defence expenditures.” As part of this rationalisation, the revenue budget of Military Farms (MFs), Ex-servicemen Contributory Health Scheme (ECHS), Inspection Organisation (IO), Rashtriya Rifles (RR), National Cadet Corps (NCC), DRDO and Ordnance Factories were all moved to MoD (Civil Estimates) under the new Demand No. 20 (MoD (Miscellaneous), which, in addition, caters for Border Roads, Coast Guard, DEO, JAKLI, Armed Forces Tribunal, CSD, and Housing (DAD/DEO/CSD). Similarly, the capital budget requirements of all these entities were also moved to the new Demand No. 20. Defence Pensions was renumbered as Demand No. 21. And, finally, the revenue budget demands of the services and joint staff were consolidated into a single demand (new Demand No. 22) while their capital budget demands became Demand No. 23).
Surprisingly, however, in the 2017-18 budget presented a few days ago, all except ECHS and Military Farms have come back to be part of Demand No. 22. Be that as it may, in all this, the definition of what constitutes ‘Defence Expenditure’ or ‘Defence Budget’ has not changed. Was this a ‘red herring’ so that people lose sight of past recommendations and promises?
Ignored Promises and Recommendations
In its recommendations, the 14th Finance commission had stated the following: “Recognizing that revenue expenditure is critical for defence preparedness and maintenance, we have kept the defence revenue expenditure-GDP ratio constant during our projection period, instead of allowing growth to decelerate as was the case in the past. In other words, the rate of defence revenue expenditure has been allowed to increase at the same rate as the GDP, which is substantially higher than the past growth of defence revenue expenditure.”1 For its part, the Medium Term Fiscal Policy Statement 2016-17 stated that while the revenue component of defence expenditure is estimated at Rs. 1,62,759 crore in Budgetary Estimate (BE) 2016-17, during the projection period of 2017-18 and 2018-19, it is estimated to increase by 10 per cent over the previous years. And according to the budget presented recently, the GDP for BE 2017-18 is projected to grow at 11.75 per cent over RE 2016-17.2
In the light of all this, it is indeed surprising that the increase in the revenue budget for all the services in the budget presented on February 1 is about four per cent. Further, the increases in the total revenue budgets of the Army and Air Force are less than the increase in the allocation for Pay & Allowances. Only in the case of Navy has the increase in revenue budget been marginally positive. This implies that the allocation under all the other revenue heads of expenditure, which caters for operations and maintenance, has been reduced. In the case of the Navy (other than Pay & Allowances), the allocation has remained constant from BE 2016-17 to BE 2017-18.
Table 1 Revenue Budget Allocations 2017-18
Revenue Budget at RE 2016-17
Total Increase in Revenue Budget RE 2016-17 to BE 2017-18
Further, even the increase in allocations under the Pay & Allowances head of about seven per cent would not be sufficient in view of the following:
Service personnel are being paid an ad-hoc amount of 10 per cent of their reckonable pay as on January 1, 2016 over their 6th Central Pay Commission (CPC) pay scales, pending final orders for implementation of the 7th CPC recommendations to be issued after resolution of anomalies.
The government is yet to approve the 7th CPC recommendations on allowances for all employees.
Annual increment and two instalments of dearness allowance (DA) that would become due in the financial year 2017-18.
Fuel (High Speed Diesel, Aviation Turbine Fuel and Petrol) constitute a major portion of the stores expenditure. The entire training activity of the platform based weapon systems of the defence services is fuel intensive. Fuel prices had come down in 2015-16 on the back of a reduction in global crude prices. But they have been steadily rising as seen in the figure below:
Reduced revenue allocations in the face of rising fuel prices is likely to cause a reduction in the training effort, which, in turn, will have a direct impact on preparedness levels.
The Medium Term Fiscal Policy Statement 2017-18 contains further bad news: “The revenue component of Defence services is projected to increase by about 8 per cent and 11 per cent respectively in 2018-19 and 2019-20, over the previous year’s estimates.”3
The situation in the capital budget, which contributes to infrastructure building and acquisition of new weapon systems and platforms, their upgrade and replacement of legacy systems, is even worse. Table 2 indicates that capital expenditure in the last four years has been near constant at around Rs. 80,000 crore. This stagnation needs to be seen in the light of the following:
Since 2007, the shortfall in revenue allocations is being met by dipping into the capital budget. This is being done as per a policy called ‘Capital Budget Revenue Procedure’ (CBRP). This has put the system in a vicious circle. Slowing the pace of replacement of legacy systems means sustaining the same at higher maintenance costs. Higher maintenance costs result in greater amounts being pinched from the capital budget under CBRP, thus leaving a lower budget for modernisation. Committed liabilities towards stage payments of existing contracts being the first charge means fewer contracts of new schemes. This has slowed down defence capability building.
Capital acquisitions, whether directly procured from foreign original equipment manufacturers (OEMs) or through licence production routed through Defence Public Sector Undertakings (DPSUs) are import dependent.
Reduction in the purchasing power of the rupee because of an adverse exchange rate (see Figure 2) and the withdrawal from 2016-17 of the exemption from custom duties of defence imports select programmes undertaken by DPSUs, which has added an additional burden on the capital and revenue budgets.
Note: Annual average dollar exchange rate as per Reserve Bank of India (RBI). Rate for 2016-17 is the 10 month average from 01 April 2016 till 31 January 2017.
Should Alarm Bells Ring?
The parliament Standing Committee on Defence of the 16th Lok Sabha has been severely critical of allocations being substantially lower than projections and the implications thereof. It has stated that it finds the entire scenario very discouraging and that it has not been given any reason by the Ministry of Defence and Ministry of Finance for curtailing the defence budget.4 Examining the Demand for Grants for 2016-17, the Committee has noted the following:
The decline in the allocation for capital acquisition will definitely affect several procurement contracts.
All pending procurement projects would not go through unless the government increases allocations at the Revised Estimate stage.
A close examination of previous defence budgets reveals that the government’s ability to spend has come under repeated pressure with the MoD surrendering in the past four years over Rs. 35,000 crore from its capital allocations.
This state of affairs does not bode well for national security and there is a need to examine in detail the causes that have brought the defence budget and the accretion in the capability of the armed forces to such a pass.5
The reason for the Committee voicing such a concern is evident from the table below. As may be seen, defence expenditure as a percentage of GDP has been declining every year since 2013-14.
A shortfall in funds in the revenue budget impacts the serviceability level of platforms and thus training, which ultimately lowers the preparedness level. And a shortfall of funds in the capital budget creates gaps in infrastructure and retards the capability building process. The share of defence expenditure in 2016-17 has gone below the levels it was in 1955-56. In 2017-18 it will go down to 1.557 per cent of GDP. Alarm bells should indeed be ringing.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
Would a Non-Lapsable Defence Modernisation Fund Work?
Amit Cowshish
February 10, 2017
There is a plethora of evidence to show that the problem of establishing a Defence Modernisation Fund does not lie with any ‘rules of business’, but instead with its merit and workability.
One idea that keeps resurfacing in discussions on the defence budget is the creation of a non-lapsable defence modernisation fund (DMF) to harvest the money that remains unspent, especially under the capital segment, at the end of the financial year. In 2015-16, a sum of Rs. 85,894.44 crore was allocated for capital expenditure of the three services in the budget estimates (BE). The allocation was reduced to Rs. 74,299.61 crore at the revised estimate (RE) stage. Yet, at Rs. 71,675.43 crore, the actual expenditure was Rs 14,219.01 less than the initial allocation. Similarly, in 2016-17, the BE for capital expenditure of the three services was Rs. 78,586.68 crore, which was brought down to Rs. 71,700 crore at the RE stage. Assuming, for the sake of argument, that the actual expenditure will not be less than the RE, the underutilisation during the current year would amount to Rs. 6,886.68 crore.
The total unspent balance for these two fiscal years would work out to Rs. 21,105.69 crore. The argument advanced by advocates of the non-lapsable defence modernisation fund idea is that, had this amount been transferred to the fund, it alone would have been sufficient for signing contracts worth approximately Rs. 1,50,000 crore, since it is only the advance payment of 15 per cent that normally gets disbursed during the year in which a contract is signed. Further, going by back-of-the-envelope calculations, the amount available for signing new contracts in the next fiscal would be sufficient for signing contracts worth approximately Rs. 50,000 crore. Thus, in the coming year, the Ministry of Defence could sign contracts worth Rs. 2,00,000 crore, using the current allocation and the accumulation under the DMF, thereby giving a huge push to defence modernisation.
This prima facie makes for a persuasive argument for setting up a non-lapsable DMF. The question, however, is whether this is feasible and, more to the point, would it serve the intended purpose.
The idea of setting up a DMF has been around for more than a decade. There is a popular narrative that it has not been set up only because there is a marked reluctance on the part of the bureaucracy to amend the ‘rules of business’, dating back to the British era, which do not permit the setting up of such a fund. But the fact that Jaswant Singh, a former finance minister, had actually announced the setting of the fund in his interim budget speech on 03 February 2004 flies in the face of such a narrative. Yet, the myth persists. In fact, there is a plethora of evidence to show that the problem does not lie with any ‘rules of business’, which, in any case, can be, and have been, amended several times. As a matter of fact, a non-lapsable pool of resources for development of the north-eastern region has now been in operation for more than a decade. The problem, instead, lies with the merit and workability of the fund.
The objective of setting up a DMF is, apparently, to make sure that defence procurements do not suffer on account of shortage of funds. But, in the backdrop of perennial underutilisation of the capital outlay, it is a weak argument to assert that procurements are affected by shortage of funds.
Some would argue that underutilisation of funds is not for real and that it is the result of manipulation by the Ministry of Finance (MoF) which deliberately delays the process of financial sanction for individual procurement proposals. Here, it is important to note that proposals costing between Rs. 500 and 1,000 crore require approval of the finance minister and those above that limit require approval of the Cabinet Committee on Security (CCS), in which the finance minister is a member. The view is that the delays are caused either because of bureaucratic shenanigans or because the MoF needs to withdraw money at the RE stage to meet the fiscal deficit target. Assuming for the sake of argument that either or both of these reasons are valid, it is still difficult to visualise how these issues would be taken care of by the DMF, unless the role of the MoF and CCS in approving expenditure were to be eliminated simultaneously.
This can, of course, be done in relation to financial sanction for firmed up proposals before the signing of contracts by delegating full powers to the defence ministry. But even that would not solve the problem of the actual availability of funds. In addition, there can be no guarantee about the complete absence of problems in exercising delegated financial powers.
Be that as it may, there are two possibilities. One, that the unspent amount is withdrawn from the Consolidated Fund of India (CFI) and kept aside in some account to be used as and when required. The problem with this move, however, is that the government does not earn as much as it spends. It has to borrow to meet the expenditure year after year. Which implies that the amount in question, to be withdrawn and kept aside, would largely come out of borrowings. It would make little sense to borrow money, pay interest on it, and keep it idle till such time as the need arises for using it. For the record, while in 2015-16 interest payments accounted for Rs. 4,41,659 crore, in the coming fiscal the expenditure on this count is projected to be Rs. 5,23,078 crore.
