 Welcome to Newsclick. The defence budget forms a very important part of the financial, the budget for the year 2020-21 like all previous years. Nearly 16% of government's total expenditure has been allocated for defence, which includes defence pensions also. And it comes to around 2.1% of the gross domestic product of India. But if you go by SIPRI's method of calculating military budget, which includes investment or allocations made for paramilitary formations or which are meant for so-called internal security, then we find that the defence budget increases or the military budget increases from 4.71 lakh crores to 5.57 thousand crores, which is a stupendous amount which comes to roughly 2.5-2.6% of the GDP. Now keeping these rough figures in mind because these are large numbers, the most important feature of this budget is that the maximum increase that has taken place in the defence budget this time is on account of defence pensions which has increased by nearly 14%. In contrast to this hike in defence pension, allocations for defence pension, rest of the allocations have increased by no more than 3% on an average. It is therefore the manpower costs or the pension costs including the manpower cost becomes a critical factor for any defence planning that has to be done in this country about in terms of acquisition of modern weapons, upgradation, investments in industries, in defence industries, military industries. We have with us the Raghunandan, member of Delhi Science Forum and a defence analyst with NewsClick to take us through some of the highlights of the defence budget especially the rising manpower costs which have been repeatedly been cited as one of the reasons why Government of India finds that it is woefully short of funds to allocate for capital acquisitions of the defence sector. Welcome to NewsClick. So, my first question is it is very clear from taking a look at the defence, the overall budget allocations that there is a stupendous increase in defence pension. If you take defence pension and the pay allowances of service personnel especially in the Indian army, not so much in the navy and air force, we find that the manpower costs are taking away large chunk of resources which are otherwise allocated. So, how do we, how do you look at it as a? Well, two aspects obviously stand out. One is as you said the very fact that pensions, manpower costs, etc. are such a large proportion of the defence budget. And naturally if you take the total defence budget and pensions and manpower costs are such a high percentage, then the amount of money left for capital expenditure is very small. And given the financial constraints the government is working under at present which do not allow much for expansion of the total defence budget, this restricts the capital expenditure that you can make which essentially means as far as the public is concerned, the military has embarked on a program of modernization of the armed forces which requires buying of new equipment. And if you do not have money for capital expenditure, the modernization program of the armed forces is going to suffer. There is no getting away from that. But internal to the issue of manpower expenditure and pensions, I would say there are two distinct aspects which need to be addressed separately. The first is pensions and the second is the running costs of manpower. If you look at pensions separately which is where the largest increase has been registered, this is largely due to two reasons. One of course is the one rank one pension scheme which has jacked up the amount of pension requirements that you have which is by the way bulk of the effect of which is going to start kicking in now. The second aspect is the duration of service of the armed forces personnel which used to be an average of seven years earlier is today an average of 17 years which means that virtually every serviceman becomes entitled to full pension for the rest of his life. Now that obviously poses a huge burden on the pensions and salaries account. So I think essentially what this implies in the future is you need to cut down on manpower costs and especially pensions. The pension structure depends on how you structure the manpower resources of the armed forces and ideally you should not be looking for very long term service but look for shorter duration service and faster rotation of personnel which will reduce the pension burden but I think even more importantly India just like it has been stuck with legacy equipment on the capital side is also stuck with an antiquated structure of the army which is heavily dependent on having a large number of service personnel which reflects a very outmoded concept of the army and of battle scenarios which are no longer relevant in the world today. I could elaborate on that further if we have time we can go into that. Let us restrict ourselves. But at the moment I will stop with that. Since defense pension and manpower costs have been cited as one of the main reasons for for making a capital acquisitions slow or inadequate. The next question that comes to mind is that while fine defense pensions you cannot do anything about because it is a deferred wage and it is a commitment which has been made and no but I mean a sovereign government having given this promise cannot pull out from it. So that is going to be a fixed cost whether we like it or not. Having said that what are the ways in which manpower's costs can be contained that is the larger issue. So as I said there are two major ways as you said pension is a deferred wage and it is support for you as a retired government employee and a defense employee for the rest of your natural life. What has already been committed is one part what you can do is to restructure the structure of the armed forces for the future. So that the future generation of entrants into the armed forces do not become such a large burden on pension funds. Like I said essentially by shortening the duration of service of bulk of the personnel and making suitable arrangements for alternative employment of retired of service