Monday, 5 February 2018

Navy and air force also feel the pinch of personnel costs

Defence allocations have not kept pace with rising salaries and pensions

By Ajai Shukla
Business Standard, 5th Feb 18

The defence Budget, which the Union Government presented on Thursday, underlines serious issues around the structure of the army, navy and air force and the growing imbalance between equipment and manpower costs.

Overall, the army emerges as a manpower intensive force, with a burgeoning salary and pension bill that accounts for three-quarters of its allocation, leaving only scraps for modernising a vast inventory of equipment that is racing towards obsolescence.

But the navy and air force, albeit to a lesser extent, have also begun feeling the pinch of increased personnel costs, which is constraining their ability to resource new weaponry. While the army makes the case that numbers are essential for manning a sprawling mountain border with China and Pakistan, the navy and air force admit that an expensive technological edge is essential for their functioning.

Given the importance of equipment modernisation, the overall defence budget should rise at least at the same pace as salaries and pensions, so that equipment modernisation is not hit. That has not happened, with rising personnel constituting a growing proportion of the army, navy and air force budgets.

A detailed, year-on-year analysis by Business Standard of defence spending since 2014-15 reveals that the navy’s personnel costs, inclusive of pensions, has risen from 21 per cent that year to 30 per cent in the coming year’s budget.

That has proportionally impacted the navy’s capital budget, which has fallen from 58 per cent of its allocations in 2014-15 to just 46 per cent this year and the next.

In real terms, that has reduced the navy’s capital budget from Rs 22,269 crore (Rs 222.69 billion) in 2014-15 to just Rs 19,348 crore (Rs 193.48 billion) in the current year. The earlier level will not be regained even next year, for which the navy has been allocated Rs 20,848 crore (Rs 208.48 billion) in its capital budget.

Given that most categories of military equipment have an annual inflation rate of 5-10 per cent, this translates into a substantial decline in buying power each year.

This decline will directly impact the progress of procurements the navy regards as essential for safeguarding India’s 7,500-kilometre coastline, its island archipelagos and the stretch of ocean from the Strait of Hormuz in West Asia to the Malacca Strait at the entrance of South East Asia.

These include the planned purchase of frigates from Russia, minesweepers from South Korea, a line of six submarines to be built in India, a second indigenous aircraft carrier, naval fighters to operate off that carrier, and multirole helicopters to boost warships’ anti-submarine capability.

The air force faces a similar situation, with personnel costs having grown from 24 per cent of its budget in 2014-15 to over 35 per cent in the coming year. During this period, the air force’s capital allocations have proportionally dipped from 58 per cent to 49 per cent this year.

In absolute terms, the air force’s capital budget has remained almost static from Rs 32,796 crores (Rs 327.96 billion) in 2014-15 to Rs 35,756 crore (Rs 357.56 billion) in the coming year. Already burdened by a large number of committed liabilities like the Rs 5000 to 7,000 crore (Rs 50-70 billion) annual instalments for the Rafale fighter, the air force has little left for planned purchases like the single-engine fighter and a range of force multipliers like aerial refuellers that are in the pipeline.

The increase in personnel costs across the 1.6 million-person military has stemmed from the implementation of the One Rank, One Pension formula, and across-the-board salary increases recommended by the 7th Central Pay Commission.

The Parliament’s Standing Committee on Defence has recommended the revamping of personnel policy, as have successive committees including the Naresh Chandra Task Force and the Shekatkar Committee. However, no substantive changes have been announced or implemented.

Chart: Personnel costs rise, modernisation suffers

(Rupees billions)
Salary
(X)
Pension (Y)
Manpower costs
(X+Y = Z)
Non-salary revenue
(A)
Capital budget (B)
Total Non-manpower (A+B = C)
Total service budget Z + C
Ratio on personnel
Ratio on equipment
Army*



















2014-15 (Actual)
616.39
543.48
1,159.87
322.16
132.46
454.62
1,614.49
72%
8%
2015-16 (Actual)
653.52
541.16
1,194.68
348.23
206.02
554.25
1,748.93
68%
12%
2016-17 (Actual)
772.36
776.58
1,548.94
375.87
282.31
658.18
2,207.12
70%
13%
2017-18 (RE)
848.85
837.22
1,686.07
375.55
252.06
627.61
2,313.68
73%
11%
2018-19 (BE)
892.83
959.49
1,852.32
387.94
266.88
654.82
2,507.14
74%
10.5%