The other possibility is that the unspent balance is rolled over to the next year and added to that year’s budgetary allocation to constitute a notional pool of funds, as it were, from which money could be withdrawn. Any such appropriation will require approval of parliament. More to the point, in the year the money lying idle in the DMF is to be used, the MoF will, in any case, have to raise it. It cannot do so as and when MoD asks for it during the year. It will have to be done necessarily as a part of the budgetary process in the beginning of the year. This effectively implies that MoD will have to project the requirement at the BE stage and the MoF will have to raise enough resources to allocate the sum asked for. And that brings the case for setting up a DMF back to square one.
The Standing Committee on Defence has been assiduously advocating the setting up of the fund despite being informed of the reasons why the idea was given up in 2004 itself. It has, in fact, advised the MoD “to process the creation of DMF with suitably changed modalities in Consultation with the Ministry of Finance so that the modernisation programme can be carried forward smoothly at the desired pace without any need to seek the Parliamentary approval again and again.”1
Apart from there being little discussion on what kind of changes need to be made, and whether there is enough justification to make the changes exclusively in respect of the defence budget, the question whether it will serve the intended purpose continues to be moot.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
In view of China’s adverse reaction to India’s missile testing, this year’s Republic Day parade could have been used for strategic signalling to arrogant entities questioning India’s ‘strategic autonomy’. Nuclear deterrence is also about demonstration and display of capabilities. If you have it, then flaunt it!
Is China feeling threatened by India’s Inter-Continental Ballistic Missile (ICBM) capabilities? The way it has reacted to India’s recent back-to-back successful testing of Agni-IV and V, it is clear that China is rattled and upset with India’s growing missile capabilities. Though India had been testing these missiles for the last five to six years, China had by and large refrained from commenting over India’s missile programme. The last time China had reacted was in April 2012, when Agni-V was first test-fired successfully. China did not react when Agni-V was test-fired for the second time in September 2013 and for the third time in January 2015. India’s Strategic Forces Command (SFC) is expected to conduct two more tests before inducting Agni-V missile into its weapons arsenal. Similarly, there was no reaction from China when Agni-IV was first test-fired earlier in November 2011, and thereafter in September 2012 and January 2014, before being inducted into the armed forces in December 2014, though user trials are still on.
However, after India conducted the fourth test of Agni-V on December 26, 2016, Chinese foreign ministry spokesperson stated the very next day that “The UN Security Council has explicit regulations on whether India can develop ballistic missiles capable of carrying nuclear weapons.” The spokesperson added, “China always maintains that preserving the strategic balance and stability in South Asia is conducive to peace and prosperity of regional countries and beyond.” Interestingly, similar to the statement issued by China in April 2012, after Agni-V was first tested, the latest statement too reiterated that India and China “are not rivals for competition but partners for cooperation.”1
The Chinese spokesperson was probably referring to the United Nations Security Council (UNSC) Resolution 1172 of June 1998, which was passed in the aftermath of the nuclear tests conducted by both India and Pakistan in May 1998. The resolution had urged India and Pakistan not to develop nuclear weapons delivery platforms like ballistic missiles and also to cap their nuclear weapons programmes and cease all fissile materials production. This resolution was approved under Chapter VI of the UN Charter and is non-binding. There are no constraints therefore on India pertaining to its weapons and missile programmes.
In response to the Chinese reaction, the spokesperson of the Indian Ministry of External Affairs immediately affirmed that “India's strategic capabilities are not targeted against any particular country and India abides by all the applicable international obligations. India’s strategic autonomy and growing engagement contributes to strategic stability.”2 The Indian print and electronic media, however, stated the obvious; claiming that, now with 5000 km-plus range, Indian missiles could reach any part of China. The way media went about commenting on India’s growing missile capabilities, which received wide international coverage as well, could have to an extent spurred China to react.
The Chinese spokesperson in her statement had alluded to speculations in the media reports about India developing Agni-V to counter China. This came out in a more upfront manner in an editorial published in the Global Times, country’s leading English-daily affiliated to the Communist Party of China, two days after India successfully conducted the user trial of Agni-IV on January 02, 2017. The editorial accused India of breaking “the UN's limits on its development of nuclear weapons and long-range ballistic missile” as “New Delhi is no longer satisfied with its nuclear capability and is seeking intercontinental ballistic missiles that can target anywhere in the world.” The editorial warned that China “will not sit still if India goes too far...If the UN Security Council has no objection over this, let it be. The range of Pakistan's nuclear missiles will also see an increase.”3
Interestingly, three weeks later, Global Times carried an editorial emphasising the strategic significance of Dongfeng-41, China’s own ICBM, and how it could bring more respect to China. The editorial argued that, “It is logical that Beijing attaches particular importance to the Dongfeng-41 as a strategic deterrence tool. With China's rise, China's strategic risks are growing. China bears the heavy task of safeguarding national security. Nuclear deterrence is the foundation of China's national security, which must be consolidated with the rising strategic risks.” Taking the argument further, the editorial stated that, “China must procure a level of strategic military strength that will force the US to respect it.”4
However, media coverage of the successful test-firing of the two long-range missiles by India cannot be considered as the only reason why China reacted so brashly. Some of the recent developments too could have added to China’s growing discomfort over India gaining prominence in the strategic arena. Beijing is probably finding it difficult to accept the fact that India, despite not being a signatory to the Nuclear Non-proliferation Treaty (NPT), is getting preferential treatment from the rest of the world (read the US, Russia and the European Union). India had recently joined the Missile Technology Control Regime (MTCR), whereas China’s credentials to be in the grouping were found lacking. Meanwhile, China has been trying to ensure that India does not gain entry into the Nuclear Suppliers Group (NSG). Instead, it wants Pakistan to gain entry into the NSG, fully aware of its highly questionable non-proliferation record.
While China appears concerned about India’s growing ballistic missile capabilities, it fully understands that the concept of so-called strategic stability in South Asia is actually a misnomer. The People’s Liberation Army (PLA) had established a special missile arm in their defence establishment, called Rocket Force, on December 31, 2015. Further, China itself had tested various missiles during 2016. These tests included Intermediate-Range Ballistic Missiles (IRBMs) like DF-21, ICBMs like DF-41 (a multiple warhead missile), a hypersonic missile test-fired from Chinese J-16 strike fighter, anti-ship missiles like YJ-12 and YJ-18, and missile defence interceptor test for missile DN-3, which is also known to have the capability to destroy satellites in the low earth orbit. In fact, very recently, there were reports about PLA’s Rocket Force conducting an exercise with DF-16 medium range ballistic missile, which, with a range of 1,000 km, can easily target several countries in China’s neighbourhood including the US military assets in Japan.
China fully understands that having arsenal in thousands is of little consequence. What counts is the potency and accuracy of the weapons/missiles and the nature of military tactics employed. It is but obvious that China must be keenly monitoring India’s progress in the submarine-launched ballistic missile (SLBM) arena. India has already successfully tested the K-4 SLBM and its efforts to marry this missile with the submarine are progressing well. China probably worries that India’s growing military profile is no longer South Asia-specific.
Apart from raising objections to India’s missile testing and stalling India’s entry into the NSG, China has also been acting against Indian interests on the issue of terrorism emanating from the Pakistani soil. India, however, does not appear to be giving a strong response to such Chinese actions. India could have launched a ‘different form of surgical strike’ by exhibiting its missile potential during the Republic Day parade in January this year. For all these years, the parade has been used by India to display its achievements and progress in social, scientific and military sectors.
Globally, it has been observed that countries use such ceremonial parades to display their military capabilities to the world. On September 03, 2015, China had held a grand military parade to mark the 70th anniversary of the victory of ‘Chinese People’s War of Resistance against Japanese Aggression and the World Anti-Fascist War’. The occasion was used by China to display a host of new armaments, ranging from ICBMs to medium-long range bomber aircraft, highlighting the nation's inherent military strategy of “active defense.”5 Russia is also known to use the occasion of Victory Day parade held every year on May 09 (to commemorate the victory of the Soviet Union over Nazi Germany) to demonstrate their military capabilities. States like North Korea, South Korea, Iran, etc. are also known to use such ceremonial parades to demonstrate their military strength including missiles.
During the 2013 Republic Day parade, India had displayed Agni-V and at that point of time too Chinese media had taken note of it. During the subsequent years, 2014 and 2015, Japanese Prime Minister Shinzo Abe and the US President Barack Obama were the chief guests for this parade. It appears that India avoided displaying its nuclear might after 2013 for obvious geopolitical reasons. But, January 2017 parade was different. During the last one year, China has repeatedly rubbed India the wrong way and for no reason. Hence, it was important to fully display India’s strategic capabilities.
A display of ICBM in a ceremonial parade may have a very limited strategic relevance but, what was important is the timing. In view of China’s adverse reaction to India’s missile testing, this year’s Republic Day parade could have been used for strategic signalling. Nuclear deterrence is also about demonstration and display of capabilities. If you have it, then flaunt it! Such strategic signalling is often necessary to send a strong message to arrogant entities questioning India’s ‘strategic autonomy’.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
The main threat to Mexico comes from illegal privately-operated aircraft which are heavily involved in smuggling. The inability of the Mexican Air Force to guarantee the integrity of its own airspace is therefore a matter of concern.
In September 2016, it was reported that the Mexican Air Force (Fuerza Aerea Mexicana – FAM) has retired the last of its tiny force of F-5E fighters.1 While these reports may be exaggerated, it is quite clear that unless necessary steps are taken and sufficient funds allocated FAM’s combat capabilities will continue to suffer.2 This is the latest in a series of seemingly insurmountable challenge that have over the decades stymied FAM’s effort to develop a viable combat capability.
However, FAM still has fleets of robust and well-equipped transport aircraft and helicopters. The former has a mix of C-130, C-295 and C-27 tactical transports with a substantial force of Boeing jets for VIP transport. The latter operates a large fleet of over a hundred helicopters including no fewer than 32 UH-60L/M “Blackhawks”, 27 Mil Mi-8/-17s, 31 Bell 412/212 and 66 Bell 206s with 20 MD 500F “Defenders” providing a potent attack element.3 In contrast to these modern and capable assets, FAM’s combat fleet is in poor shape and in dire need of rejuvenation.
