DEFENCE BUDGET NEEDS TO BE HIKED TO PAY FOR RAFALE, OTHER NEW PURCHASES: REPORT
WEDNESDAY, OCTOBER 19, 2016 BY INDIANDEFENSE NEWS
The report said 90% of the budgeted defence spending goes towards payments for already announced projects, the capital allocation has been unchanged at Rs. 86,300 crores
ICICI Securities said the amount earmarked in defence budget for new purchases is so low that it has been exhausted on just the Rafale fighter deal alone
Mumbai: Having signed the €8.8-billion Rafale deal, the government will have to increase the defence budget midway through this financial year to pay for new orders, domestic brokerage ICICI Securities said on Tuesday.
“The amount earmarked for new purchases is so low that it has been exhausted on just one purchase alone—the Rafale fighter, whose 15% signing advance amounts to Rs8,700 crore,” it said in a note.
“Additional allocations are now required for fresh acquisitions over the remaining half of FY2016-17,” it said, adding the additional allocations are “inevitable”. However, the report did not quantify the increase it sees in the budget. The revision will take the defense spending up to 2.5% of the GDP, as against the originally envisaged Rs3.41 trillion or 2.26% of the GDP, it said.
The report said 90% of the budgeted defense spending goes towards payments for already announced projects and added that over the past two years, the capital allocation has been unchanged at Rs. 86,300 Crores.
Pointing to the deal with Russia announced at the just-concluded Brics summit, it said this shows the country’s “inability to wait for the domestic ‘primes’ to catch up to global technology standards”.
‘Primes’ are domestic manufacturers like Tata Power SED, Bharat Electronics, and Larsen & Toubro, which are vying for a pie of the defense spending pie. The brokerage said at present, Rs1.27 trillion has been committed for foreign purchases, while another Rs. 90,800 Crores is expected to be ordered and also raised question marks over the actual boost to domestic manufacturing.
“These orders will have limited domestic beneficiaries over the next five-six year period and will constrain the domestic defense budget significantly for any meaningful indigenous manufacturing to happen,” it said, pointing to the recent orders. The government has been trying to push domestic manufacturing through efforts like having mandatory local sourcing in new contracts.
In wake of the heightened tensions following the Uri attack, finance minister Arun Jaitley had affirmed the government commitment to spend for defending the country.
Defense minister Manohar Parrikar had last week said he expected another Rs. 50,000-60,000 Crores worth of defense contracts to be signed by March 2017, taking the total since this government came to power in May 2014 to Rs3 trillion.
http://www.indiandefensenews.in/2016/10/defence-budget-needs-to-be-hiked-to-pay.html
WEDNESDAY, OCTOBER 19, 2016 BY INDIANDEFENSE NEWS
The report said 90% of the budgeted defence spending goes towards payments for already announced projects, the capital allocation has been unchanged at Rs. 86,300 crores
ICICI Securities said the amount earmarked in defence budget for new purchases is so low that it has been exhausted on just the Rafale fighter deal alone
Mumbai: Having signed the €8.8-billion Rafale deal, the government will have to increase the defence budget midway through this financial year to pay for new orders, domestic brokerage ICICI Securities said on Tuesday.
“The amount earmarked for new purchases is so low that it has been exhausted on just one purchase alone—the Rafale fighter, whose 15% signing advance amounts to Rs8,700 crore,” it said in a note.
“Additional allocations are now required for fresh acquisitions over the remaining half of FY2016-17,” it said, adding the additional allocations are “inevitable”. However, the report did not quantify the increase it sees in the budget. The revision will take the defense spending up to 2.5% of the GDP, as against the originally envisaged Rs3.41 trillion or 2.26% of the GDP, it said.
The report said 90% of the budgeted defense spending goes towards payments for already announced projects and added that over the past two years, the capital allocation has been unchanged at Rs. 86,300 Crores.
Pointing to the deal with Russia announced at the just-concluded Brics summit, it said this shows the country’s “inability to wait for the domestic ‘primes’ to catch up to global technology standards”.
‘Primes’ are domestic manufacturers like Tata Power SED, Bharat Electronics, and Larsen & Toubro, which are vying for a pie of the defense spending pie. The brokerage said at present, Rs1.27 trillion has been committed for foreign purchases, while another Rs. 90,800 Crores is expected to be ordered and also raised question marks over the actual boost to domestic manufacturing.
“These orders will have limited domestic beneficiaries over the next five-six year period and will constrain the domestic defense budget significantly for any meaningful indigenous manufacturing to happen,” it said, pointing to the recent orders. The government has been trying to push domestic manufacturing through efforts like having mandatory local sourcing in new contracts.
In wake of the heightened tensions following the Uri attack, finance minister Arun Jaitley had affirmed the government commitment to spend for defending the country.
Defense minister Manohar Parrikar had last week said he expected another Rs. 50,000-60,000 Crores worth of defense contracts to be signed by March 2017, taking the total since this government came to power in May 2014 to Rs3 trillion.
http://www.indiandefensenews.in/2016/10/defence-budget-needs-to-be-hiked-to-pay.html
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