1nd1a
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NEW DELHI: The government has enforced a ban on new defence purchases till March 31. The decision has been prompted by severe fiscal deficit challenges, and to safeguard against the usual haste in clearing major defence deals before the financial year draws to a close.
According to a senior source, the move is part of the finance ministry efforts to "conserve" as much government finance as possible in the last lap of 2011-12 in the face of severe shortages in government collections from sources such as taxes and divestment.
Though it is not clear how many deals have been directly hit by the ban, some big ticket purchases from all the three services are in the final stages of approval. For instance, the IAF deal for basic trainer jets is worth over $1 billion, the Army's wish-list for Ultra Light Howitzers from the US is pegged at over $1 billion coupled the plan to purchase Light Utility Helicopters for the Army.
Source said that the MoD had spent about 66% of the total capital budget outlay in this fiscal's first three quarters. "It was better than usual performances," the source said.
The ban is to be seen in the light of the finance ministry's decision to cut the defence budget by a few thousand crores. Be that as it may, it is an unusual step since government usually spends maximum on defence capital outlay in last quarter.
The overall defence spending scenario is also facing long-term pressures. According to the latest estimates by the MoD, almost 70% of the capital outlay is committed for signed contracts. The MoD has instructed the three services to prioritize their purchases since the committed liabilities would have to be persisted with for a few more years.
India's total budget is around $32 billion, and of this the new purchases accounted for $13.8 billion this fiscal. On the contrary, China's defence budget has crossed $100 billion.
The ministry is expecting about 10% overall hike in the defence budget, and a 15% spurt in capital outlay.
Ban on new defence deals till Mar 31 - The Times of India
According to a senior source, the move is part of the finance ministry efforts to "conserve" as much government finance as possible in the last lap of 2011-12 in the face of severe shortages in government collections from sources such as taxes and divestment.
Though it is not clear how many deals have been directly hit by the ban, some big ticket purchases from all the three services are in the final stages of approval. For instance, the IAF deal for basic trainer jets is worth over $1 billion, the Army's wish-list for Ultra Light Howitzers from the US is pegged at over $1 billion coupled the plan to purchase Light Utility Helicopters for the Army.
Source said that the MoD had spent about 66% of the total capital budget outlay in this fiscal's first three quarters. "It was better than usual performances," the source said.
The ban is to be seen in the light of the finance ministry's decision to cut the defence budget by a few thousand crores. Be that as it may, it is an unusual step since government usually spends maximum on defence capital outlay in last quarter.
The overall defence spending scenario is also facing long-term pressures. According to the latest estimates by the MoD, almost 70% of the capital outlay is committed for signed contracts. The MoD has instructed the three services to prioritize their purchases since the committed liabilities would have to be persisted with for a few more years.
India's total budget is around $32 billion, and of this the new purchases accounted for $13.8 billion this fiscal. On the contrary, China's defence budget has crossed $100 billion.
The ministry is expecting about 10% overall hike in the defence budget, and a 15% spurt in capital outlay.
Ban on new defence deals till Mar 31 - The Times of India