The FAM has a proud combat history, contributing a 25-aircraft squadron of P-47 “Thunderbolt” to fight in the Pacific during 1945. The 201st “Aztec Eagles” too had fought with distinction in the skies over the Philippines and Okinawa and had conducted numerous close-support and escort missions – clocking over 2800 hours and dropping nearly 1500 1000lb and 500lb bombs - against a determined Japanese opposition.4
The P-47s along with other vintage aircraft such as A-24 “Dauntless” dive-bombers, AT-6 “Texan” armed trainers, and B-25 “Mitchell” bombers formed a potent combat force in Central America during the early 1950s. These were augmented by armed T-28 “Trojan” trainers in 1958. The FAM nearly found itself in action against neighboring Guatemala after latter’s P-51 “Mustangs” attacked Mexican fishing boats killing three Mexican nationals. In this operation, worth y of deeper study, a strike package of AT-6 and T-28s (armed with rockets, machine gun pods and reportedly napalm bombs) was prepared with three P-47s flying top-cover and a C-47 transport serving as an airborne command post. This force, which penetrated Guatemalan airspace before being ordered to abort the mission, represents a relatively rare example of coordinated air operations in 1950s Central America.5
The P-47s thus formed the core of the FAM’s fighter fleet until 1961 when Mexico took delivery of the first of 15 “Vampire” F.Mk.3s. These were used to equip the 200th Jet Fighter Squadron and were later joined by two “Vampire” T.11 trainers.6 The distinctive ovoid shape of the Vampire’s forward fuselage led to the type being known as the “Flying Avocado” – a name only enhanced by the dark green night camouflage they initially wore before being repainted in all-aluminum scheme in 1964. The “Vampire” was not a popular aircraft in FAM service and was phased out in 1967.
In 1961, Mexico also began taking delivery of Lockheed AT-33A-1 trainers under the United States Military Assistance Programme (MAP).7 The first three aircraft, delivered in September 1961, were precursors to deliveries totaling no fewer than 58 aircraft between 1961 and 1987. Known as the “Tetra” in FAM service, the AT-33 and T-33 variants of this aircraft formed the core of two air groups – the 7th Jet Fighter Group (AT-33A-1s serving with the 202nd Jet Fighter Squadron and the 200th Jet Fighter Squadron with “Vampires”) and the 10th Air Group (with the 210th, 211th and 212th Fighter Squadrons) formed in the 1980s when 40 additional “Tetras” were delivered.8 By 1998, only 24 “Tetras” remained and these were combined into the new 402nd Air Squadron and deployed extensively in the interception of illegal flights. For this purpose, the two nose-mounted 0.50-cal M2 machine guns were augmented with 7.62mm MAG machine-gun pods and LAU-32 or MA2A rocket launchers.9 After serving the FAM with distinction for 45 years, the last 12 “Tetras” were retired from service in 2007.
By 1977, the FAM was looking for a new tactical fighter aircraft and considered several options – the F-5E, the Dassault Mirage F.1, the F-4 Phantom-II and the IAI Kfir C.2 were among the leading contenders. An initial request for 30 F-5Es and 6 F-5Fs, to equip three fighter squadrons, was rejected by the US Congress.10 Efforts were then made to acquire two dozen Kfir C.2/TC.2 fighter/fighter trainers with interest being expressed in establishing a local production line.11 However, the United States once again vetoed the sale of these aircraft to Mexico citing concerns over the export of the GE J79 engine. It was only in 1982 that the United States relented and authorised the sale of a dozen F-5s – 10 F-5Es and 2 F-5Fs to Mexico.12 This force of 12 was destined to be the FAM’s first purpose built combat aircraft since the “Vampire”.
Between August and September 1982, under a US$ 110 million Foreign Military Sales (FMS) deal – called “Peace Aztec” – the delivery of 12 F-5Es, ground support equipment, training, AIM-9B “Sidewinder” air-to-air missiles, LAU-3 rocket pods with associated rockets and Mk.82 and Mk.83 General Purpose bombs took place.13 These aircraft were formed into the 401st Air Defence Squadron and the nine survivors continue to nominally serve with this formation. A modest upgrade was undertaken with AN/APQ-159V (5) radars and GPS systems being fitted to the F-5Es in place of the obsolete AN/APQ-139 during a major overhaul in the early 2000s.14 In retrospect, at some US$ nine million per aircraft, the “Peace Aztec” programme represented good value for money but the number of aircraft acquired was woefully inadequate.
While Mexico can neither afford to obtain nor sustain air defence assets capable of deterring an attack from its northern neighbor, threat from the latter is anyway considered virtually non-existent. Rather, the main threat to Mexico comes from illegal privately-operated aircraft which are heavily involved in smuggling. Mexico’s assets are incapable of dealing with this threat – especially with the retirement of the “Tetras”. This was graphically demonstrated 2000 onwards when, using newly acquired Airborne Early Warning (AEW) platforms in the form of the EMB-145SA/RS and the C-26B “Merlin”, the FAM made determined efforts to intercept illegal flights – often suspected of narcotics trafficking. With only 10 aircraft – two of which were trainers – the 401st Squadron was unable to make more than four to five aircraft available for national deployments – two aircraft being retained for the defence of Mexico City at all times.15
By 2016, however, only three aircraft were operational and Mexico had resorted to cannibalising two of the aircraft for spares. Efforts to keep the fleet airworthy continue with the engines of three aircraft being dispatched to RUAG Aviation of Switzerland for overhaul.16 However, it is questionable whether these efforts will be able to sustain the F-5s for much longer. Mexico has mooted the idea of augmenting its combat fleet with 14 to 24 ex-Swiss Air Force F-5Es but no order has been forthcoming to date. An American offer in 2004 of 10 ex-USAF F-16A and two F-16B Block 15 MLU with spares, training and armament was turned down, as the price of US$ 1.2 billion was deemed excessive for ‘old’ aircraft.17
The bulk of the FAM’s ‘combat’ force consists of armed turboprop trainers. Mexico was the largest customer for the Pilatus PC-7 trainer with 88 delivered 1979 onwards. Even today, 65 remain in service and these have re-equipped many of the old “Tetra” squadrons and the famed 201st “Aztec Eagles” squadron.
These aircraft were delivered with hardpoints for 0.50-cal machine guns and 2.75-inch rocket pods and in this configuration, they were deployed on strike missions during the Chiapas insurgency of 1994-95. This had the unfortunate effect of Switzerland declining to sell 48 of the newer PC-9 type when Mexico insisted that these be fitted with hardpoints.18 Mexico did eventually acquire two PC-9Ms in 2006 but these were deemed unsuitable and one was sold to Ireland as an attrition replacement for the Irish Air Corps.19 The FAM eventually purchased a dozen T-6C “Texan-II” trainer/ light-attack aircraft in two batches of six from the United States – the first of perhaps as many as 48 – to begin the replacement of the ageing PC-7s in both the training and attack roles.20
With the F-5Es of the 401st Air Defence Squadron barely serviceable and of limited availability, Mexico’s air defence rests on the dubious capability of its PC-7s and T-6Cs. These aircraft while undoubtedly very useful for light strike operations and excellent for training, offer very limited air-intercept capabilities. While these may be adequate for intercepting slow and low-flying propeller-driven aircraft, they are incapable of reaching or catching higher flying executive jets and ex-airliners that are more commonly used by the narcotics smugglers.21 The PC-7 and T-6C are barely capable of catching more modern turboprop civilian aircraft such as the Beechcraft King Air, which are also widely employed by smugglers.
The degradation of the FAM’s combat fleet comes at a time when drug cartels have battled the Mexican state for over a decade. The lucrative narcotics smuggling routes to the United States and even to Europe have made extensive use of aircraft to move their product. The inability of Mexico to guarantee the integrity of its own airspace is therefore a matter of concern. Unfortunately, to date, Mexico has been unable to muster either the will or the wherewithal to undertake the acquisition of even a modest number of combat aircraft needed for the task.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
There is a strong case for abandoning the present approach of looking at the defence budget through the narrow prism of allocation and utilisation, and instead focus on outcomes.
It may sound harsh but the changes made in the structure of the defence budget for the second year running appear quite aimless. In the process, however, these disruptive changes have raised two questions.
The first question concerns the very definition of the defence budget. The practice followed till 2015-16 was to refer to the sum total of the net revenue and capital allocation for the three services (including Joint Staff), Defence Research & Development Organisation (DRDO), and Ordnance Factories (OFs) as the ‘defence budget’.
When the finance minister announced an allocation of Rs. 2,46,727 crore for the armed forces in his 2015 budget speech, he did not include the allocation made for meeting the requirements of the ministry’s own secretariat and of a number of other organisations such as the Coast Guard and the Armed Forces Tribunal. But while presenting the union budget for 2017-18, he included these elements and announced a total allocation of Rs. 2,74,114 crore for defence expenditure.
Of course, in 2017-18, as in 2015-16 and earlier years, the figures mentioned by the finance minister did not include the outlay on defence pensions. (In the budget speech for 2016-17, there was no mention of the allocation made for defence or pensions.)
So, what is India’s defence budget? It could be any of the following:
This is important because the defence budget would look more reasonable if it were to be defined as the sum total of all allocations, including defence pensions, than if it were to be defined only as the sum of allocations made for revenue and capital expenditure of the armed forces.
To illustrate: The allocation for defence, excluding defence pensions, for 2017-18 would work out to 1.6 per cent of GDP. But if defence pensions are also considered as a part of the defence budget, the total allocation would be 2.1 per cent of GDP.
The way defence expenditure is defined by the Stockholm International Peace Research Institute (SIPRI) would require the inclusion of expenditure for which provision is made in all the four demands for grant of the Ministry of Defence (MoD), including the demand for defence pension.
This issue has to be also looked at in the light of the fact that changes were made in 2016 with a view to providing “a holistic picture of budgetary allocations and effective expenditure monitoring.”1 Despite all the changes made since then, expenditure related to J&K Light Infantry – a regular infantry regiment of the Army – continues to be outside the Army’s budget. So much for providing ‘a holistic’ picture of budgetary allocations.
It would be possible to take a holistic view only if the entire expenditure on defence, including the expenditure on defence pensions, is taken into account. This issue needs to be settled to infuse an element of realism in the discourse on India’s defence budget.
The second question concerns the objective of the exercise. What purpose has been served by restructuring of the demands for grant? Tucked away in the budget documents last year was a statement that the exercise “to rationalize Plan and Non-Plan schemes of all Ministries and Departments (had) been undertaken” for “effective outcome oriented monitoring of implementation of programmes and schemes/projects and to ensure optimum utilization of resources.” The document went on to say that the “existing programmes and schemes (had) been reorganized into outcome-based Umbrella programmes and schemes” and that this “process would be carried forward in the coming years.”
That none of that is true of the revamped demands for grant of the ministry of defence is another matter. The demands for grant of the ministry continue to be bereft of any outcome-orientation.
There is a strong case for abandoning the present approach of looking at the defence budget through the narrow prism of allocation and utilisation. What matters more is not ensuring utilisation of the budget but focussing on the outcomes. For ensuring outcome-oriented monitoring of the defence budget it is necessary to revisit the structure of the demands for grant and reformulate them, to the extent it is possible to do so, in terms of specific programmes, schemes and projects.
The present discourse on the defence budget revolves around concepts such as the modernisation budget, manpower costs, and allocation for ‘new schemes’ or other operational requirements. Interestingly, there are no specific budget heads which capture expenditure related to these concepts as they do not fit into the scheme of budgetary classification. For example, there is no formal budgetary classification relating to ‘modernisation’ (often also referred to as ‘capital acquisition’) in the budget documents, much less its bifurcation into ‘committed liabilities’ and ‘new schemes’. There are also no cut and dried budget heads for capturing allocation and expenditure on such critical operational requirements as procurement of ammunition or maintenance of in-use equipment, weapon systems and other platforms.
