Indian Army

Separate budget for domestic defence purchases requires more clarity

By financial express

At a webinar organised by the Ministry of Defence (MoD) on February 22, Defence Minister Rajnath Singh announced bifurcation of the capital procurement budget into domestic and foreign ‘routes’ to ensure more procurement from the domestic industry.

The Press Information Bureau’s release of the even date says that the MoD plans to invest about 63% of the outlay for the Financial Year (FY) 2021-22 on domestic procurement. It works out to an impressive Rs 70,221 crore.

To put this stratagem in perspective, Finance Minister Nirmala Sitharaman had announced a slew of measures on May 16 last year to revive the pandemic-hit economy. One of these was to provide a separate budget for domestic capital procurement, apart from corporatisation of the Ordnance Factory Board, raising of the limit on Foreign Direct Investment to 74% through the automatic route, and promulgation of a negative list prohibiting import of various defence products.

She did not clarify -though it seemed highly unlikely even then- whether the funds under this category will be provided in addition to the allocation already made in the union budget for the FY 2020-21, which is what could have truly made a big impact on rejuvenating the domestic defence industry.

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