MoD spends 65% of this year's defence capital budget on domestic procurement - Broadsword by Ajai Shukla

No return of funds: 99.5% of the defense budget used

By Vikas Gupta

Defence News of India, 21 Apr 22

The Ministry of Defense (MoD) announced on Wednesday that it had exceeded its target of spending 64% of the capital acquisition budget on domestic industry in the 2021-22 financial year.

“At the end of the 2021-22 fiscal year, the Department of Defense was able to exceed (sic) this target and used 65.5% of the capital acquisition budget on local purchases through of Indian industry to realize Prime Minister Shri Narendra Modi’s vision of ‘Aatmanirbhar Bharat’(self-governing India),” a MoD press release said.

“Furthermore, according to the March 2022 preliminary expenditure report, the MoD was able to utilize 99.5% of the Defense Services budget in the financial year 2021-22,” the MoD said.

In fact, Finance Minister Nirmala Sitharaman had on February 1 committed the government to cut spending for the current year. Presenting the budget to Parliament, she said: “Our government is committed to reducing imports and promoting AtmaNirbhartain the equipment of the armed forces. 68% of the capital procurement budget will be allocated to domestic industry in 2022-23, compared to 58% in 2021-22.

Indeed, the government spent more than 65.5% on domestic capital acquisition, slightly more than the 64% it had targeted. Its capital expenditure target for the domestic industry in fiscal year 2022-23 remains at 68%.

In his budget speech to parliament, Sitharaman said, “Defense R&D will be open to industry, startups and universities with 25% of the defense R&D budget earmarked.

She also promised: “Private industry will be encouraged to undertake the design and development of military platforms and equipment in collaboration with the Defense R&D Organization (DRDO) and other organizations through the model SPV. An independent nodal umbrella organization will be set up to meet a wide range of testing and certification requirements. »

However, it is unclear exactly how the percentage of native content in a particular defense gear would be calculated. If it is based solely on the entity an order is placed with, there will likely be an overstatement of native content.

For example, an order for, say, Arjun tanks, placed at the Avadi Heavy Vehicle Factory (HVF), superficially contains high indigenous content, since the tanks are made in India. However, it should be taken into account that several systems and sub-systems of the tank would be purchased over-the-counter by HVF from global suppliers. It would be misleading to add the cost of these parts to the native contents of the tank.