The sporadic and disjointed information available in the reports of the Standing Committee on Defence is invaluable, but it cannot make up for the dysfunctional system of budgetary classification. It is high time that serious thought is given to a thorough revamping of the system of budgetary classification so that information is captured in a manner that serves the objective of outcome monitoring.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
It is in the US interest not to encourage Israeli policies that could possibly lead to further radicalisation of Palestinians.
US President Donald Trump voiced mild criticism of the Israeli government’s expansion of Jewish settlements in the West Bank, at a dinner with a Jewish magnate on February 08, 2017. Thereafter on February 15, 2017, during Israeli Prime Minister Benjamin Netanyahu’s official visit to Washington, Trump mildly rebuked Israel for expanding its settlements and advised that a compromise was necessary. More significantly, while not ruling out a two-state solution, Trump declared that he would be happy with any solution (a one-state or a two-state) that was acceptable to both the Israelis and the Palestinians. Analysts note that this is the first time the US has not explicitly supported a two-state solution.
The Netanyahu Government however is proceeding ahead with the expansion of settlements in the West Bank. There are presently more than 125 such settlements and nearly 100 outposts with approximately 400,000 Israelis residing in these enclaves. If the settlements are to be subsumed within Israel as part of a future agreement, the Palestinians would be left with a diminished territory for fulfillment of their socio-economic and political aspirations.
The settlement policy has assumed a new dimension of late, because, it will be executed henceforth within the statutory framework of the Regulation Law recently enacted by Israel’s Knesset. Despite continuous efforts of the international community and even after the adoption of the United Nations Security Council (UNSC) Resolution 2334 in December 2016, enjoining on Israel to freeze and roll back its settlements, the Palestine Authority (PA) headed by Mahmoud Abbas has not been able to do much to stall their settlement drive. The Arab countries, excepting perhaps Jordan, have many pressing issues on hand involving their immediate security and economic concerns and are not in a position to actively engage in support of the Palestinian cause. Now, with Trump’s reformulation of the US policy on Palestinian statehood, imponderables arise on whether Israel’s settlement drive can be checked at all through international pressure.
The White House press secretary had observed on February 02, 2017 that the US Government does not believe that the existence of settlements is an impediment to peace, whereas the construction of new settlements or the expansion of existing settlements beyond the current border may not be helpful to achieving peace between Israel and Palestine. Trump’s advocacy of restraint on Israel’s settlement policy, prior to apparently abandoning the two-state approach on Palestine, seems to be in line with the above-cited White House press statement.
The Trump administration’s position appears to be similar to the stand taken by former President George W. Bush in 2004 when, as a consequence of the Bush-Sharon dialogue, Israel was to limit the growth of settlements and remove unauthorised settlements, but the latter was not obligated to return to borders drawn up as per the armistice of 1949. Nikki Haley, the US permanent representative to the UN, has however observed that there is no question of abandoning the two-state policy though attempts are on within her government for an out-of-the-box solution.
Netanyahu meanwhile is on a politically shaky ground domestically, owing to rumblings within his right wing Likud Party-led coalition government. Avigdor Liberman (present defence minister) and his Yisrael Beiteinu party joined the ruling coalition a few months back and mounted pressure for a more aggressive posture on Palestine. Netanyahu therefore cannot be seen to be abandoning or conceding on the present expansive settlement policy propagated by the hardliners within his political combine, particularly after the passing of the Regulation Law.
The Law incidentally enables the consolidation of settlements by obliterating the distinction between those that were aggressively set up like Itama — deep in the West Bank and Ma’ale Adumin — a commuter settlement on the suburb of Jerusalem. It therefore legitimises usurpation of territory not abutting the original state of Israel but far beyond. Netanyahu is also aware that the Law which sanctifies the settlement policy may not survive for long and may be overturned by the Israeli Supreme Court on grounds of inequity and on the premise that it is technically outside the Israeli constitutional ambit. He has to therefore derive the maximum mileage from the existing settlement policy and the Law within a short span of time. The Israeli premier has also perforce to extract the most favourable outcome from the Trump administration.
The Trump administration may not be oblivious to the possibility of escalation of tensions between the Israelis and the Palestinians as a result of continuing settlements policy.
It is possible that the US president will keep in view the broader US interests in West Asia — where negative repercussions of the US policies vis-à-vis Palestine cannot be ruled out. Unlike the Barack Obama administration, Trump will not allow any formal condemnation of Israel in international fora like the UNSC. His government is also likely to maintain and upgrade the US-Israel economic and defence ties. It is in the US interest however not to encourage Israeli policies that could possibly lead to further radicalisation of Palestinians in the West Bank and those in Gaza, by elements like the Islamic State of Iraq and Syria (ISIS) and other similar outfits.
Given the above, Trump may continue to exert some restraining influence on Israel’s settlement policy, at least in the short term. A significant check on Israel’s aggressive settlement policy in the near future may de facto arise from within its polity, i.e. from its legal institutions and moderate political and social groups. Reinforcing these efforts can only be possible if Trump realises the futility of promoting a single state of Israel with a restive Palestinian populace within. This would only increase the prospects of greater radicalisation of large segments of the latter and those in the peripheral regions, which would be against the US interests.
The author is a commentator on international affairs and a retired IDAS officer who has served in senior positions of Government of India and a State Government. The views expressed are the author’s own.
For the financial year 2017-18, the Ministry of Home Affairs(MHA) has been allocated Rs. 83,823 crore, a hike of around 11.5 per cent over that of the previous year. Though the Union government has been providing substantial budget support to the MHA to aid its reform and modernisation programs, the ministry’s efforts to bring about desired reforms have shown mixed results so far.
Beginning with the spike in budgetary allocation to the Ministry of Home Affairs (MHA) in 2009-10 following the Mumbai terror attacks of November 2008, the MHA has been witnessing a steady increase in its allocations over the years. In the last three years too, allocations have increased from Rs. 61,401.78 crore in 2014-15 to 65,651.10 crore in 2015-16, and to 73,406.37 crore in 2016-17. For the upcoming financial year 2017-18 as well, this upward trend has persisted with allocations reaching Rs. 83,823 crore, a hike of around 11.5 per cent over that of the previous year.
Of the total allocations to the MHA, allocation made under the head ‘Police’ pertains to matters of internal security such as the central armed police forces (CAPFs), central police organisations (CPOs), border infrastructure, intelligence, disaster and emergency management, etc. The increased budgetary allocations under the ‘Police’ head over the years reflect the growing concerns over various internal security challenges plaguing the country as well as a firm intent to tackle them. The emphasis, has been to prioritise these threats and challenges and deal with them in a concerted and sustained manner through security interventions and development activities.
One of the serious internal security threats that the country has been grappling with for more than a decade is left wing extremism (LWE). At present, 106 districts in 10 states are affected by LWE.1 Although the primary responsibility of fighting LWE lies with the concerned states, the Union government assists them by providing battalions of central armed police forces to counter the subversive activities of left wing extremists and maintain public order. Given that the Central Reserve Police Force (CRPF) is the primary force deployed in the LWE-affected states, the Government of India had, in 2009, sanctioned funds for raising 39 additional battalions of the CRPF. As a result, the CRPF has been receiving the highest allocations in successive budgets since then. In the previous fiscal year, the force received Rs. 16,228. 18 crore, which has been increased by another 1635.35 crore to Rs. 17,868.53 crore for 2017-18. Of the sanctioned 39 battalions, 26 have been raised till 2016 and the remainder is to be raised by 2018-19.
Another way in which the Union government assists the LWE affected state governments is by providing funds for capacity building through various security related expenditure (SRE) schemes. Under these schemes, the Union government reimburses the expenditure incurred by LWE-affected states in training and operational requirements of the security forces, insurance of police personnel, ex gratia payments to the families of civilian or security forces personnel killed in LWE violence, compensation to surrendered left wing extremist cadres under the surrender and rehabilitation policy of the respective states, etc. In the last two financial years, i.e. 2015-16 and 2016-17 (until 15 November 2016), funds released to LWE states under these schemes were Rs. 258.65 crore and 111.49 crore, respectively. For the upcoming fiscal year, the budgetary allocation under SRE has been pegged at Rs. 1,222 crore, an increase of Rs. 380 crore from the previous year. Since SRE also comprises expenditures incurred by Jammu and Kashmir and insurgency affected states in the North East, the rise of almost 45 per cent under this head could be because of the deteriorating security situation and the expectation of a consequent rise in spending under SRE in these states.
Border management is the second area that has witnessed a substantial increase in budgetary allocations for the fiscal year 2017-18. The need to effectively secure the country’s international borders against infiltration, trafficking and irregular crossings has become even more pressing following a series of successful infiltration attempts by Pakistani terrorists through the India-Pakistan international border and subsequent attacks on strategic installations in the past couple of years. These attacks have raised serious concerns about the effectiveness of the present border management system in thwarting such border breaches and has compelled the Union government to undertake measures to fortify the India-Pakistan and India-Bangladesh borders in particular. Towards this end, the Union government had decided to enhance surveillance and detection by building ditch cum fence barriers, putting up laser walls along riverine stretches, employing sensors, cameras and tunnel detection gadgets, building roads and other infrastructures along the borders. The implementation of the comprehensive integrated border management systems (CIBMS) along the India-Pakistan border on a pilot basis is a step in this direction. Accordingly, Rs. 2,600 crore has been allocated for border infrastructure, of which 2,355 crore is for capital expenditure i.e., spending on fences, electronic surveillance gadgets, etc. This amount is, however, lower than the Rs. 2,490 crore provisioned for 2016-17. One of the reasons for the lower allocation could be the under or non-utilisation of funds due to various reasons, a fact revealed by the revised budget of 2016-17, where the expenditure under capital outlay has been reduced to Rs. 1,722.33 crore.
Similarly, budgetary allocations for the border guarding forces have been substantially increased to improve their strength and efficiency. Allocations under this sub-head are made for raising additional battalions, training, procurement of weapons and ammunition, administrative requirements, etc. The Border Security Force (BSF), which has responsibility for the India-Pakistan and India-Bangladesh borders, received the highest amount of Rs. 15,569.11 crore, an increase of Rs. 917 crores from the previous year. Furthermore, the Land Port Authority of India (LPAI), entrusted with the mandate to build and manage integrated check posts (ICPs), received Rs. 300 crore for 2017-18, an increase of 241 per cent from the previous year. This highlights the government’s commitment towards greater regional integration by ensuring the smooth and efficient cross border movement of people and goods. Likewise, the Border Area Development Programme (BADP), a scheme to meet the infrastructural requirements of the border people, received an enhanced allocation of Rs. 1100 crore, an increase of 11 per cent from 2016-17.
