NEW DELHI: Despite the rise in capital expenditure on defence and a correspondingly lower proportion of the outlay on pay and allowances, less than 15 per cent of this year's defence budget will be utilised for the purchase of new equipment.

Of the capital outlay of nearly Rs. 42,000 crore, about Rs. 20,000 crore is earmarked pay for previous purchases and Rs. 9,000 crore on other sectors such as ordnance, Defence Research and Development Organisation, land and works, and the married accommodation project. The remaining Rs. 54,000 crore of the total budget outlay would account for pay and allowances, stores and maintenance of equipment.

And if the Government pares a few thousand crore from the capital account this fiscal too as it has done in the previous two years, the Defence Ministry will be left with an even smaller amount to make new purchases.

The Union Finance Ministry did not fully accept the Defence Ministry's list of new purchases and reduced their proposals by nearly Rs. 3,000 crore, besides cutting the projected revenue expenditure by about Rs. 5,000 crore.

The Defence Ministry, however, is satisfied with the trend of capital and revenue expenditure since the Eighth Five Year Plan (1997-2002) when the revenue ratio was 70 per cent.

In current year's budget, it stands at 56 per cent with capital outlay accounting for remaining 44 per cent as compared to 30 per cent during Eighth Plan.

The Ministry officially maintains that "considering the new status of new schemes and projects, the allocation is sufficient to meet the requirement of modernisation of the armed forces, both for committed liabilities and other scheme and projects."

It is hoping that the additional allocation will be met at the revised estimates (RE) stage.

At the same time, the Ministry says the reductions in the previous two fiscals and the lower capital outlay for the current fiscal are not sought by the Ministry of Defence but imposed at the RE stage.

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