 On Friday 5th July, India's new finance minister, Nirmala Sitaraman, presented the budget for 2019 and 20 for Government of India. We are looking at the defence allocation for 2019-20 made in this budget and what it reveals about the nature of modernization, upgradation and other plans and policies that the government has for the armed forces. We have with us Major General Harshak Akkar who comes from the artillery regiment of the Indian Army and is one of the most prolific writers on military affairs currently in India. Welcome Sir to NewsClick. Thank you. Sir, my first question to you, you have seen the budget, they were something very striking this time about the budget because for the first time the finance minister failed to even give out in her budget speech. The quantum of money being allocated for defence and merely talked about and referred to withdrawal of custom duty on import of military equipment and platforms. How do you see that the omission on her part to mention the size of the defence budget and the increase that she was proposing for 2019-20? The fact that she did not mention the term defence or the allocations at all in the budget immediately gave you the confirmation that there is going to be no increase. It is going to remain the same if there was an increase or decrease like in all other cases where such incidents have, I mean where such changes have taken place, they were part of the main budget speech. Her only remark of cutting of customs duty for imports amounts to about 25,000 crore or spread over 5 years, it is not 25,000 crore in one year. So it was evident from the way she went that she is not going to tamper with what was announced in February this year. In any case this custom duty was introduced in 2016 by the previous government of the same party belonging to the same party but in the previous avatar. Now let us come to the budget, the size of the budget because that has also raised a lot of fibros. Now there are two components to the budget. One is the defence budget and the other is the defence pension. If you put the two together, the amount that has been allocated is Rs 4,31,000 crore rupees for year 2019 and 20. If we just take the defence budget minus the pension, it is Rs 3,12,000 crores for the three services, the revenue and capital as well as the civil expenditure of the Ministry of Defence. How do you read the sum which has been allocated, both the revenue as well as the capital for those three services before I come to the other parts of it? How do you read the allocations which have been made for the three services? The allocations overall are as per the norms laid down. The Army getting the largest share than the Air Force and the Navy. As far as the revenue is concerned, it is based on the standing force that we have. The standing force is determined by the threats that we have. Today we have come down to the concept of no additional increment of manpower so it is save and raise. When we talk of raising the additional commands, whether the cyber, space or the special forces command, we are looking to cutting down manpower somewhere to be able to create manpower for this. So as we induct technology to some level, we can afford to cut manpower but there is always a limit to the cuts. The Air Force and the Navy, the Navy especially when it is acquiring new ships, for every ship you need manpower alongside. It cannot cut from one in place in the other so therefore it may get difficult for the Navy similarly for the Air Force. The Army is a place where the Army Chief's present concept of undergoing a complete reorganization or restructuring where he is looking at cutting down manpower may possibly be able to support the save and raise but when you look at the revenue budget, there are some aspects to it which have been missed out somewhere. Over the last two-three years, especially since Uri, when the Army realized it had drastic shortfall of ammunition and it had to be prepared for a 10-day war or more and it had to create the ammunition funds from the government were not forthcoming. It cut a large part of its revenue expenditure including construction of married accommodation projects to divert funds for building up its ammunition stocks. Now those projects that you cancelled and if you remember over the last few months or maybe around 7-8 months ago, the Army contractors were almost up in arms because their building payments or their construction payments have not been made. If you have to make those payments and you have to cater for the normal running of the forces, the revenue expenditure is equally essential. This is what we require for our normal maintenance of the forces. Salaries is one part, you have got to maintain your infrastructure, you have got to maintain your weaponry, you have got to maintain your transport fleets. Can I interrupt here, sir? What proportion of the revenue expenditure goes towards salary wages and what proportion is allocated for maintenance? The largest portion goes towards salaries and wages, which is where you determine the strength of the Army. Based on the threats, the government has approved the manpower strength. The Army does not, today they are not raising any more Army manpower but you are raising it of the CAPFs basically because of the revenue expenditure and the pension bill. I will come to that, sir, because that also ties up with what General Bepin Ravath has recently stated that the government has accepted the Army's restructuring plan, including rightsizing of the force. I will come to that. But if we stick just to the budget part of it right now, now one part of the budget you have explained as deals with the revenue, the other part deals with the capital. Now capital is what, where there has been much heart burning amongst the veterans as well as service personnel because that is where we will be know how much money would be available to the various services to buy various equipments and platforms that they require, correct? Now of the total sum that has been allocated, capital account of roughly 1,00,000 crores, 30,000 crores or 3,000 crores, 1,00,000 plus crores, now it seems that most of the money that has been allocated to the three services, the bulk goes to the Air Force of roughly 39,000 crores followed by Army of 29,000 crores and then comes Navy with 23,000 crores allocated for it. But a report today in the Hindu also points out that these allocations have to be seen in light of the fact that these are committed liabilities, installments which are due for contracts signed earlier. The Army and Air