Defense Budget – Holy Cow Syndrome


(Brig (retd) GB Reddi)

“Holy Cow” syndrome continues to haunt the debate over the Defense Budget even after 72-years. At best, the debate is peripheral, pedagogic and pedestrian. What does it reflect? Is it reflection of intellectual bankruptcy of “Political Blindmen of Hindustan” or analysts, academics and media?

Why Defense Budget is so critical to not only the Armed Forces, but also to the nation? If armed forces are not modernized with alacrity, they risk ignominy of defeat in a future conflict against China or a stalemate even with Pakistan. “Two Front” conflict will be disastrous. Surely, armed forces cannot continue to wage wars with Generation 3 or4 combat equipment to wage futuristic wars against adversaries with modern Generation 4.5 or even 5 combat systems.

As per former Vice Chief of Army Staff, Lt. Gen. Sarath Chand statement last year to the Parliamentary Standing Committee, “68% of our equipment is in the vintage category; just about 24% in the current; and 8% in the State-of-the-art category. Similarly, the Indian Air Force (IAF) fighter squadrons (multi-role fighters and Ground Attack) as against authorized 42 squadrons is down to 31 combat squadrons as on date to include: 11 x Su-30MKI; 3 x MiG-29; 3 x Mirage 2000 (undergoing upgrade), 6 x the Jaguar – ground attack (initial stage of upgrade); 2 x two upgraded MiG-27; and 6 x MiG-21Bison (sitting ducks or Flying Coffins in any future war). And, the submarine fleet available is seriously limited.

Stating the obvious, Indian armed forces is waging endless wars on multiple fronts – proxy wars, counter terrorism, counterinsurgency, anti piracy operations and so on. Overstretched and ill equipped, armed forces are facing “Budget Crunch” year after year and plan after plan over the past 3-decades.

Ipso facto, the costs of modern combat systems and manpower are astronomical. Cost-effective modernization through downsizing by eliminating non-essentials and the ‘tail’ is vital. Thus, the vital imperative for comprehensive debates in the Parliament to identify requirements, total costs, assign priorities and allocate financial resources to ensure more deployable, capable and effective forces.

First and foremost, hardly ever the current and emerging threats are ever comprehensively debated in the Parliament which is essential to formulate predictable budgets – 5 or 10-year roll-on plans.

China is rapidly innovating competitor both in military technologies but also in restructuring their forces into agile, smart and highly flexible forces. Speed matters in innovation; but none of the MPs have shown appetite for it in the Parliament. Shift from the legacy of the past to the future is an imperative; otherwise, armed forces risk losing the first fight of the next war (ala repeat First Battle of Panipat, on 21 April 1526 when Babur’s guns proved decisive in battle, because Ibrahim lacked artillery).

Next, the debates in the Parliament or even in the media over rapidly changing war-technologies are at best superficial; so also the call for dynamic shifts in preparing for future wars: Jointness and Multi Domain Operations in Space, AI, Cyber, UAVs and others. In contrast, China is focusing on development of hypersonic weapons – five times the speed of sound, and maneuvering them. Nuclear war-fighting capability is quite suspect.

Innovation is, therefore, the urgent need – shift from “Make in India” through transfer of technologies to “Made by India” through indigenous R&D. For timely innovation, predictability is critical not just for the MoD, or for the services, but it’s also important for industry partners. Predictability allows industry partners to do their own investment in R&D.

DRDO innovation capabilities are suspect except in few fields. Similarly, persisting with Defense Public Sector Units (PSU) or behemoths incapable of keeping in step or marching ahead of adversary technology innovations and timely deliveries needs total review. Outdated R&D programs or projects need to be abandoned or reduced. No need to reinvent the wheel or fruitless reverse engineering undertakings including unnecessary upgrades sometime duplicative with other systems.

Enough also of endless and pointless bureaucratic five-year studies indulgence and setting requirements, and then an RFP when you have no idea what you really can build resulting in time-and-cost over runs. It is time for the next-generation military technologies to be defined by cross-functional teams to identify and prioritize our future technology investments. Also, offer scope to industry to develop either on stand alone or PPP or in joint collaboration with foreign industry in a strict time frame.

