India proposes ‘non-lapsable' modernisation fund

The Indian Ministry of Defence has increasingly been overspending its modernisation allocation, according to Janes Defence Budgets, which closely tracks Indian military expenditure. (Janes Defence Budgets)

India is proposing to introduce a defence modernisation fund that will enable unspent money to be carried forward to the next fiscal year. Under current regulations such funding is returned to the government at the end of each financial period.

Indian Minister of State for Defence Ajay Bhatt said in a parliamentary reply on 8 December that a ‘non-lapsable fund' is being considered by the government as a means to support the modernisation of the Indian Armed Forces.

“[A] separate mechanism is being worked out by [the] Ministry of Finance (MoF) in consultation with [the] MoD [Ministry of Defence] to explore a special dispensation to MoD to operationalise a non-lapsable defence modernisation fund,” Bhatt said. He added that under existing laws such funding expires in alignment with parliamentary authorisations for each budget year.

Bhatt did not elaborate on the proposed fund. However, he did explain that defence modernisation funds in India are augmented by supplementary and revision expenditures. Such funding streams ensure that “urgent and critical capabilities are acquired without any compromise to operational preparedness of the defence services”, he said.

In previous years the Indian MoD has made several unsuccessful attempts to convince the MoF to allow unspent capital funding to be carried forward to the ensuing fiscal year.

For instance, in 2017 India's Standing Committee on Defence said the MoF rejected a non-lapsable funding proposal from the MoD on grounds including its contention that the country's defence budget is sufficiently large to source necessary modernisation funds.