Force in fact have got a lower allocation than what their committed liabilities apparently happen to be. It's only Army which would have a surplus of roughly about 7,000 crores to make new purchases. Now how do you read this situation? Because simultaneously we are talking about Navy acquiring a number of vessels for which orders are going to be placed very soon with the shipyards, Air Force going to acquire very, I mean I don't know when it will be signed but there is this plan to get 114 fighter jets for which again money would be required for transport planes, money would be required. How do you read this? What does it mean? Okay, let's look at it in a slightly different manner. Go back to last year, we had the same problem last year, did anything stop, right? So what I mean to say is there are shortfalls at the beginning of the financial year. We faced it, last year we had even a lesser budget where we had the vice chief Sarachand raise the point and publicly go on record to say that we have got no money for our committed liabilities. The army was short of its committed liabilities, but what stopped? You still modernized, you still managed to get money from here and there and you were able to make two. At the moment the Air Force, if you look at the figures, is shot by 9,000 by about 7 to 8,000 crores approximately. The Navy is shot by about 3,000 crores. The army like you said is surplus. That is going to be some way out between the defense and the finance minister to work out that the deals go through. The committed liabilities are done and we make a basic payment. Like the Air Force may further delay giving it to the HL, the HL may be compelled to take a loan for the time when the payments are made subsequently. The same may happen as far as the Navy is concerned. After you will most to a large extent be going to our own dockyards. The problem comes when you go in for joint ventures. Joint ventures under the make in India where you are supposed to support the setting up of the industry. You are supposed to support R&D. The future infantry combat vehicle has been on the cards and every year it is getting pushed away because funds are not there. Hopefully with Nirmala Sita-Raman having seen both sides, the budget is on and out. Hopefully she should logically be looking at catering for a reserve which makes slowly get released to the armed forces on an as required basis. The moment you announce that it is part of the budget, I have got 10,000 crores and I am going to give it to you in your capital. You watch the jumping in the three serviced headquarters for their demands. So I have a feeling because the same thing Jetli did last year and Sarachand went and I mean it was public outcry. It was given out to the member of parliament committee on defense, the standing committee on defense. I mean it was announced all over and it again led to immense discussions across all media channels but everything moved. So I still have a feeling, I still have faith in the system that the government realizes that we are sitting on a powder cake. Park is not going down, China the trust levels have not come up, your NSG deal is not through which implies that they still wish to push you away while we talk peace on one side. Park has presently cooled off pushing in Kashmir after Balakot. How long will the threat remain? They are under tremendous pressure themselves, not only FATF, not only IMF, the fact that they know that we now have our full holding of ammunition, they are even scared because they are not in that position. So things are changing but a time may come when something happens and you have to go so you have got to be prepared. You cannot afford to let another MiG-21 come down. So the government is going to move, how do they create, when do they create? I would prefer giving Nirmala Sitaraman sometime and I would wait to see the way serviced quarters would react in the next few months. When one talks about the defense budget and the allocations for defense, there is always this complaint that defense allocations have instead of rising they have actually fallen and people talk about the size of the GDP and the percent of GDP that ought to be allocated for defense. What is your take on it? In fact, when you look over the years, we have been demanding 3% of the GDP. In the present context, 3% would be asking too much. The government has got immense priorities of its own, whether it is infrastructure development, social needs, lifting up the Indian population which we cannot let it to be down in terms of defense. At the same time, I would go back to the words of Abdul Kalam which he many spoke in the Indian military academy and he said national security and national development go hand to hand. Without one, you cannot have the other and without the other, you cannot have the first. When you have development, you have got funds for national security. When you have got national security, funds will flow for national development. That is how India has the largest FDI in South Asia. It is because our institutions are secure, the nation is secure. So that is how it will flow. In the way the GDP is growing, forgetting about the challenges that we face because China is more concerned towards the US than India. Park is a major threat. We have no offensive desires anywhere including in China. So even if we touch 2%, I think we will be very, very well off. Well, we have touched 2% because it's slightly more than 2% of... We are talking about pensions. Well, it seems that the figure that has been released, it seems that they come to if you do not, I mean, just restrict yourself to defence. It's 1.62. No, if the revenue, capital and pension is added, then it comes to 2... No, to the pensions. You see, pensions has never been a part of the same. Well, this is... It is when you want to show a boost in figures you add pension. No, the pension, this is an accounting practice. It's not a reality. In the actual expense that the country incurs on account of defence is 4,31,000 crores, which must include pension because pension is nothing but deferred wage of the military personnel. So it is part. The second point, sir, that your point is well taken that the size, the number of... I mean, what percentage of GDP it should be is not such a critical factor. It whatever is required, at least it should meet the requirements of the armed forces. But I want to move away to another point, sir. One of the issues that has been troubling government of India and it's been this came up during this whole conflict over one rank, one pension was the