Defence Budget Allocation & Defence Procurement Procedure : News & Discussions
- Thread starter Ashwin
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Trading window closed on 27th for most companies (that I follow anyway ). Any deal signed now like the BEL one will likely be registered for next FY books for convenient purpose.
Book closure in case of FY end happens on 31st March unlike other months of the year.Trading window closed on 27th for most companies (that I follow anyway ). Any deal signed now like the BEL one will likely be registered for next FY books for convenient purpose.
Depending on order book often late big deals are counted in next years book for a better forecast next year. BEL got a handful of orders this month. Hoping BDL bags some more.
Orders have nothing to do with it . It has everything to do with the advance payment received. If they don't receive the advance , the order is counted against next year's target.
Point well taken in which case what was the urgency behind releasing so many orders in the last few remaining days of the FY? It could well be done at leisure next FY.
After all the unutilized funds go back to the GoI coffers as the plan to recycle these funds into the next FY's budget in addition to fresh provisions for CAPEX for the next FY for respective armed forces has not yet been activated.
Finally you last comment helps the case of the DPSUs not the armed service in question. There's no incentive for the latter to speed up activities in the dying days of the FY. Yet we've seen a flurry of activity on their behalf releasing orders left right & center. What gives?
The point I mentioned is respective of the companies, not the user who will have to surrender the excess budget if its not spent within the FY. Companies have no such condition or immediate exposure to risk, they just have to balance their books & almost all of them have full order book for next few years at least. I guess it was the MoD encouraging to clear the orders, specially the companies have been lobbying for many of those that were stuck for a long time. So I am pretty glad most of the projected orders are finally being given contract for. Raw material procurement in 1-2 cases has already started this quarter, so an urgency was much needed.
Next years capex, I am not sure what they would do or not. So far the projection as we know in next 5 years most of contracts, over 130billions of those capital acquisition, will go to Indian MIC. How much the Govt is willing to put in the capex is their matter. But with election year in 2024, a slowdown won't be unexpected.
Still doesn't explain why the Armed forces released orders at the eleventh hour . Companies lobbying MoD to release orders is an on going activity . Orders stuck for various reasons is also not something unusual in our set up .
Besides most of the orders released in the last couple of weeks are definitely for mid to high value items . I'm afraid your arguments don't wash . Each of these individual orders would've to be scrutinised to see their payment terms . There has to be an advance component in it however small in terms of the percentage of the order value they comprise .
Otherwise the rush to release these orders at the last minute are inexplicable .
Besides most of the orders released in the last couple of weeks are definitely for mid to high value items . I'm afraid your arguments don't wash . Each of these individual orders would've to be scrutinised to see their payment terms . There has to be an advance component in it however small in terms of the percentage of the order value they comprise .
Otherwise the rush to release these orders at the last minute are inexplicable .
Inefficiencies.
One way to save nation. Cancel UPSC exams and start recruiting IIM MBA graduates to run those posts. The guy signing off the deals will have no understanding of long lead items, how the work is outsourced to 3rd parties, what makes economic sense, etc.
Are you really surprised at the current situation?
Just wait till we get the figures about CAPEX returned by IAF.
Have you seen the nature of the orders released by the IA & IN in the last 2 weeks ? Those are big ticket items . There's no way you can put the release of orders at the eleventh hour down SOLELY to inefficiencies in the system or lack of recognition of the procurement mechanics of defense production.
I suspect MoD & the respective armed forces would've reached some sort of understanding long back to prioritise releasing of orders depending on how a particular armed force characterized their requirements & order list , during a particular FY COME WHAT MAY in order to meet the requirements of those armed forces & to exhaust the CAPEX sanctioned to them .
I suspect you'd see the same pattern played out every year in the past too albeit the scale of it would be different.
It's inefficiencies. No one wants to lead that's it. Everyone gives importance to their pensions.
Because let's say someone shows initiative and forwards a big ticket item like say 2 squadrons of Rafales. Then although that's very logical thing to do, but someone in India will raise a voice against it, and you know what will happen. Nothing much, a investigation will happen, it will be found everything is in order and things will proceed.
But the person who took the initiative will have a comment written in his/her service book. And that will be a hindrance for release of arrears, promotions, pensions, everything.
They are all government employees having zero specialisation trying to secure their pensions.
I think the example you've provided is mixing up the decision making process which is the preserve of the political class with that of the execution of it which is the duty of the bureaucracy.
They don't apply in this case.
