Hindustan Aeronautics Ltd (HAL) and Rafale controversies may hinder Budget allocation for Defencethis year. Public-private partnerships (PPP) in the sector may also hamper the public sector units’ (PSUs’) role in Defence procurement, say analysts tracking the industry.
Some also said the government has failed to deliver on its ‘electoral promises’ towards Defence and the inadequacies of the Defence budget were highlighted last year by Vice-Chief of Army Staff in Parliament.
“The situation is fairly tight as paying almost ₹20,000 crore as advance for Rafale, there is hardly any budget left for the other capital projects. There are huge liabilities...even 10 per cent rise in the allocation will not add much value,” Major General (Rtd) Bishamber Dayal, a Defence expert, told BusinessLine.
He said if the government is serious about the modernisation plan then a minimum corpus of ₹30,000 crore should be allocated for modernisation over and above the revenue expenditure — pay and allowances.
“The Ordinance Factory Boards (OFBs) and PSUs are very stressed and fully stretched to meet the ambitious defence corridors initiative of the government.
A separate package of minimum ₹30,000 crore is required for their modernisation,” he added. According to analysts, there were many announcements made in the last year’s Budget by the Finance Minister Arun Jaitley, but no developments have taken place, except a few, like Foreign Direct Investment in the sector.
In his speech in the Budget last year, Finance Minister Arun Jaitley had said, “We have opened up private investment in Defence production including liberalising foreign direct investment. We will take measures to develop two defence industrial production corridors in the country.”
Defence policy
The government will also bring out an industry-friendly Defence Production Policy 2018 to promote domestic production by public sector, private sector and MSMEs, he had said.
However, the way developments are happening, the MSMEs are not gaining anything in the sector, said experts.
Apart from the Centre, there are States who are also willing to open up defence production so that they can gain in terms of employment.
States’ role
For instance, Uttar Pradesh Chief Minister Yogi Adityanath recently at an event in Greater Noida said his government had a strong focus on mega infrastructure projects such as the Bundelkhand Defence Corridor.
Also, on the other hand, the government is promoting a lot of start-ups in defence manufacturing and as part of the ‘Make in India’ campaign, the Defence Ministry is working towards the goal.
Having said that, the upcoming Budget is not likely to give a boost for the industry, as experts feel it will be more of an election campaign rather than giving relief to some of the demands of the industry as well as the forces.
“In an election year when the government is looking at votes, except a few rhetoric to attract attention nothing much is likely to be allocated,” added an industry veteran.