size of our salary, wage and allowance bill as well as the pension bill of the armed forces, which it is claimed is eating up and reducing revenue, which would otherwise be available for the services to use as and when they require or in the form in which they require to meet their needs. What do you think needs to be done? The government of India, I mean, army headquarters has now come out with this plan. Bipin Rawat has said that the four point, four categories under which army is looking at restructuring itself, rightsizing itself. The government has agreed to and 100,000 posts, it seems, would get reduced exactly over which period I'm not aware of because that has not been provided. But one assumes that it'll be between 5 to 10 years at least. It can't be in one year, 100,000. Now in the last decade, we raised 100,000 soldiers to meet a demand for the two special mountain divisions followed by the decision to go in for a mountain strike court, for which we raise. Now we are going in for reducing 100,000 numbers. Do you think this is the best way for the military to move or the government to move when it thinking, when it talks about reducing the salary and pension bill of the armed forces and sees that as the major cause of the shortfall in defence budget? If you look at the, let's start with the 17 core which you were talking about. I don't think we ever got the funds to raise 17 core because you were not looking at creating because you could not afford to create that additional manpower. So today what you are doing is save and raise. You are adjusting forces from one part to the other. In addition, you are cutting down manpower. When you raise the integrated battle groups, it's not going to be the present strength of the formation. It's a realistic requirement in the present operational scenario of a nuclear war. You're looking at speed, you're looking at decisiveness, you're looking at task-based missions. So you're looking for that and which is going to be a reduction in manpower as compared to what is held. Plus you have removed a few formations. You've reduced military farms, you've made them zero. There are a number of workshops which you have now removed and you're going to outsource it to the civil. So you're cutting down manpower. Now as far as 17 core is concerned, in addition to saving of manpower from here, you are re-adjusting formations which become surplus on account of creation of the battle groups towards spark. So they now get affiliated towards 17 core. That is still in progress. There was an odd article on it. I have no idea on the veracity of the truth. But the way things are flowing, it appears to be moving in this direction. So you think it is possible to reduce at least a significant number of posts from the army over the next? You see, reducing posts is one part. Second part is to handle your pension budget. Now the army javan retires from 35 upwards. Can we look at increasing his age? Because when he retires at 35, his pension is lowest. His responsibility is the highest. Aging parents, growing children. And what is he called a pension? If he doesn't have anything at home, then he looks at what job, a security guard. That is all that the industry offers him. So can we increase his service without touching on the operational efficiency? Can we trust him to operate for another 5, 7, 8 years more? But it seems what the army is planning or at least the army headquarter is planning is to go in for a younger force, reduce and go in for more short service duration. No, that's a different problem. But I am looking at the javan. Now let me come down to officers. If you want to give a carrier to the permanent carder, then you have to logically have a higher support carder, which is a short service and a smaller permanent carder. Now that ratio of ours is skewed today. Now to get a longer support, sorry to get a larger support carder, you have to give them the incentive to serve and then an opportunity to move on. But today the industry wants people with 10 years of service. He does eight years or nine years in the army, does a six month or a one year course at one of the IIMs and he will be gobbled by the industry because of his experience background, because of his management background. That is the carder which is served and your requirement goes into a second carrier with a lump sum of money, not part of the pension bid. Those who will now remain in service and continue going up will be a smaller permanent carder who will have better chances of promotion, better chances of being overlooked. So you feel that this is a workable proposition and this will. It's been tried in different forms earlier. The question is we have never been able to market it. We have never been able to convince the industry. Those who are leaving after eight years of service and doing the course in one of the IIMs have a chance of being picked up. Then those who have gone through the regular service and are now looking for a job, the same IIM, same course. One, the last question which I have is linked to my first question. Nirmala Sita Raman began by announcing withdrawal of custom duty on import of military equipment by the services, right? And that was supposed to be a big benefit to the defence by around roughly rupees 5000 crores annually. But she didn't say anything about excise duty and GST that has also been imposed on many of the purchases that the services have to make. For some items it's 18% for vehicles, for instance it's 24% which is exorbitant. Now they haven't taken care of that. My point is both this as well as the custom duty was an indirect way in which the Ministry of Finance would allocate money to the defence and then take back part of the money in form of taxes. So they have done away with custom duty but they have neither done away with excise duty nor with GST. Now how do you see that? This is being penny by pound foolish. You see what she had announced at that time was that this will help the imports which is what was the intention of India's enhancing its defence needs from external sources. And post that in one of her interviews she'd also said this will help us in importing our equipment from the US. So this possibly is an incentive for the import. Whatever is going to be make in India that she's going to take her pound of flesh from there. Okay, thank you very much for this time, General. We look forward to having you with us again on other matters that have to do with the military. But thank you once again for today. My pleasure. 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