Ipso facto, the present acquisition system, particularly the raging controversy over “Rafale”, is contra speed. Lines of accountability and authority are still not very clear albeit cleared by the Supreme Court. The bureaucracy who are accustomed to operate through the arms dealers, remain stumbling blocks to acquisitions and modernization. And, some media houses get sadistic pleasure in speculating, rumor mongering and sensationalizing stories around unsubstantiated ‘hidden deals’.

Most importantly, quite often one hears of episodic modernization initiatives instead of holistic modernization formulations to include: actors, structures, processes and combat equipment. For example, the knowledge of military affairs of political and bureaucratic policy decision makers from national security point of view remains woefully inadequate. The need for creating the CDS has been on the anvil for over 3-decades; but not yet in sight due to the contrived military coup threat. The talk of “jointness” has been discussed over the past 2-decades; but the creation of joint theatre commands remains a distant prospect.

Viewed in the above framework, on predicted lines, Piyush Goyal, the stand-in Minister has claimed that over Rs.20,000/- crores is the single largest increase ever made in the interim Union Budget total allocation, that is Rs 3,01,866 crore ($42.7 billion) for what is conventionally termed as the defense budget – from allocation of Rs. 2.85 lakh crores in the current fiscal year (2018-2019). However, Piyush Goyal qualified that additional funds would be provided “For securing borders and to maintain preparedness of the highest order, if necessary”.

In 2018-19, the shortage of funds for the three services alone amounted to 30 per cent – or Rs 1,12,137 crore – against a projected requirement of Rs 3,71,023 crore. What is of greater concern for the MoD is that this shortage is unlikely to be bridged in the next few budgets.

Yet another significant issue that is glossed over is the details of debate over the overall allocation of Rs 4,31,011 crores on to the Ministry of Defense (MoD). Why, where and how the remaining allocation is spent never gets debated? If ever debated, increase in pensions is given as the justification. What about expenditure on other accounts like the DRDO, Military Cantonments and Lands, etc?

Let me highlight that the usual script of debate over the ‘Defense Budget” includes: 1) meager GDP proportion in comparison with other nations; 2) share of budget allocation service-wise; and 3) gross inadequacy to meet projected requirements for modernization of armed forces. Hardly ever the debate covers in depth review of the entire gamut of armed forces modernization affairs.

The clamor is over decrease in the share of Defense Budget in GDP from 1.48% in the current year to 1.44% in 2019-2020 Budget.  In contrast, the USA share is over 3%, Russia is over 5% and China is over 2% of GDP. However, in real terms of 2017, USA with US $ 610 billion heads the list followed by China with US $ 228 billion.  India lags behind Russia (US $ 66.3 billion) at US $ 64.9 billion in the 5th position.

Next, the decrease in the share of Defense Budget in Central Government Expenditure from 11.4% to 10.8% is never questioned when there are major shortfalls and delays in procurement of latest state-of-the-art weapon/combat systems.

Furthermore, year after year the share of different services in the Defense Budget get highlighted endlessly highlighting that it is skewed disproportionately in favor of the Army. Also, the Army’s predominant share is justified due to its overwhelming numerical superiority. Accounting for 86 per cent of total uniformed personnel (of 1.4 million as of 2017), the bulk of its budget is spent on Pay and Allowances (P&A). In the 2019-20 budget, the Army’s P&A accounts for 69 per cent of its revenue budget and 57 per cent of its overall budget.

Next, the growth of nearly 10 per cent (Rs 7,198 crore) in capital acquisition outlays provided in the interim budget appears healthier, but woefully inadequate from modernization requirements. As per IDSA papers, “the previous allocation was not even sufficient to meet the committed liabilities (CL) or to pay for signed contracts. To put this in perspective, in 2018-19, as against Rs 1,10,044 crore required for CL, the total allocation for modernization — which includes, besides CL, New Schemes for signing fresh contracts — was Rs 74,116, leaving a gap of Rs 35,928 crore or 33 per cent. Against this shortage, the increase of a mere Rs 7,198 crore is only going to compound the problem for the MoD which would be in an extremely difficult situation to prioritize its payments for both previously signed contracts and the contracts to be signed till the end of 2019-20.”

