OROP effect: Major chunk of defence budget goes to salaries, pensions

Ajay Banerjee

Tribune News Service

New Delhi, February 29

Despite a hike in the budget, the Ministry of Defence has literally been weighed down by increased salaries and pensions — the expected effect of the Seventh Pay Commission and enhanced pensions.

The allocation for new weapons, equipment and systems has been increased, but not the quantum jump that is needed to rapidly bridge the gap. Union Finance Minister Arun Jaitley, surprisingly, did not mention the allocation of defence in his Budget speech in Lok Sabha today.

The budget for MoD is Rs 2,58,589 crore. The ongoing fiscal had a defence budget pegged at Rs 2,33,341 crore and the hike works out to be 9.76 per cent. Another Rs 82,332 crore is allocated for pensions, making it a total of Rs 3,40,921 crore. It’s for the first time that pensions have been clubbed with the budget.

The budget includes a capital outlay of Rs 90,208 crore, including a sum of Rs 78,586 for new equipment, weapons, aircraft, naval warships, Army vehicles.

Notably, the spending on salaries for the three services – the Army, Navy and the IAF, along their civilian staff — has been budgeted at Rs 95,849 crore — that is Rs 5,641 crore more than the capital expense. The biggest increase is in terms of pensions, which itself will cost Rs 82,332 crore. It’s up from Rs 60,238 crore in the ongoing fiscal, ending March 31.

Though the expense of the MoD will account for 10 per cent of all government spending, it leaves India ‘gasping for breath’ to catch up with its neighbour China, which is spending $144 billion. India’s budget of 2,58,589 crore is $38.2 billion – which is just about 26 per cent of China. Meanwhile, the US Department of Defence has submitted a budget of $582.7 billion to the Congress.

Already India’s expenses on operations and maintenance are dropping while expenses on salaries have risen. The finding of a study conducted for the pay commission by Institute for Defence Studies and Analysis, a New Delhi-based think tank, says India’s expenditure on personnel as a percentage of total defence spending witnessed a sharp increase from 27.55 per cent in 2007 to 41.12 per cent in 2012, reflecting the impact of the implementation of the 6th Pay Commission.