personnel who leave the services in other avenues of employment. So that's. But Ragu the problem that one has encountered because I remember even the previous finance commission had recommended that there should be a horizontal shift. I mean people who retire from armed forces personnel could be accommodated in the central paramilitary formations. That would be one way of reducing the manpower costs in one even if it increases in the other you are able to keep it within a certain. But there was reluctance on the on part of the Ministry of Home Affairs and it came from the organization themselves ITBP BSF all of them themselves put their foot down by saying that this will not do. So there was this problem in terms of accommodating them. How do you reduce there is no way one can reduce the numbers. So it's only in the future that one can say the impact. That's right. You can't do it at present. Now the CDS has already on record of saying that they are thinking in terms of restructuring the army where by precisely what you suggested is what probably will be in in in force which is that they'll be shorter. There'll be a greater rotation rotation of and the period would be seven to nine years so that more and more and then the youthful nature of the infantry battalions especially can be retained. That is one way but there is another issue that is also linked to it when one looks sees it. If we go by Cypri's definition of military budget which also includes the paramilitary formations which are by the way trained along the same lines as the infantry battalions of the army. And from our own history we know that these are also modeled on the Irish Constabulary's model for the colonies that they followed. If we include that we find that there has been a stupendous increase in personnel of the paramilitary formations simultaneously as there has been an increased augmentation in the strength of the army as a result of their internal security duties and where they've been involved. Now the current army chief is on record in his first public statement saying that the army wants to go back to its primary role of defending the border and move away from its secondary role. How do you see that? Do you think that there is a possibility of breaking away from our... See militarily of course I mean it does not make sense for the military to be saddled with so many duties in counter insurgency operations within India. The military should be brought in or is required to be brought in only when things have gone beyond control and I don't see that happening because most of the insurgencies around are low grade insurgencies and don't really call for such large deployments as we have seen in the recent past. What is required more and this again relates to the kind of military as well as paramilitary that you're looking for is a more technology intensive military rather than a manpower intensive military. This whole idea of hordes of army or hordes of police people going in is I think a very antiquated concept and does not relate to present conditions of either insurgency or of warfare. Raghu, let's move from the manpower to the capital side briefly. Now although the allocation have risen now to 118 lakh crores it's still I mean the people are still unhappy because it's not sufficient to meet all their requirement. Now this is a issue that has plagued Indian Armed Forces for a long time that they need more but there is not sufficient fund but there is also third question. We have failed somewhere in creating an indigenous military industrial complex which could meet our requirements and our needs and therefore we are always looking for big ticket items to be bought from abroad which are always at a high price and especially because if their emergency purchases the price shoot up. Given that what that our pie is limited how do it does what should the government do in order to make maximum use of the limited scarce resources that we have? I think there are three aspects to this question and without elaborating too much on each I'll just summarize the three aspects. The first is the military as it is structured today is overloaded with legacy equipment something like 70 to 75% of the equipment with all three services but particularly in the army are legacy equipment meaning they are 40 to 50 year old types of weaponry. So there is urgent need for modernization if you want to restructure the armed forces to meet the requirements and demands of contemporary warfare. Having said that if this is to be achieved clearly you need to have money to spend on modernizing your armed forces restructuring the armed forces which will involve more expenditure in the short term but leading to savings of money in the medium to long term because as all militaries have modernized the modernization has come with the reduction in numbers of the armed forces. You mean including the personnel? Including the personnel very much including the personnel and the best example I can give is our friends to the north in China. China has embarked on a massive modernization program in their military which involves not just acquisition of new and modern weapons and network centric systems but simultaneously a very serious reduction in their armed forces. If you remember and think back to the Indochina war of 1962 the talk then in military circles and military historians will tell you today was that the Chinese used numbers of armed forces to overwhelm the opponents the Chinese army is no longer like that. China has cut its armed forces personnel particularly in the army by more than one million in the last 10 years that's a huge reduction. We are thinking in terms of reducing 100,000 over the next five years. Yes but that is too small a number we have got a such a huge standing army compared to even to China whose army strength now is more or less at par with India despite having a huge long border with Russia to the north having border with India to the south and having all kinds of other ambitious projection of their military but they are doing all this by modernizing