The IDSA paper also stated “the MoD has already signed contracts in 2018-2019 contract worth more than Rs 60,000 crore. These include the S-400 Triumf (Russia: Rs 40,000 crore), P1135.6 Frigates (Russia: Rs 6,679 crore), Air Defense Fire Control Radar (Israel: Rs 4577 crore), Diving Support Vessels (Hindustan Shipyard: Rs 2,494 crore) and Survey Vessels Large (Garden Reach Shipbuilders and Engineers: Rs 2435 crore). Assuming 15% payment in a year, the total requirement would amount to over Rs 9,000 crore.”

In sum, such a skewed debate mercilessly exposes the pedestrian and perfunctory ways of debates by MPs in the Parliament besides reports of “Standing Parliamentary Committee” and even the Comptroller Auditor General of India (CAG) who is responsible to carryout audit.

Most important, none ever questions the failure of the ‘first step’, that is, publishing a single “National Security Strategy” document over the past 72-years that should form the basis for publishing “Holistic Military Strategy Doctrine”, which constitutes the basis for all “Defense Budget” planning to include identification of requirements, priorities and financial allocations.

Meanwhile, hype governs the launch of the ‘Make in India’ initiative in 2014. Of course, the MoD has undertaken a host of initiatives to promote indigenous defense manufacturing –  setting up of two defense industrial corridors — one each in Uttar Pradesh and Tamil Nadu —  and promulgating a draft defense production policy that aims at increasing defense production to Rs 1,70,000 crore by 2025.

The ‘Hard Facts’ or the “naked Truth” of force levels particularly the IAF and the Indian Navy is quite alarming. For example, in early 1990s the IAF had around 42 operational fighter squadrons mostly with Generation 3 fighters. Today, the IAF is down to 31 squadrons mostly with Generation 4 fighters. Quite a few of them are old. And Generation 4 + and 5 fighters are very expensive with all the add-ons.  So, cost-effectively modernization of the IAF and increase its capability, and change the way air warriors fight in order to implement the National Defense Strategy, are vital imperatives.

Let me compare the US AF squadrons strength and it modernization efforts: down to 312 squadrons of all categories from 401 squadrons post cold war in early 1990s. Their multi-role fighter squadrons (Generation 5, 4.5 and 4) strength alone is 68 (9 x F-22 A; 7x F-35; 34 x F 16s; and 18 x F 15s). And their projection additional squadrons are 74 – mostly Gen 5 fighters.

Similarly, China has 28 x J-20 stealth multirole Gen 5; 24 upgraded Su-35; 76 x Su-30MKK; 50 x J-16;  346 x J-11s; 76 x Su-27SK/UBK; over 400 x J-11/15/16; 235 x J-10;  and 96 x J-8. Predictions indicate that large quantities of Chengdu J-10 and Shenyang J-11/15 will be its main force, with J-16 and JH-7A as the PLAAF backbone precision strike fighters besides J-31 stealth fighters.

Similarly, the Indian Navy is also suffering from ‘fund crunch’, particularly the submarine fleet. Total number of ships around 136-138 appears a “BIG NAVY”. But it is not true. And, the navy plans to expand to a fleet of 150 ships in the next ten to fifteen years, with 50 warships now under construction and 100 new vessels in the acquisition pipeline. The Navy’s wish list is quite exhaustive – very high cost three-career fleet and six nuclear-powered ballistic missile submarines in service in the near future. Boeing 737 P-8I maritime reconnaissance aircraft have begun to be inducted and 5 additional Kamov Ka-31 AEW helicopters will be added to the existing fleet of 11 helicopters. Augment airborne maritime surveillance, strike, anti-submarine warfare [ASW] and air defense capability through induction of shore-based aircraft, integral helos, carrier based aircraft, space based assets and UAVs.

Despite Indian Navy’s current force levels and projected ‘wish list’, it pales into insignificance in comparison with Chinese Naval armada of 496 ships and 232 various auxiliary vessels. Predicted to have 6 aircraft careers in the near future.

Thus, the Defense Budget is woefully inadequate to meet the requirement of acquisitions of host of new military technologies and combat systems to wage future wars. Projections for upgradation of the GPS satellite, replacement of fighters, helicopters, submarines etc remains on paper under wrap.

To sum up, the Interim Defense Budget is nowhere near meeting the modernization requirements of its different services. Budget allocation must facilitate buying combat systems faster and smarter through indigenization of innovation and manufacturing. Hopefully, allocations will be more pragmatic in the next Budget presentation after the elections by the new regime.