It’s that time of the year when government officials indulge in aggressive discussions behind the closed doors of South Block over the exact funds that should be earmarked for the Indian Armed Forces in the next financial year. As the defence services put forth their projections and list out unique arguments as to why they would like a bigger budget for modernisation and sustenance, closely assessed would be what they have spent so far of the funds given in 2021-22.
The final decision of finance minister Nirmala Sitharaman will be public knowledge on February 1. But this time, a host of reasons have come together to put their weight behind why the Indian Navy should get a quantum jump in the budgetary estimates for the next fiscal, and thus a bigger share of the defence budget.
The China factor is one of them. But what I imply here is not the much-oversold phenomenal expansion of the Chinese People’s Liberation Army Navy (PLAN) to become the world’s largest maritime force. What counts here instead, is their forays into the Indian Ocean in limited numbers—ranging from three to eight ships—and, of course, the presence of their submarines in Indian waters, which will only go up in the future with an increase in their maritime interest and energy security in the region.
As such, the Navy’s focus right now remains on building capabilities based on its threat perceptions—including protection of its Sea Lines of Communication (SLOC) in the IOR. This makes it among the key reasons for it to bring many of its projects on track, which were stalled over the years due to a consistent low budget.
The Navy’s capital budget so far
Let’s first take a look at the Navy’s capital budgets over the years. Data from the last five years shows that the initial budgetary estimates of the force were consistently kept in the range of Rs 19,348 crore and Rs 23,156 crore from 2016-17 to 2019-20 before it went up to Rs 26,688 crore in 2020-21 and Rs 33,253 crore in the financial year 2021-22.
But, importantly, an analysis of the revised estimates and the actual expenditure in this period shows that the service did not just spend the budgets allotted to it but much more than it.
For instance, in 2020-21, the revised estimates and the actual expenditure of the Navy were Rs 37,542 crore and about Rs 41,600 crore—much more than the Rs 26,688 crore earmarked initially.
The story repeated itself in 2019-20 when the Navy was initially allotted Rs 23,156 crore, but that went up to Rs 26,156 crore as revised estimates, while the actual expenditure was even higher at Rs 27,446 crore. Data from the previous financial years tell a similar story.
The trend to catch here is the Navy’s high absorption capacity—also fueled by a large number of orders and thus huge yearly committed liabilities. This makes it a crucial reason as to why it should have seen a jump in its budgets, also considering the comparative absorption capacity of the Navy is the highest among all services.
But what has happened on the ground has been quite contrary. In fact, the Navy’s share becomes much lower if the overall defence budget is considered.
In December 2019, former Navy Chief Admiral Karambir Singh had pointed out that the force’s share of the defence budget had decreased from 18 per cent in 2012-13 to 13 per cent in 2019-20, forcing it to recalibrate its plans of being a 200-ship Navy by 2027. As per available data, this went up to 16.3 per cent in 2021-22 and around 15.3 per cent in the year before.
Getting its delayed projects on track
In response to a question on the expanding Chinese PLAN, Navy Chief Admiral R Hari Kumar had said in December last year that the force does not go into bean-counting but works on developing capabilities based on its maritime interests.
But thanks to a progressive decline in funds, the force is yet to arrive at the number-of-ship Navy it aspires to become in the next 10 years, something which will now be decided in accordance with the tri-services integrated capability development plan (ICDP).
A jump in the Navy’s budgets would give a fresh impetus to many of its ongoing and planned projects. Some of them include the Rs 40,000-crore Project 75 (India), or P-75(I) under which six modern conventional submarines would be indigenously constructed and the Project-17 Alpha, or P-17A, under which seven stealth frigates are being indigenously built. Procurement of landing platform docks, minesweepers and tanker fleet support ships should be priortised, given the Navy just has one LPD at present, and zero minesweepers and FSS.
The lack of funds has also been quoted to brush aside Navy’s plans to have a third aircraft carrier aimed at sustaining sea control. Even if it gets a go-ahead at this point, it will take around 10 years to come into existence.
Funds to be ploughed back into economy
As per data in various open sources, despite the fund crunch, the Navy has spent over 60 per cent of its capital budget on indigenous procurements in the last two years. Except for the engines and gas turbines, much of the Navy’s assets are made in Indian shipyards.
As many as 28 ships and submarines commissioned into the Navy in the last seven years have been constructed in India and of the 39 ships and submarines, under construction at present, 37 are being built in domestic shipyards.
Thus, much of the funds that the finance ministry will allocate to the Navy will eventually go back to the Indian economy, downstream to MSMEs and aid creation of jobs and skilling of workers.
There should also be some jump in the revenue budget of the Navy considering the rising inflation and also because a lot of funds under this head go in maintaining old ships.
In his opening remarks, Admiral Kumar had said that Acceptance of Necessity exists for 72 projects worth Rs 1,97,359 crore, of which 59 projects or over 88%, are for indigenous development.
“Through these projects, we will also aim to provide as much impetus as possible to the Startup India and Skill India initiatives,” he had said. That’s an idea many are likely to be on board with.
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