Cabinet considering Non-Lapsable Defence Modernisation Fund

The parliamentary report says that the proposed Non-Lapsable Defence Modernisation Fund (NLDMF) will be created for procurement of logistics and equipment for the armed forces and Married Accommodation projects from ‘within India’ (Make-in-India initiative) only and only after the normal budgetary allocation get exhausted, writes senior journalist Sanjib Kr Baruah.

New Delhi: Catering to an old demand of the defence ministry that has been seeking a non-lapsable fund keeping in the backdrop of the time consuming military modernisation programme that India is embarking on, the Union Cabinet is looking to finalise a draft note for creating a Non-Lapsable Defence Modernisation Fund (NLDMF) in consultation with the concerned stakeholder ministries and departments, a parliamentary panel on defence has said in its report tabled in parliament on Tuesday.

Significantly, the 15th Finance Commission had also recommended the constitution of such a fund for defence and internal security to bridge the gap between projected budgetary requirements and actual allocation for defence and internal security.

The parliamentary report says that the proposed NLDMF will be created for procurement of logistics and equipment for the armed forces and Married Accommodation projects from ‘within India’ (Make-in-India initiative) only and only after the normal budgetary allocation get exhausted.

The NLDMF proposal says that the fund is to be credited with the part proceeds of monetization of defence land.

The models for the development of infrastructure on these lands may also facilitate employment and income generation for meeting the needs of a growing economy and population, propelling the country’s overall growth and development, the report adds.

In order to operationalise the proposed NLDMF, a separate mechanism would be created to identify the defence lands which can be utilised for resource generation, without prejudicing the applicable security protocols.

While the entire proceeds from monetization shall initially be credited to Consolidated Fund of India (CFI), 50 per cent of such proceeds shall go to the NLDMF through Demand for Grants approved by the Parliament while the balance 50 per cent of the proceeds from defence land monetization will be retained in CFI.

The expenditure from the NLDMF will be subject to the extant norms prescribed and followed in the defence ministry towards the purchase of arms, ammunition, etc. and also towards procurement of defence equipment under the capital side, the report said.

The finance ministry has also proposed that in case of non-utilization of funds in NLDMF for three years from the date of crediting such amounts in the fund, such sums will be credited back to CFI.

Every year, the finance ministry will furnish a statement showing the accretion and withdrawal from the fund in a transparent manner.