NEW DELHI: India may be facing immense military challenges from a powerful China, all the more accentuated by an ongoing border impasse along the difficult Karakoram and the mighty Himalayas since May 2020, but the message is loud and clear—to continue and consistently tread on the path of becoming militarily powerful with indigenous efforts that will be increasingly captained by a private sector.
That is why all four of the major highlights of the defence allocation in Union Budget 2022 underline the ‘indigenous’ and ‘private’ thrust.
First, in an obvious bid to reduce dependence on imports, 68 percent of the capital expenditure to be incurred for acquisition of new and advanced weapons, platforms and systems will be reserved only for local buys. This is a notable hike from the 64% reserved last year.
Second, defence minister Nirmala Sitharaman announced that one-fourth of the R&D budget will be kept aside to aid private companies, startups and academia. This is an upfront chiding of overriding dominance of the public sector entities in defence manufacturing as well as an encouragement to many of the fledgling private firms that are doing remarkable work in developing and harnessing advanced technology.
Third, in what could expedite clearances for indigenous industries much faster besides being much more cost-effective, a nodal body for testing and certification is being set up to meet the requirements of defence systems and platforms.
Fourth, a Special Purpose Vehicle (SPV) model has been envisaged to promote the private role in joint development systems. “Private industry will be encouraged to take up design and development of military platforms and equipment in collaboration with DRDO and other organisations through SPV model,” the finance minister said in her statement.
Overall, the total defence outlay was increased by about 9.9 percent from Rs 4.78 lakh crore in 2021-22 to Rs 5.25 lakh crore for 2022-23 which is about 13.31% of the total budget. Over a nine-year period from 2013-14, this is a 107.29% enhancement from Rs 2.53 lakh crore to Rs 5.25 lakh crore in 2022-23.
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In the most critical component of capital expenditure or the expenditure incurred to buy new weapons, platforms and systems, the 2022-23 allocation saw a 9.7 percent hike from last year’s revised estimate of Rs 1,38,850 crore to Rs 1,52,369 crore. This is a 76% increase over a nine-year period from 2013-14.
The revenue expenditure head or the head that includes payments of salaries and maintenance of establishments saw an allocation of Rs 2,33,000 crore for 2022-23. While Rs 1,19,696 crore has been set aside for defence pensions, Rs 20,100 crore has been set aside for the Ministry of Defence (Civil).
Shortly after the budget statement, defence minister Rajnath Singh tweeted his approval of his cabinet colleague Sitharaman’s proposal: “The 68 percent of defence capital procurement budget has been allocated towards local procurement. It is in line with the ‘Vocal for Local’ push and it will certainly boost the domestic defence industries.”
“The proposal to reserve 25 percent of the R&D Budget for Startups and Private entities is an excellent move,” Singh added.
There were immediate reactions from the private sector.
Said SP Shukla, president, Society of Indian Defence Manufacturers (SIDM), an apex body of the Indian defence industry: “SIDM welcomes the announcement of setting aside 68% of capital outlay of defence budget for domestic industries. This will sustain investments and attract fresh capacity creation.”
“Creation of a Nodal Body for setting up Testing and Certification requirements of defence systems and platforms will help the domestic industry through faster processes and cost-efficiency.”
“Allocation of 25% of Defence R&D budget for Startups, Academia and Private Industry is a much-needed reform. We thank Ministry of Defence and Ministry of Finance for this major boost to Research and Innovation,” Shukla added.
Said Baba N. Kalyani, CMD, Bharat Forge: “The Government’s commitment to promote self-reliance and indigenization by leveraging Indian Industry is once again reinforced with the 68% (enhanced) domestic allocation for defence capital procurement.”
“Earmarking 25% of Defence R&D budget for Industry, Start-ups & Academia is a forward looking measure that will pave way for investments in frontier technologies and capability development. Industry in partnership with DRDO through SPV mode for development of critical weapon systems and military platforms is a path-breaking reform that will significantly transform the Indian defence eco-system and lead India to being a net-exporter of defence equipment/platforms.”
The Capital segment of the MoD (Civil) budget catering to organisations such as Indian Coast Guard (ICG), Border Roads Organisation (BRO) and Directorate General Defence Estates (DGDE) etc has also seen a notable jump of 55.60%. In absolute terms, this amount is Rs 8,050 crore in FY 2022-23 against Rs 5,173 crore in FY 2021-22.
The Capital Budget of Border Roads Organisation (BRO) has been increased by 40% to Rs 3,500 crore in FY 2022-23 vis-à-vis Rs 2,500 crore in FY 2021-22. This will expedite the progress of the creation of border infrastructure including important tunnels (Sela and Naechiphu tunnel) and bridges on major river gaps.
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Underlining the importance of overall maritime security, the Capital Budget of the Indian Navy has been enhanced by 44.53%, with a total allocation of Rs 46,323 crore in FY 2022-23. This increase is aimed at the acquisition of new platforms, creation of Op and Strategic Infrastructure, bridging of critical capability gaps and building a credible maritime force for the future.
Additionally, to boost the Coastal Security, the Capital budget of Indian Coast Guard has been enhanced by 60.24% to Rs 4,246 crore in FY 2022-23 vis-à-vis Rs 2,650 crore in FY 2021-22. This enhancement is aimed at building up of assets such as acquisition of ships & aircraft, augmentation of infrastructure, establishment of coastal security network and building up technical & administrative support structures.
Rs 173.03 crore and Rs 131.08 crore have been provisioned under DGDEs Capital Budget for BE 2022-23 and RE 2021-22, respectively, mainly for the construction of boundary posts/pillars and perimeter fencing of Defence Land. This is directed towards preventing encroachment on Defence Land.
Towards hand holding of the newly created seven Defence Public Sector Undertakings (DPSUs), Rs 1,665 crore in RE 2021-22 and Rs 1,310 crore in BE 2022-23 has been earmarked for their planned modernisation. Additionally, Rs 2,500 crore in BE 2022-23 and also in RE 2021-22 has been set aside as Emergency Authorization Fund.
Further, for enabling the Defence Industrial eco-system in the country, iDEX and DTIS has been allocated Rs 60 crore and Rs 23 crore respectively in the FY 2022-23.
Under the iDEX (Innovations for Defence Excellence) Scheme, MoD aims to create an environment that fosters innovation and encourages technology development in Defence by engaging R&D institutes, academia, industries, startups and even individual innovators.
Defence Testing Infrastructure Scheme (DTIS) envisages the creation of state-of-the-art testing infrastructure in partnership with the private industry thereby boosting domestic defence and aerospace manufacturing.
