Defence Minister Manohar Parrikar revealed on Friday that he had found $3 billion (around Rs 20,169.75 crore) which was lying forgotten in a US account. Parrikar said that he had discovered India was paying the US Department of Defence (Pentagon) for new weapons despite $3 billion which had been paid earlier was lying in an account in Washington, according to a report by Business Standard.
The money had been placed in the account managed by the US Defence department for weaponry it was going to buy through the Foreign Military Sales (FMS) programme. This account is used by the department to procure equipment on behalf of foreign government from US-based vendors such as Lockheed Martin and Boeing.
Parrikar in the report said that due to ill-management, or lack of attention to this account, the country had slightly less than $3 billion which is piled up in the account and has not been earning interest. He added that he saved money from this year’s capital budget as he had drawn on this account.
The account had come down to $1.7-1.8 billion (Rs 11,429.5 crore – Rs 12,101.9 crore) from somewhere near $3 billion, he further added. This he said must have been as they had paid nearly Rs 6,000 crore from the fund for our committed liabilities. He added that they must have saved almost $700-800 million (Rs 4,706.3 crore – Rs 5,378.6 crore) in foreign exchange.
Parrikar said that he had saved up to Rs 3,000 crore by tightening up payment norms to Indian vendors, which include defence public sector undertakings (DPSUs), he said in the report. Payments had been made even to companies that had failed to deliver the contracted equipment, he added.
India’s Defence Ministry is strictly monitoring the staged payment clauses, according to contracts. Parrikar said that they are not allowing it to be loosely paid, even to DPSUs.
The revised allocations have been brought down to Rs 65,808 crore, from this year’s allocation of Rs 77,798 crore for capital expenditure. The report added that even if Parrikar saved Rs 9,000 crore, it still leaves Rs 3,000 crore unspent.
The coming year’s capital budget for three services amounts to Rs 70,380 crore. He had stated that this provides Rs 10,000 crore – Rs 12,000 crore for new purchases, with the balance pre-committed to installments on procurement concluded in earlier years.
He further said in the report that since new contracts require an up-front payment of no more than 10-15%, this amount adequately provided for the Rafale contract, expenditures on the mountain strike corps and an estimated Rs 1 lakh crore worth of new contracts which are expected to be concluded by the end of the coming year.
However, this claim does not add up as the Rafale deal which is priced at a minimum of Rs 63,000 crore, the new contracts add up to at least Rs 1.63 lakh crore, for which the advance required is between Rs 16,300 crore to Rs 24,450 crore said the Business Standard report.
Parrikar also said that government has instituted a new way of tabulating the defence budget, which would reflect several expenditures that have so far been kept invisible.
This new methodology includes for the first time defense pensions and allocations to the Ministry of Defense. This amounts to 17.23% of the overall government expenditure, he said.