military equipment and reducing the number of armed forces personnel because modern warfare does not involve sending 200,000 soldiers in the trenches that's not the way wars are fought these days so you don't require that many people. So I think India should embark on a crash program in the next five to ten years of simultaneously reducing the strength of the armed forces while increasing the technology content of the thing and therefore increasing the modernization of our forces. The third aspect is the aspect of indigenization that you indigenization in the short term is not going to save you money let me put it clearly because a more expensive or equally expensive because you will start off being more expensive because your skill levels are still low your productivity will be low your numbers may not scale up but gradually once you achieve scale and your skills and productivity is improved then your costs will start coming down provided you have invested again some money in research which will reflect back in the amount of technology that you see a lot of the so-called indigenous equipment we are making in India today still contains 40 percent of crucial components which are imported. So part of joint venture is with some OEA? Either way so if you want to substitute those also through indigenous manufacture you need to spend money on research so again it's the same thing as we were saying earlier in order to achieve savings in the longer run you need to make investments in the short term. It's very clear that we are going to remain lack resources adequate enough to meet all the requirements of the armed forces which they list for some time to come especially now because of the economic slowdown the reduction in tax revenue we don't know what the future holds in terms of the economy etc etc. Now the government is thinking of moving away from budget allocations to some other means to find resources for the military. Now one of the things that they had asked the 15th finance commission to look into was to come out with some method by which external security as well as internal security could get non-lapsable funds and this has been an old standing demand of the parliamentary standing committee on defense. Several standing committees have made the same recommendations. Now the real issue that blocks the acts as an obstruction is article 266 of the Indian Constitution which relates to consolidated fund of India and it's clause one makes it very clear that once the fund is whatever funds are left it becomes part of consolidated fund of India and you can't withdraw it without the parliament approving it through a demand for grant. Now that's the only tricky point but the real issue there nevertheless remains even if you have to create a non-lapsable fund where do you find that surplus which will become part of the non-lapsable fund and therein comes a suggestion from the Ministry of Defense that let's have another round of sess meant for defense. How do you look at that? Again I'll give my response in two parts one is with regard to lapsable funds. I think that point is moot today because it's been a long time since the allocation of the budget has been so much that the defense forces have had to surrender money because every year they used to this was see even if you look at this year's budget the amount of budget allocation for capital expense is less than the amount already committed from the previous year for equipment that you have already purchased. So where is the question of returning the money? It's already exhausted. It's already exhausted before you've received it. In fact you don't have money for fresh acquisitions. India has got a long list of acquisitions it is going to make submarines warships fighter aircraft marine aircraft carrier based aircraft carriers and so on. There's no money for any of these because the money that you've got for capital acquisition is to pay for what you've already ordered or acquired and leaving you nothing for new equipment. So you will still be left juggling balls in the air when you're so I think that point is now moot we have moved way past that point. So if sess is what is required to be done yes provided the Indian public has to be assured that this is not good money being thrown after the bad. See we are already as I said lumbered with a inefficient oversized out of date military and if you need to support that by having more money coming in then it's pointless unless you draw up a firm publicly seemingly viable program of military modernization which involves expenditure in the short term in order to obtain savings in the long term then the public will see the justification of this therefore you should be able to draw up a plan that we will spend more now through the sess which will then save us budgetary allocations in the 5 to 10 year time. The only problem again as you pointed out the only problem is even educational sess which government of India has been imposing for number of years it has accumulated more than rupees 90,000 crores which has not been availed of that is that is precisely the point I was making. So in the military sector that is not the problem today today the problem is not if I get money I will not be able to spend it you already spent more than what you require. So today there will be no problem of that in terms of defense expenditures but we should ensure that any amount of money that is allocated fresh goes into modernization of the services not in running expenses or revenue expenditure of the services goes in for modernization which will assist in a plan where running expenses and manpower costs are seen to reduce over the next 5 to 10 years because then you can say we have got this much extra money now we will save that much extra money by reducing the manpower over 5 to 10 years. Let us hope that they that they that they that is the only way to do it they are careful and they plan well in advance that is right. Thank you Raghu for today this is all for now keep watching news news click and if you have any comments or feedback do write to us.