The third segment which received a substantial increase in allocations is police modernisation and infrastructure. Under police modernisation, Rs. 800 crore has been allocated for modernisation of the state police forces. This sum includes grants by the Union government to states to strengthen police infrastructure in terms of training, weaponry, mobility and communication, and the establishment of secure police stations. Further, it also includes the establishment and upkeep of the crime and criminal network tracking system (CCTNS). Building projects, both residential and office, for CAPFs and COPs received Rs. 4008.06 crore, indicating the seriousness of the Union government to improve the living and working conditions of these police organisations.
The Intelligence Bureau (IB), which in recent years has been augmenting its strength, has also received an allocation of Rs. 1,577 crore, an increase of 11 per cent from the previous year. Most of the expenditure, however, will be revenue outlay indicating an increase in spending on salaries and perks of personnel. In the past, the IB was functioning at a reduced strength with a shortfall of around 2000 agents, but in the aftermath of the Mumbai terror attack, calls were made to strengthen the IB in a comprehensive manner through increased recruitments, among other things. The IB has been recruiting personnel since 2009 but this is yet to reflect accurately in the manpower strength since full induction of operatives would only happen after the completion of their training. Last but not the least, Delhi Police, the National Emergency Response System for crimes against women and national disaster schemes also received increased budgetary allocations for the fiscal year 2017-18.
The enhanced budgetary allocations for the MHA since 2009 reflect the efforts of the successive Union governments to comprehensively overhaul the internal security set up of the country through a series of measures such as capacity building of security and law enforcement organisations through strength augmentation, improved training, modern weaponry and other infrastructure, technical upgradation; enhancing intelligence gathering, analysis and dissemination; infrastructure development in violence affected areas as well as border regions; improving responses to natural disaster and other emergencies; etc. The budgetary allocations for the fiscal year 2017-18 is a continuation of this process. Though the Union government has been making substantial budget allocations to the MHA, the ministry’s efforts to bring about the desired reforms have, however, shown mixed results so far. While the revenue outlays have been increasing, the capital outlays have seen troughs and crests in the last four years. This indicates that while the concerned organisations have been successful in increasing manpower, they have been unable to build up the commensurate infrastructure required for capacity building such as training schools and laboratories, and procuring additional vehicles and boats, arms and ammunitions, computers and surveillance equipment, etc. Efforts, therefore, must be made to fully utilise the budgetary outlays provided to the MHA in order to achieve a comprehensive reform of the internal security system of the country.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
This commentary is inspired by the Annual Gorkha Brigade Conference held at New Delhi on 11 February 2017 and the unique relationship between India and Nepal that this military connection underpins.
This commentary is inspired by the Annual Gorkha Brigade Conference held at New Delhi on 11 February 2017 and the unique model of military diplomacy it fosters between India and Nepal. The Gorkha Brigade is an association representing approximately 40,000 Indian and Nepali Gorkha soldiers as well as about 90,000 Indian Army pensioners in Nepal. The Brigade comprises seven regiments, viz, First, Third, Fourth, Fifth, Eighth, Ninth and Eleventh Gorkha Rifles. The missing serials were allotted to the British Army on India’s independence. Each regiment is further organised into five or six infantry battalions, which is the basic, fully independent, and functional unit of the Indian Army. Thus 3/9 GR denotes the Third Battalion of the Ninth Gorkha Rifles, an exclusive classification which has baffled many within and outside the armed forces fraternity. The Gorkha Brigade also encompasses the Defence Wing of the Embassy of India in Nepal and the Gorkha Recruiting Depots of Gorakhpur and Ghoom (Darjeeling). The President of the Gorkha Brigade is always the senior most serving officer from amongst the seven regiments; presently, the Chief of Army Staff, General Bipin Rawat, a second generation officer of the Eleventh Gorkha Rifles, has that honour.
This year the Gorkha Brigade is also celebrating the bicentenary of one of its oldest regiments, the Ninth Gorkha Rifles. The First Battalion of the Ninth Gorkhas was raised by the British in 1817 as the ‘Fatehgarh Levy’. Contrary to popular belief that the British were the first to recruit Gorkhas, it was in fact Maharaja Ranjit Singh, who, impressed by the bravery and valour of these big hearted little men from the hills, raised a battalion of Gorkhas to serve in the Sikh Army in 1809. As a result, all soldiers serving in the Indian Army are still called ‘Lahorey’ in Nepal, i.e., those who serve in Lahore – the capital of Ranjit Singh’s empire. The celebrations of the bicentenary commenced with a Motorcycle Rally of 1/9 GR flagged off by General Rawat on 30 January from Delhi. The motorcyclists drove through the traditional recruiting areas of the Regiment in Western Nepal honouring many ex-servicemen en route. Their arrival in Pokhra in Nepal on 4 February coincided with a massive rally where almost 3,500 ex-servicemen and widows had gathered to celebrate the bicentenary of the Regiment. The event was attended by General Rajendra Chhetri, Chief of Army Staff, Nepal Army, Shri Ranjit Rae, Ambassador of India to Nepal, and Lt. Gen. AK Bhatt, Colonel of the Regiment of the Ninth Gorkhas. India and Nepal share a unique tradition wherein their respective Chiefs of Army Staff are anointed as Honorary Generals of the other’s forces. General Rajendra Chettri is already an Honorary General of the Indian Army and General Bipin Rawat is likely to be conferred the reciprocal honour on his first visit to Nepal.
Ex-servicemen welfare is a state subject in India, with the Indian Army and the Ministry of Defence having only a limited role in it. However, Nepal being a Sovereign Nation, the welfare of Nepal-domiciled ex-servicemen of the Indian Armed Forces and pensioners of the Central or State Government including para-military forces is the responsibility of the Embassy of India in Nepal. The Government of India owes a debt to these citizens of Nepal for having dedicated their lives in service of our nation and the Defence Wing of the Embassy carries out this onerous task, a model without parallel in the world, with exemplary efficiency. Here, it would be pertinent to explain the range of its activities.
The Defence Wing of the Embassy has three Pension Paying Offices at Kathmandu, Pokhara and Dharan, each handled by a serving officer of the Indian Army under the Defence Attaché. Approximately 1,27,000 pensioners (90,000 of the Indian Army and 37,000 of the Central and State Governments as well as para-military) draw pensions from these offices. About 30,000 of these pensioners are paid pensions directly in their respective bank accounts. The rest reside in areas yet to be covered by banking infrastructure and draw their pensions in cash. The Pension Paying Offices carry out 36 payment camps every year in various remote locations, some accessible only on foot, to disburse these pensions. It is to the credit of this organisation that it has completed the payment of One Rank One Pension arrears to all pensioners in Nepal. The total amount disbursed as pensions and arrears in this financial year is likely to exceed INR 2,500 crore or Nepali Rupee (NR) 4,000 crore, and possibly reach INR 3000 crore or NR 4,800 crore per annum by 2018/19.1 At a conservative estimate, the 32,000 Nepal domiciled serving soldiers remit approximately INR 1,000 crore equivalent to NR 1,600 crore per year.2 This total at approximately NR 6,400 crore is almost equivalent of 63 per cent of the total foreign grant in aid received by the Government of Nepal from all donor countries for the year 2016/17at NR 10,689.64 crores and greater than its own allocation for Defence at NR 3601.80 crore.3 Further, this figure does not include remuneration received by Nepali citizens as other employees of the Indian Government; there is no definitive figure available for the numbers of such personnel. The pensioner’s ratio does offer some basis for extrapolation wherein these pensioners form approximately 21 per cent of the total pensioners of the Indian Government. It can therefore be assumed that a similar ratio is in service at any given point of time with the Government of India and, if their remittances were to be added, the figures would further increase.
The Indian Ex-servicemen Welfare Organisation in Nepal (IEWON) is an independent organisation chaired by the Ambassador of India with representation from senior officials from the Governments of Nepal and India. It functions under the aegis of the Defence Wing of the Embassy and is responsible for the welfare of the Nepal-domiciled pensioners of the Government of India. In an exceptional decision, the Government of India chose to execute its social welfare activities through its ex-servicemen residing in Nepal. These ex-servicemen have shown exemplary zeal, honesty and determination in executing these social welfare projects, most of which are drinking water projects in remote hilly areas where drinking water is an acute problem. This has not only empowered these ex-servicemen and enhanced their status in society but also created more than one lakh ambassadors for Brand India and the values that it stands for. The IEWON also carries out other welfare activities including the provision of educational scholarships and vocational training for the wards of pensioners through 22 District Soldier Boards manned by Ex-servicemen it employs all over Nepal. The total annual budget of these welfare schemes is approximately INR 5.5 to 6 crore.4
The Government of India also provides opportunity to any citizen of Nepal to serve as an officer in the Indian Armed Forces, a fact that goes unnoticed in the haze and smoke surrounding Indo-Nepal relations. Some Nepali citizens have already risen to the rank of Major/Lieutenant General or equivalent. This displays the amount of trust and faith that India has on the citizens of Nepal. A Nepali youth has twin opportunities compared to his Indian counterpart; he can either join the Nepal Army or the Indian Armed Forces. No country in the world has opened its armed forces to a neighbour in this manner besides the other aspects of this special relationship like the open border. Different studies estimate the number of Nepalis working or residing in India to be between one and 1.6 million. The Indo-Nepal Trade Treaty of 2009 provides special treatment to industrial products of Nepal to promote development of industry in that nation on a non-reciprocal basis.5 Many Indian industries like Dabur have shifted production to Nepal as it is cheaper to produce in Nepal and distribute in India. There have been occasions when this special arrangement has been questioned by myopic interests on either side: Indians questioning the need to recruit Gorkhas when an ample recruitable population exists in the country; and Nepalis objecting to the impropriety of sovereign citizens of Nepal serving another country. This petty squabbling ignores the geo-political reality of a land locked Nepal hemmed in by the Himalayas to the North and India to the South as well as India’s moral obligations therein. It also ignores the fact that Nepal does not have the wherewithal, infrastructure and industry to provide employment for its bulging youth population. India provides the only viable option for their gainful employment and for the remittances therein.
A comparison with the British Gurkhas6 is inevitable here as even Great Britain maintains this special bond. The British have reduced their four Gurkha regiments existing in 1947 to one and this has two infantry battalions. Though the exact strength of British Gurkhas has not been mentioned on their website, an approximation, given the units and subunits mentioned, would be about 3,500 men.7 The number of British Gurkha pensioners residing in Nepal is dwindling as the majority choose to settle down in Britain after the British parliament voted to offer British Gurkhas the right to settle in the UK in 2009.8 The contrasts with the Indian relationship are glaring if only because of the sheer numbers involved.
This author had the opportunity to meet several pensioners from Nepal at a regimental reunion at Ranchi.9 Each one was immensely proud of his service in the Indian Army and grateful for the pensions and welfare activities being provided to them. They were especially happy with the recent extension of the Ex-servicemen Contributory Health Scheme (ECHS) to private hospitals in Nepal as also the extension of canteen facilities to pensioners in Nepal. Similarly, every senior Indian Army officer of the Gorkhas at the Gorkha Brigade Conference spoke of the exemplary qualities of the Gorkha soldiers. One of the Generals said that the Nation was grateful to these citizens of Nepal for their service and no amount of pensions or welfare activities can truly repay the debt that India owes these brave warriors. This unique bond is the core of Indo-Nepal friendship. Irrespective of the noise and clutter that surrounds this relationship, both governments need to nurture this core and build on the foundation it offers so that the association contributes to the Comprehensive National Security of both nations.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
On 5 February 2017, a version of the Hawk Advanced Jet Trainer (AJT) was unveiled. The aptly-named “Advanced Hawk” is a joint-venture between BAE Systems and Hindustan Aeronautics Limited (HAL). It has been developed using internal funds on an equal risk basis and offers significant enhancement of the capabilities of the basic Hawk AJT.
