Interim Budget: Defence allocation raised by 10% to Rs2,24,000 crore

Finance minister P Chidambaram has proposed a 10-per cent increase in the allocation for the defence ministry to help its modernisation drive.

Accordingly the defence allocation in the interim budget will go up to Rs2,24,000 crore, an increase of 10 per cent year-on-year.

The allocation for the ministry in the last financial year (2013-14) was Rs2,03,672 crore, of which around Rs80,000 crore was to be spent on modernisation.

Allocation for the previous fiscal was 14 per cent more than the previous year's defence budget.

The ministry is also said to have spent 82 per cent of that amount till the start of this month.

The hike in allocation comes at a time when the ministry has postponed a number of procurements in the pipeline while some are in their final stages of execution.

These include a $20-billion (Rs1,25,000 crore) deal to acquire 126 multi-role combat aircraft for the Indian Air Force, which had to be postponed because of lack of funds (See: Rafale fighter deal put off as India's defence budget exhausted).

Defence minister AK Antony had said last week the purchase deal would be left  to be finalised by the next government.

''It has to wait for the next financial year starting 1 April,'' Antony had said, adding, ''Ninety-two per cent of our capital budget has already been used, with only 8 per cent left".

Other acquisitions in the pipeline include deals for 22 Apache combat choppers and 15 Chinook heavy-lift helicopters.

The defence ministry is also in advance stage of negotiations for a Fifth Generation Fighter Aircraft (FGFA) programme with Russia, on which it is expected to spend around Rs1,50,000 crore in the next 10-15 years.

It is also in the process of issuing the tender for the approximately Rs60,000 crore deal for procuring six large conventional diesel electric submarines for the Navy.

The ministry has been seeking additional funds of Rs40,000 crore since last year, but that request has been turned down in view of the economic slowdown.

In view of defence scams in which foreign firms were involved, the ministry has also worked towards promoting indigenisation in the defence sector for which it made a major procurement policy change to make the importing of weapons systems the last option for the three services.