Navy**



















2014-15 (Actual)
57.79
22.96
80.75
78.91
222.69
301.60
382.35
21%
58%
2015-16 (Actual)
61.90
23.11
85.01
88.02
198.75
286.77
371.78
23%
53.5%
2016-17 (Actual)
71.61
35.75
107.36
99.76
199.97
299.73
40.709
26.5%
49%
2017-18 (RE)
83.89
41.71
125.60
104.90
193.48
298.38
423.98
29.5%
46%
2018-19 (BE)
86.34
48.36
134.70
109.37
208.48
317.85
452.55
30%
46%










Air Force



















2014-15 (Actual)
105.33
37.66
142.99
92.09
327.96
420.05
563.04
24%
58%
2015-16 (Actual)
112.87
37.74
150.61
97.34
311.98
409.32
559.93
27%
56%
2016-17 (Actual)
128.61
65.81
194.42
99.95
303.86
403.81
598.23
32.5%
50%
2017-18 (RE)
166.30
70.70
237.00
105.80
335.56
441.36
678.36
35%
49%
2018-19 (BE)
177.53
80.32
257.85
110.68
357.56
468.24
726.09
35.5%
49%










(Source: budget figures)

* Including Rashtriya Rifles and National Cadet Corps
** Including Joint Staff

7 comments:

Anonymous said...

An excellent analysis.
China I hear has moved 53 fighters to Tibet according to Times Now.
But we all can take consolation from the fact that we at Doklam sent the Chinese scuttling back from their occupation with their tails between their legs.
The bravery and the superior training of our Jawans is a great force multiplier and should be taken into account while discussing the defence budget. Underthe leadership of PM r soldiers have proved themselves to be the best in the world in places of severe conflict like Kashmir and the Far East, they have become battle hardened fighting the Stone pelters.
Officers are known for their initiative like binding one of them terroists to the front of a Jeep. Our NDA and IMA are the best in the world.
Doklam has taught the Chines that under Modi India cannot be messed with.
One Indian Jawan is = to four Chinese soldiers. The chinks do not have a clue at what’s coming.
As General Rawat doctrine is. India is prepared to fight on three fronts. All at the same time and give a bloody thrashing to
China
Pakistan
Terrorism
We must not forget our three million strong RSS stalwarts are fully military trained and Yogi Ji has his own Sena.
Please do not give such a pessimistic and cowardice view in your article you Congress bas***tard - people like you should be put against the wall and shot.
When we consolidate our power, RSS is going to make a big concentration camp like the Gulag. It will be in Ladak where it is very cold, presstitutes like you will be first to be put in them. You will be left to die in the first winter with very little food and no warm clothing.
Many people are going to go into these camps anti nationals, un patriotic people and Muslims

Anonymous said...

The writing has been on the wall, if you see western armed forces.
IAF has increased its manpower by going in for a big number of SU-30.
They should have bought limited 2 seater Su-30 rest single seater Su-27.
The beauty is everyone claims it is cost effective platform.

Have jets that can carry stand off weapons, not fly 3000 miles into enemy territory.
Make these weapons by thousands very year so they become cheap.

Same with navy, each ship should have lower number of crew.
More automation at all levels.
The situation will get even worse when army introduces 100+ attack helicopters.
The way to go would be to have JCOs fly attack and light helicopters.

Anonymous said...

the armed forces are paid well especially after 7th pay commission and still want more. add to that OROP and on top of that we are adding tens of thousands of more men and women to fill in the gaps of people who are leaving or retiring. this is not tenable and will lead to exponential growth in pension and revenue budget leaving little for capital expenses. no other department gets pension entitlement and hence no wonder defence budget is highest line item in the general budget. even cutting down on men will not yield results quickly as they will move from serving to pensioners. our requirement is 250 bil dollars and for that we need to add 50 bil in our capex for 5 years and that cannot happen and even if does that costs will increase every year.
make the shekatkar committee public and implement it in letter and spirit. otherwise in the next few years we will have the 3rd largest budget and yet the force with maximum gaps and obsolescence.

Anonymous said...

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

anonymous said...

Ha ha ha...you are funny

anonymous said...

Please tell MoD civillains that they are useless.

Anonymous said...

The army must realise that fewer soldiers and more equipment is the only solution to the funds crunch.