On 5 February 2017, a version of the Hawk Advanced Jet Trainer (AJT) was unveiled. The aptly-named “Advanced Hawk” is a joint-venture between BAE Systems and Hindustan Aeronautics Limited (HAL). It has been developed using internal funds on an equal risk basis and offers significant enhancement of the capabilities of the basic Hawk AJT.1 The aircraft, besides being offered as an enhanced capability trainer to larger air arms – India with 123 Hawks in service being a prime candidate – is also being marketed as an affordable light-combat aircraft choice to smaller air forces. While the Hawk AJT was a global success story in the export market, the “Advanced Hawk” enters the market at a time when China has made significant inroads into the light combat aircraft market and would be a direct competitor to the “Advanced Hawk”.2
In choosing to create a new aircraft that goes beyond an upgrade of the existing Hawk AJT, HAL and BAE have gambled on being able to break into the export market. Indeed, the Indian Air Force (IAF) is reputedly not keen to order the “Advanced Hawk” as a combat aircraft and is at best lukewarm at this stage about its necessity for enhanced training.3 However, an examination of previous exports of the Hawk as well as an evaluation of possible customers suggests that sales of the “Advanced Hawk” may not be easily forthcoming due to a combination of fiscal and political constraints in addition to cost-effective competition from Chinese platforms.
The potential export market for the “Advanced Hawk” has to be divided into two segments – customers that want a capability enhanced trainer and those that want a cost-effective light combat aircraft-cum-trainer. It is submitted that the demand for the former is going to be less forthcoming than the latter as larger air forces may opt for upgrades of their Hawks’ avionics to meet future training requirements rather than purchase new aircraft. In fact, BAE Systems and HAL have already taken cognizance of this and are offering upgrade options to existing Hawk customers with various modules from the “Advanced Hawk”.4 However, in respect of the latter requirement for cost-effective combat aircraft, the “Advanced Hawk” may be on firmer ground but will nonetheless face severe challenges in finding markets.
The Hawk AJT has been sold to every continent except South America. While most of these aircraft are used in their training role, the Air Force of Zimbabwe (AFZ) made extensive use of the Hawk T.Mk.60 as a light-strike aircraft during the 1998-2001 Second Congo War. Armed with a combination of 30mm Aden cannon (in a pod mounted on a centreline pylon), unguided rockets and bombs, the AFZ Hawks proved to be one of the most effective strike aircraft of that conflict and proved popular in service – even acting as an interceptor armed with Chinese made PL-7 air-to-air missiles.5 This combat pedigree should augur well for the “Advanced Hawk” as it offers a considerable increase in those combat capabilities with provision for Brimstone air-to-ground missiles and ASRAAM air-to-air missiles.6 BAE Systems’ attempts to market dedicated combat versions of the Hawk – in the form of the Hawk 200 series – found only three customers (Malaysia, Indonesia and Oman) for a total of 62 aircraft. However, this does not in any way negate the potential of a new dual-purpose platform – good for training as well as light combat roles.
What is of much greater importance is the fact that the “Advanced Hawk” will be subject to the export control rules of both the United Kingdom and India, with export clearances being needed from the governments of both countries.7 This could adversely affect sales as at least three Hawk operators – Indonesia, Kenya and Zimbabwe – found themselves facing spares embargoes from the United Kingdom. This led to a major fall in serviceability and eventually resulted in the latter two countries withdrawing the type from service.8 The AFZ in particular viewed the sanctions imposed by the UK as being crippling to its defence preparedness.9
This experience has had two consequences. The first is a wariness on the part of some African and Asian countries about buying aircraft subject to UK export clearances. The second has been to open the market to Chinese aircraft to countries that would not have usually chosen such an option. Nowhere is this clearer than in the case of Zimbabwe where the much less capable Chinese JL-8/K-8 trainer replaced the T.Mk.60 Hawk in the light-attack role with the AFZ’s No.2 squadron which had earned an enviable reputation during the Second Congo War.10
Mexico and the Latin American region may also be wary of UK export controls owing to that country’s close political proximity to the United States. It is unlikely that Argentina would ever be allowed to purchase British combat capable aircraft while any attempt on the part of Mexico to make such a purchase could face additional complications should the United States object. Anticipating and working to circumvent these potential political pitfalls in advance could enhance the “Advanced Hawk’s” prospects for sales.
Despite these concerns, there is a large potential market for the “Advanced Hawk”. Countries that need to replace ageing Cessna A-37 attack aircraft (such as Colombia, Uruguay and even Peru) may be tempted by the capability enhancement that the “Advanced Hawk” offers, while countries seeking to supplement or supplant equally geriatric MiG-21s and F-5s may find the cost-effectiveness of operating the “Advanced Hawk” appealing. The need for replacements for these aircraft – particularly the A-37s and F-5s – is acute, as spares are now in relatively short supply while the extreme age of many airframes will be a cause for concern. If some African and Latin American air forces eschew the “prestige” of supersonic aircraft, the “Advanced Hawk” could be an attractive option.
However, even while readily realizing that this potential market exists, the cost of the “Advanced Hawk” may be a significant deterrent factor. It is as yet unknown what the aircraft will cost. But given the level of sophistication that the type undoubtedly has, it is an open question whether countries that might see the “Advanced Hawk” as a viable aircraft choice can afford to purchase it. This factor cannot be understated as many potential customers are now unable to afford replacement aircraft or even to maintain those in service. Uruguay, for example, can only keep its A-37s flying for two or three more years and has already grounded its IA.58 Pucaras. In this respect, China is well placed, with its JL-8 and its more advanced L-15 trainer/light-strike aircraft being attractively priced.
Yet, it must be acknowledged that the “Advanced Hawk” aircraft is potentially HAL’s opportunity to break into the export market. With the support of BAE Systems, the aircraft has the potential to become a “Make in India” success story. The extent of the success will be dependent upon gauging the market honestly and targeting the product appropriately having regard to all the possible constraints. This is an opportunity that should be grasped by HAL to establish itself as a viable exporter of aircraft and it should use its partnership with BAE Systems to ensure that this project succeeds.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
The objective of asking these question should be to elicit information that generates a well-informed debate on, and facilitates the result-oriented monitoring of, the MoD’s handling of matters related to the defence budget.
Restructuring of the demands for grant of various ministries, including the Ministry of Defence (MoD) last year, and further tinkering with the MoD’s demands this year is inexplicable, to say the least. These changes neither present “a holistic picture of budgetary allocations” nor facilitate “effective expenditure monitoring”. Such an outcome-oriented monitoring was the stated objective of the exercise in the first place.1 Following up on this, the Standing Committee on Defence (SCoD) had also recommended last year a switching over to outcome-oriented budgeting for specific projects, programmes and schemes for capital acquisitions.2
The way MoD’s demands for grant for the next fiscal are structured is unlikely to facilitate outcome-oriented monitoring in the manner suggested by SCoD. If, for example, allocations continue to be made under budget heads like ‘Aircraft and Aero-engine’ and ‘Other Equipments’, as is the case this year also, there will be no clarity at the end of the year as to which specific acquisition contracts the MoD intended to sign during the year and what was the budgetary provision made for them. Consequently, the focus of the ministry will continue to be on ensuring utilisation of funds whichever way it can be done rather than on specific projects. In fact, expenditure on several other objects, such as procurement of ammunition, maintenance of in-use equipment and infrastructure development must also be brought under the purview of outcome-oriented monitoring.
This then is the first question that needs to be asked: how close is the MoD to adopting outcome-oriented monitoring of expenditure on revenue and capital procurements which account for nearly one-third of the defence budget? Only such a monitoring will bring in greater efficiency in the management of budgetary outlays. But this is not the only question that needs to be asked. There are at least nine other questions that have a direct bearing on the efficacious utilisation of the defence outlay in general and for the next fiscal in particular.
To begin with, it is not clear what has been achieved by restructuring the ministry’s demands last year and by the further tinkering with it this year? While the benefit of the exercise is yet to manifest itself, it has led to a strange situation where, for example, the outlay for the National Cadet Corps (NCC) forms a part of the Army’s demand for grant while the outlay for Jammu & Kashmir Light Infantry (JAKLI) – an infantry regiment of the Army – continues to figure in the demand for MoD (Miscellaneous).
Two, it would be useful to get the details of all capital acquisitions contracts the MoD had planned to sign during 2016-17 for which provision had been made, and those that did not go through. It is the latter which need closer examination to see why these contracts did not materialise, with a special focus on those which got stuck either because of paucity of funds or took an inordinately long time after the completion of contract negotiations.
Three, the Standing Committee should ask the ministry to provide information on the current status of all cases of acquisition in which Acceptance of Necessity (AoN)3 has been granted. This will help identify the stage(s) at which the procurement process often gets derailed and, more importantly, which cases are lagging behind the prescribed time frame.4 The committee needs to prod MoD to institute a system for having a detailed analysis carried out by an independent agency of the contracts planned, but not signed, during a given year as well as the progress made in respect of each case in which the AoN has been accorded. That should help pinpoint the problems, take corrective actions, and assign responsibility.
Four, the Committee could help clear the air about ‘Make in India’ in defence. There is lack of clarity on the current ‘policy’ and how it is different from the way things were being done earlier. Foreign companies and governments, in particular the United States, want to participate in ‘Make in India’ but cannot figure out how to do it. It would be interesting to ask where the strategic partnership model, defence technology fund5 and other such initiatives being contemplated by MoD fit into the scheme of things and what is the roadmap for reaping the benefits of ‘Make in India’ in defence.
Five, the ‘Make’ procedure adopted by MoD in 2006 for indigenous design, development and manufacture of prototypes of futuristic equipment with funding by the ministry has not yielded the desired result. Not a single development contract has been signed thus far. The Technology Perspective and Capability Roadmap, released by MoD in 2013,6 to enable private industry to gear up for meeting the future requirements of the armed forces has not helped. A new list of 23 projects has been released in 2016.7
The questions that need to be asked in this regard are: (a) why no development contract has been signed so far? (b) what has been the feedback from the industry regarding the usefulness of the new list of 23 projects; and (c) which ‘Make’ projects are planned to be processed in 2017-18? The last question assumes significance in view of the fact that only a sum of Rs 44.63 crore has been allocated for providing assistance for prototype development under the Make procedure for 2017-18, down from Rs 183.79 crore allocated in the revised estimates for 2016-17, creating the impression that MoD does not expect many projects to take off during 2017-18, as the ‘Make’ procedure entails reimbursement of a substantial part of the development cost.