This is a very good time for the contracts, we trying to promote export & hosting African def min people, best way to do that is to procure ourselves first. Geopolitical situation now is such that nobody is looking at us buying 2.5billions worth of Brahmos & rus get half of profits , and most of the west are busy with Ukr buildup issue. We delayed procurement a lot owing to that, correct to go this way of sudden huge contract awarding imo. Reasoning can differ. Another bout of turmoil would invariably cause supply chain issues to build up again which just subsided a little after last 12 months. Raw material cost, availability, timely delivery all this factored in I would say this is alright.
The explanation, the money for the import that are still outstanding & not cleared, instead of surrendering that portion, its diverted to domestic orders.
Its no longer listed between services : https://www.indiabudget.gov.in/doc/eb/sbe21.pdf
2024 Interim Budget | Government to consolidate the demand of three Services in defence allocation
Total allocation for the MoD stands at ₹6.2 lakh crore for 2024-25, which is 13.04% of the total Union Budget presented
In a significant measure to bring jointness in the procurements of the armed forces, the Government has decided to consolidate the demand of the three services in the capital head of the defence budget based on similar items of expenditure such as land, aircraft and aeroengines, heavy and medium vehicles among others. In the interim budget presented by Finance Minister Nirmala Sitharaman, there was no significant change in the allocation for defence with the total allocation for the Ministry of Defence (MoD) stands at ₹6.2 lakh crore for 2024-25.
“This will bring flexibility in financial management by enabling the MoD to reappropriate the fund among the three services keeping in view the inter services priority. This mechanism will also expedite decision making and ensure better utilisation of the capital budget,” the MoD said in a statement.
This is a significant measure towards bringing in jointness in procurements among the three services and addresses the shortfall often faced between committed liabilities, milestone payments to be made for past deals, versus the allocation for each service which was faced by Navy and Air Force in the past. For major capital procurements, the authority to prioritise is the Chief of Defence Staff and once cleared is sent to Defence Acquisition Council for approval.
The allocation of ₹6.2 lakh crore is 4.72% higher compared to the Budget Estimates (BE) and marginally lower, -0.38%, than the Revised Estimates (RE) for 2023-24 and is 13.04% of the total Union Budget presented. Of this, 27.67% goes to capital, 14.82% for revenue expenditure on sustenance and operational preparedness, 30.68% for pay and allowances, 22.72% for defence pensions and 4.11% for civil organisations under MoD. The capital allocation, which is for new procurements, stood at ₹1.72 lakh crore, 5.78% higher than the BE of last year.
Budget data shows that from BE to RE of 2023-24, Defence Ministry returned ₹5,371.8 Crore from the capital component while it received an additional ₹28,548.61 Crore under revenue expenditure, other than salary, meant for sustenance and operational commitment. For FY 2024-25, the revenue allocation, minus pay and allowances, is ₹92,088 crore which the Ministry said is aimed at providing best maintenance facilities and support system to all platforms, including aircraft and ships. It also facilitates procuring of ammunition, mobility of resources, movement of personnel, catering to day-to-day expenditure of armed forces in strengthening the deployment in forward areas and keeping the forces always ready to take care of any eventuality, it stated.
Ms. Sitharaman in her budget speech announced a new scheme for development of deep tech for defence purposes. On this the MoD stated, “The announcement regarding a ₹1 lakh crore corpus for Deep Tech for long term loan to tech-savvy youth/companies and the tax advantage to the start-ups will give further impetus to innovation in the defence sector.”
On the capital allocation, the Ministry said that this was in line with the Long Term Integrated Perspective Plan (LTIPP) of the three Services aimed to fill the critical capability gaps through modernisation of the armed forces by “materialising some big ticket acquisitions in FY 2024-25.” The enhanced budgetary allocation will facilitate in equipping the armed forces with state-of-the-art, niche technology lethal weapons, fighter aircraft, ships, platforms, Unmanned Aerial Vehicles and specialist vehicles, it stated.
https://www.thehindu.com/sci-tech/t...purposes-finance-minister/article67799745.ece
Planned modernisation of existing Su-30 fleet along with procurement of 12 more aircraft, acquisition of new engines for MiG-29 jets, C-295 transport aircraft under induction and missile systems will be funded out of the budget being allocated, according to the MoD. “Apart from this, to take the initiative of ‘Make in India’ further the Light Combat Aircraft (LCA) MK–I IOC/FOC configuration will be additionally funded to ensure state-of-the-art technology in domestic production. The Indian Navy projects such as acquisition of deck-based fighter aircraft, submarines, next generation survey vessels etc. will all materialise through this allocation.”