Six, the Comptroller & Auditor General of India (C&AG) had highlighted a grim picture of the war wastage reserves (WWR) in a report submitted to parliament in 2015.8 The situation would certainly have improved since then but it will do no harm to get a progress report from MoD not just on the stock of ammunition but also in respect of other parameters related to defence preparedness such as the serviceability level of equipment, weapon systems and other platforms. This may take time as MoD will need to evolve a reportable matrix that reflects defence preparedness in terms of measurable outcomes, but it must be done. The ministry needs to be encouraged to evolve the matrix, if it does not already exist, and make it a standard practice to report the state of defence preparedness to the committee every year.
Seven, there is a view that defence planning is hamstrung because there is not even an indication of the likely allocation for defence in the coming years, much less any long-term assurance of funds. While it is true that there is no ‘assurance’ of funds, it would not be correct to say that there is not even an indication of funds likely to be available in the subsequent years. For instance, last year, the finance minister had indicated that the total defence expenditure, including the capital component, is estimated to be about 1.6 per cent of GDP in 2017-18 and 2018-19.
SCoD needs to ask whether the requirement projected by MoD to the Ministry of Finance was in accordance with this estimate and, if not, why. Such a question is necessary to infuse a sense of realism in the defence planning process. Plans based on unrealistic assumptions about the availability of funds are bound to run into difficulty. This issue is independent of the debate over the adequacy of defence outlays. While on the subject, one may also point out that there is a need to re-evaluate the methodology adopted by MoD for preparing the budget estimates.
Eight, the rising cost of manpower requires special attention. More than 50 per cent of the total defence outlay will be spent on pay and pensions in 2017-18. This has been the case in the past as well. The allocated amount may, in fact, prove to be quite inadequate next year. Unless the defence budget is increased substantially, rising manpower costs will choke funds for meeting operational requirements. It is of the utmost importance that the Standing Committee asks MoD what plan it has to deal with this situation.
Nine, systematic defence planning was adopted by MoD in the 1960s but it was only in 1980 that the defence plan was made co-terminus with the sixth national five-year plan (1980-85). Over the years, MoD has evolved a three-tiered system of planning. The 15-year Long Term Integrated Perspective Plan (2002-17) and the 12th Defence Five-year Plan (2012-17) expire on 31 March 2017 and are due for revision. The Annual Acquisition Plan will also need to be in place before the next fiscal begins. With the dismantling of central planning and the Niti Aayog indicating that it would also foray into defence,9 it is necessary to raise questions about the future of defence planning and the role Niti Aayog will play in it.
The objective of asking these question should be to elicit information that generates a wider and well-informed debate on, and facilitates the result-oriented monitoring of, the MoD’s handling of matters related to the defence budget. It would be counter-productive to use this exercise only to berate officials, summarily reject their viewpoint and dispense non-pragmatic prescriptions for the management of defence outlays.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
The share of defence expenditure in 2016-17 has gone below the levels it was in 1955-56. In 2017-18 it will go down to 1.557 per cent of GDP.
Until 2015-16, the budgetary allocations of the Ministry of Defence (MoD) fell under eight Demands for Grants: the five revenue budgetary demands for the Army, Navy, Air Force, Ordnance Factories, Defence Research and Development Organisation (DRDO); the Capital Budget for all five demands put together; Civil Expenditure of the MoD Secretariat, Defence Accounts Department, Canteen Stores Department (CSD), Defence Estates Organisation (DEO), Coast Guard and Jammu & Kashmir Light Infantry (JAKLI); and, finally, Defence Pensions. While the first six demands comprising the revenue and capital allocations are commonly known as Defence Expenditure, the latter two (civil expenditure and defence pensions) are not formally included in the Defence Budget.
In the 2016-17 budget, these Demands for Grants were rationalised to four demands (Demand Nos. 20 to 23) with the stated aim of providing “a clear and consolidated depiction of defence expenditures.” As part of this rationalisation, the revenue budget of Military Farms (MFs), Ex-servicemen Contributory Health Scheme (ECHS), Inspection Organisation (IO), Rashtriya Rifles (RR), National Cadet Corps (NCC), DRDO and Ordnance Factories were all moved to MoD (Civil Estimates) under the new Demand No. 20 (MoD (Miscellaneous), which, in addition, caters for Border Roads, Coast Guard, DEO, JAKLI, Armed Forces Tribunal, CSD, and Housing (DAD/DEO/CSD). Similarly, the capital budget requirements of all these entities were also moved to the new Demand No. 20. Defence Pensions was renumbered as Demand No. 21. And, finally, the revenue budget demands of the services and joint staff were consolidated into a single demand (new Demand No. 22) while their capital budget demands became Demand No. 23).
Surprisingly, however, in the 2017-18 budget presented a few days ago, all except ECHS and Military Farms have come back to be part of Demand No. 22. Be that as it may, in all this, the definition of what constitutes ‘Defence Expenditure’ or ‘Defence Budget’ has not changed. Was this a ‘red herring’ so that people lose sight of past recommendations and promises?
Ignored Promises and Recommendations
In its recommendations, the 14th Finance commission had stated the following: “Recognizing that revenue expenditure is critical for defence preparedness and maintenance, we have kept the defence revenue expenditure-GDP ratio constant during our projection period, instead of allowing growth to decelerate as was the case in the past. In other words, the rate of defence revenue expenditure has been allowed to increase at the same rate as the GDP, which is substantially higher than the past growth of defence revenue expenditure.”1 For its part, the Medium Term Fiscal Policy Statement 2016-17 stated that while the revenue component of defence expenditure is estimated at Rs. 1,62,759 crore in Budgetary Estimate (BE) 2016-17, during the projection period of 2017-18 and 2018-19, it is estimated to increase by 10 per cent over the previous years. And according to the budget presented recently, the GDP for BE 2017-18 is projected to grow at 11.75 per cent over RE 2016-17.2
In the light of all this, it is indeed surprising that the increase in the revenue budget for all the services in the budget presented on February 1 is about four per cent. Further, the increases in the total revenue budgets of the Army and Air Force are less than the increase in the allocation for Pay & Allowances. Only in the case of Navy has the increase in revenue budget been marginally positive. This implies that the allocation under all the other revenue heads of expenditure, which caters for operations and maintenance, has been reduced. In the case of the Navy (other than Pay & Allowances), the allocation has remained constant from BE 2016-17 to BE 2017-18.
Source: “Union Budget 2017-18”, at http://indiabudget.gov.in/vol2.asp?pageid=2 (accessed February 01, 2017).
Further, even the increase in allocations under the Pay & Allowances head of about seven per cent would not be sufficient in view of the following:
Fuel (High Speed Diesel, Aviation Turbine Fuel and Petrol) constitute a major portion of the stores expenditure. The entire training activity of the platform based weapon systems of the defence services is fuel intensive. Fuel prices had come down in 2015-16 on the back of a reduction in global crude prices. But they have been steadily rising as seen in the figure below:
Reduced revenue allocations in the face of rising fuel prices is likely to cause a reduction in the training effort, which, in turn, will have a direct impact on preparedness levels.
The Medium Term Fiscal Policy Statement 2017-18 contains further bad news: “The revenue component of Defence services is projected to increase by about 8 per cent and 11 per cent respectively in 2018-19 and 2019-20, over the previous year’s estimates.”3
The situation in the capital budget, which contributes to infrastructure building and acquisition of new weapon systems and platforms, their upgrade and replacement of legacy systems, is even worse. Table 2 indicates that capital expenditure in the last four years has been near constant at around Rs. 80,000 crore. This stagnation needs to be seen in the light of the following:
Note: Annual average dollar exchange rate as per Reserve Bank of India (RBI). Rate for 2016-17 is the 10 month average from 01 April 2016 till 31 January 2017.
Should Alarm Bells Ring?
The parliament Standing Committee on Defence of the 16th Lok Sabha has been severely critical of allocations being substantially lower than projections and the implications thereof. It has stated that it finds the entire scenario very discouraging and that it has not been given any reason by the Ministry of Defence and Ministry of Finance for curtailing the defence budget.4 Examining the Demand for Grants for 2016-17, the Committee has noted the following:
The reason for the Committee voicing such a concern is evident from the table below. As may be seen, defence expenditure as a percentage of GDP has been declining every year since 2013-14.
A shortfall in funds in the revenue budget impacts the serviceability level of platforms and thus training, which ultimately lowers the preparedness level. And a shortfall of funds in the capital budget creates gaps in infrastructure and retards the capability building process. The share of defence expenditure in 2016-17 has gone below the levels it was in 1955-56. In 2017-18 it will go down to 1.557 per cent of GDP. Alarm bells should indeed be ringing.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
There is a plethora of evidence to show that the problem of establishing a Defence Modernisation Fund does not lie with any ‘rules of business’, but instead with its merit and workability.
One idea that keeps resurfacing in discussions on the defence budget is the creation of a non-lapsable defence modernisation fund (DMF) to harvest the money that remains unspent, especially under the capital segment, at the end of the financial year. In 2015-16, a sum of Rs. 85,894.44 crore was allocated for capital expenditure of the three services in the budget estimates (BE). The allocation was reduced to Rs. 74,299.61 crore at the revised estimate (RE) stage. Yet, at Rs. 71,675.43 crore, the actual expenditure was Rs 14,219.01 less than the initial allocation. Similarly, in 2016-17, the BE for capital expenditure of the three services was Rs. 78,586.68 crore, which was brought down to Rs. 71,700 crore at the RE stage. Assuming, for the sake of argument, that the actual expenditure will not be less than the RE, the underutilisation during the current year would amount to Rs. 6,886.68 crore.
The total unspent balance for these two fiscal years would work out to Rs. 21,105.69 crore. The argument advanced by advocates of the non-lapsable defence modernisation fund idea is that, had this amount been transferred to the fund, it alone would have been sufficient for signing contracts worth approximately Rs. 1,50,000 crore, since it is only the advance payment of 15 per cent that normally gets disbursed during the year in which a contract is signed. Further, going by back-of-the-envelope calculations, the amount available for signing new contracts in the next fiscal would be sufficient for signing contracts worth approximately Rs. 50,000 crore. Thus, in the coming year, the Ministry of Defence could sign contracts worth Rs. 2,00,000 crore, using the current allocation and the accumulation under the DMF, thereby giving a huge push to defence modernisation.
This prima facie makes for a persuasive argument for setting up a non-lapsable DMF. The question, however, is whether this is feasible and, more to the point, would it serve the intended purpose.
The idea of setting up a DMF has been around for more than a decade. There is a popular narrative that it has not been set up only because there is a marked reluctance on the part of the bureaucracy to amend the ‘rules of business’, dating back to the British era, which do not permit the setting up of such a fund. But the fact that Jaswant Singh, a former finance minister, had actually announced the setting of the fund in his interim budget speech on 03 February 2004 flies in the face of such a narrative. Yet, the myth persists. In fact, there is a plethora of evidence to show that the problem does not lie with any ‘rules of business’, which, in any case, can be, and have been, amended several times. As a matter of fact, a non-lapsable pool of resources for development of the north-eastern region has now been in operation for more than a decade. The problem, instead, lies with the merit and workability of the fund.
The objective of setting up a DMF is, apparently, to make sure that defence procurements do not suffer on account of shortage of funds. But, in the backdrop of perennial underutilisation of the capital outlay, it is a weak argument to assert that procurements are affected by shortage of funds.
Some would argue that underutilisation of funds is not for real and that it is the result of manipulation by the Ministry of Finance (MoF) which deliberately delays the process of financial sanction for individual procurement proposals. Here, it is important to note that proposals costing between Rs. 500 and 1,000 crore require approval of the finance minister and those above that limit require approval of the Cabinet Committee on Security (CCS), in which the finance minister is a member. The view is that the delays are caused either because of bureaucratic shenanigans or because the MoF needs to withdraw money at the RE stage to meet the fiscal deficit target. Assuming for the sake of argument that either or both of these reasons are valid, it is still difficult to visualise how these issues would be taken care of by the DMF, unless the role of the MoF and CCS in approving expenditure were to be eliminated simultaneously.
This can, of course, be done in relation to financial sanction for firmed up proposals before the signing of contracts by delegating full powers to the defence ministry. But even that would not solve the problem of the actual availability of funds. In addition, there can be no guarantee about the complete absence of problems in exercising delegated financial powers.
Be that as it may, there are two possibilities. One, that the unspent amount is withdrawn from the Consolidated Fund of India (CFI) and kept aside in some account to be used as and when required. The problem with this move, however, is that the government does not earn as much as it spends. It has to borrow to meet the expenditure year after year. Which implies that the amount in question, to be withdrawn and kept aside, would largely come out of borrowings. It would make little sense to borrow money, pay interest on it, and keep it idle till such time as the need arises for using it. For the record, while in 2015-16 interest payments accounted for Rs. 4,41,659 crore, in the coming fiscal the expenditure on this count is projected to be Rs. 5,23,078 crore.
The other possibility is that the unspent balance is rolled over to the next year and added to that year’s budgetary allocation to constitute a notional pool of funds, as it were, from which money could be withdrawn. Any such appropriation will require approval of parliament. More to the point, in the year the money lying idle in the DMF is to be used, the MoF will, in any case, have to raise it. It cannot do so as and when MoD asks for it during the year. It will have to be done necessarily as a part of the budgetary process in the beginning of the year. This effectively implies that MoD will have to project the requirement at the BE stage and the MoF will have to raise enough resources to allocate the sum asked for. And that brings the case for setting up a DMF back to square one.
The Standing Committee on Defence has been assiduously advocating the setting up of the fund despite being informed of the reasons why the idea was given up in 2004 itself. It has, in fact, advised the MoD “to process the creation of DMF with suitably changed modalities in Consultation with the Ministry of Finance so that the modernisation programme can be carried forward smoothly at the desired pace without any need to seek the Parliamentary approval again and again.”1
Apart from there being little discussion on what kind of changes need to be made, and whether there is enough justification to make the changes exclusively in respect of the defence budget, the question whether it will serve the intended purpose continues to be moot.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
In view of China’s adverse reaction to India’s missile testing, this year’s Republic Day parade could have been used for strategic signalling to arrogant entities questioning India’s ‘strategic autonomy’. Nuclear deterrence is also about demonstration and display of capabilities. If you have it, then flaunt it!
Is China feeling threatened by India’s Inter-Continental Ballistic Missile (ICBM) capabilities? The way it has reacted to India’s recent back-to-back successful testing of Agni-IV and V, it is clear that China is rattled and upset with India’s growing missile capabilities. Though India had been testing these missiles for the last five to six years, China had by and large refrained from commenting over India’s missile programme. The last time China had reacted was in April 2012, when Agni-V was first test-fired successfully. China did not react when Agni-V was test-fired for the second time in September 2013 and for the third time in January 2015. India’s Strategic Forces Command (SFC) is expected to conduct two more tests before inducting Agni-V missile into its weapons arsenal. Similarly, there was no reaction from China when Agni-IV was first test-fired earlier in November 2011, and thereafter in September 2012 and January 2014, before being inducted into the armed forces in December 2014, though user trials are still on.
However, after India conducted the fourth test of Agni-V on December 26, 2016, Chinese foreign ministry spokesperson stated the very next day that “The UN Security Council has explicit regulations on whether India can develop ballistic missiles capable of carrying nuclear weapons.” The spokesperson added, “China always maintains that preserving the strategic balance and stability in South Asia is conducive to peace and prosperity of regional countries and beyond.” Interestingly, similar to the statement issued by China in April 2012, after Agni-V was first tested, the latest statement too reiterated that India and China “are not rivals for competition but partners for cooperation.”1
The Chinese spokesperson was probably referring to the United Nations Security Council (UNSC) Resolution 1172 of June 1998, which was passed in the aftermath of the nuclear tests conducted by both India and Pakistan in May 1998. The resolution had urged India and Pakistan not to develop nuclear weapons delivery platforms like ballistic missiles and also to cap their nuclear weapons programmes and cease all fissile materials production. This resolution was approved under Chapter VI of the UN Charter and is non-binding. There are no constraints therefore on India pertaining to its weapons and missile programmes.
In response to the Chinese reaction, the spokesperson of the Indian Ministry of External Affairs immediately affirmed that “India's strategic capabilities are not targeted against any particular country and India abides by all the applicable international obligations. India’s strategic autonomy and growing engagement contributes to strategic stability.”2 The Indian print and electronic media, however, stated the obvious; claiming that, now with 5000 km-plus range, Indian missiles could reach any part of China. The way media went about commenting on India’s growing missile capabilities, which received wide international coverage as well, could have to an extent spurred China to react.
The Chinese spokesperson in her statement had alluded to speculations in the media reports about India developing Agni-V to counter China. This came out in a more upfront manner in an editorial published in the Global Times, country’s leading English-daily affiliated to the Communist Party of China, two days after India successfully conducted the user trial of Agni-IV on January 02, 2017. The editorial accused India of breaking “the UN's limits on its development of nuclear weapons and long-range ballistic missile” as “New Delhi is no longer satisfied with its nuclear capability and is seeking intercontinental ballistic missiles that can target anywhere in the world.” The editorial warned that China “will not sit still if India goes too far...If the UN Security Council has no objection over this, let it be. The range of Pakistan's nuclear missiles will also see an increase.”3
Interestingly, three weeks later, Global Times carried an editorial emphasising the strategic significance of Dongfeng-41, China’s own ICBM, and how it could bring more respect to China. The editorial argued that, “It is logical that Beijing attaches particular importance to the Dongfeng-41 as a strategic deterrence tool. With China's rise, China's strategic risks are growing. China bears the heavy task of safeguarding national security. Nuclear deterrence is the foundation of China's national security, which must be consolidated with the rising strategic risks.” Taking the argument further, the editorial stated that, “China must procure a level of strategic military strength that will force the US to respect it.”4
However, media coverage of the successful test-firing of the two long-range missiles by India cannot be considered as the only reason why China reacted so brashly. Some of the recent developments too could have added to China’s growing discomfort over India gaining prominence in the strategic arena. Beijing is probably finding it difficult to accept the fact that India, despite not being a signatory to the Nuclear Non-proliferation Treaty (NPT), is getting preferential treatment from the rest of the world (read the US, Russia and the European Union). India had recently joined the Missile Technology Control Regime (MTCR), whereas China’s credentials to be in the grouping were found lacking. Meanwhile, China has been trying to ensure that India does not gain entry into the Nuclear Suppliers Group (NSG). Instead, it wants Pakistan to gain entry into the NSG, fully aware of its highly questionable non-proliferation record.
While China appears concerned about India’s growing ballistic missile capabilities, it fully understands that the concept of so-called strategic stability in South Asia is actually a misnomer. The People’s Liberation Army (PLA) had established a special missile arm in their defence establishment, called Rocket Force, on December 31, 2015. Further, China itself had tested various missiles during 2016. These tests included Intermediate-Range Ballistic Missiles (IRBMs) like DF-21, ICBMs like DF-41 (a multiple warhead missile), a hypersonic missile test-fired from Chinese J-16 strike fighter, anti-ship missiles like YJ-12 and YJ-18, and missile defence interceptor test for missile DN-3, which is also known to have the capability to destroy satellites in the low earth orbit. In fact, very recently, there were reports about PLA’s Rocket Force conducting an exercise with DF-16 medium range ballistic missile, which, with a range of 1,000 km, can easily target several countries in China’s neighbourhood including the US military assets in Japan.
China fully understands that having arsenal in thousands is of little consequence. What counts is the potency and accuracy of the weapons/missiles and the nature of military tactics employed. It is but obvious that China must be keenly monitoring India’s progress in the submarine-launched ballistic missile (SLBM) arena. India has already successfully tested the K-4 SLBM and its efforts to marry this missile with the submarine are progressing well. China probably worries that India’s growing military profile is no longer South Asia-specific.
Apart from raising objections to India’s missile testing and stalling India’s entry into the NSG, China has also been acting against Indian interests on the issue of terrorism emanating from the Pakistani soil. India, however, does not appear to be giving a strong response to such Chinese actions. India could have launched a ‘different form of surgical strike’ by exhibiting its missile potential during the Republic Day parade in January this year. For all these years, the parade has been used by India to display its achievements and progress in social, scientific and military sectors.
Globally, it has been observed that countries use such ceremonial parades to display their military capabilities to the world. On September 03, 2015, China had held a grand military parade to mark the 70th anniversary of the victory of ‘Chinese People’s War of Resistance against Japanese Aggression and the World Anti-Fascist War’. The occasion was used by China to display a host of new armaments, ranging from ICBMs to medium-long range bomber aircraft, highlighting the nation's inherent military strategy of “active defense.”5 Russia is also known to use the occasion of Victory Day parade held every year on May 09 (to commemorate the victory of the Soviet Union over Nazi Germany) to demonstrate their military capabilities. States like North Korea, South Korea, Iran, etc. are also known to use such ceremonial parades to demonstrate their military strength including missiles.
During the 2013 Republic Day parade, India had displayed Agni-V and at that point of time too Chinese media had taken note of it. During the subsequent years, 2014 and 2015, Japanese Prime Minister Shinzo Abe and the US President Barack Obama were the chief guests for this parade. It appears that India avoided displaying its nuclear might after 2013 for obvious geopolitical reasons. But, January 2017 parade was different. During the last one year, China has repeatedly rubbed India the wrong way and for no reason. Hence, it was important to fully display India’s strategic capabilities.
A display of ICBM in a ceremonial parade may have a very limited strategic relevance but, what was important is the timing. In view of China’s adverse reaction to India’s missile testing, this year’s Republic Day parade could have been used for strategic signalling. Nuclear deterrence is also about demonstration and display of capabilities. If you have it, then flaunt it! Such strategic signalling is often necessary to send a strong message to arrogant entities questioning India’s ‘strategic autonomy’.
Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India.
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