Defence budget has to be realistic: FM

New Delhi, Nov 13 (UNI) Referring to the resource constraint and the growing needs of the defence sector, Finance Minister P Chidambaram today said India's defence budget needs to be guided by "realism", with utmost efficiency being exercised in its spending.

''There should be no cost overruns," Mr Chidambaram said in an international seminar here on 'Defence Finance and Economics''.

Mr Chidambaram said it was important to work out a credible defence against potential threats within a budget for defence expenditure, given the overall resources available with the Government and the competing demands on such resources.

He said defence expenditure involves large outlays, and therefore, it was important to seek optimum allocation and utilisation of the resources."Also, since the nation's security is involved, there is little room for error or slippages," he said.

''These have been extended not only to the other sectors of government but also to the corporate sector. Many of the technological advances, such as those in the areas of metallurgy, aviation, electronics, satellites and lasers, have also originated from defence applications and, thereafter, were extended to the civil side,'' he said.

The Minister spoke about the paradigm changes in times of war when a nation transfers "all the moral, physical, economic, intellectual, and even spiritual,forces " to the war effort. "But at the same time, the art of war is of vital importance to the state since a sound defence capability is, at least for the time being, the ultimate guarantor of peace," Mr Chidambaram said.

He said war was becoming more and more technology driven with rising costs in acquiring weapons and in training and development of manpower. The need of the hour, therefore, was for a defence financial management system that facilitates optimum allocation and utilisation of resources so that the country's defence services were fully empowered, trained and equipped to take on the challenges facing them.

''While the formulation of the Defence budget has to be guided by realism, its execution has to be carefull. The defence sector is highly capital intensive and has a fast rate of technological obsolescence. To utilise the resources optimally and to bring down costs without compromising upon the quality and the capability, it is necessary to invite greater private sector participation in defence production," the Minister said.

Mr Chidambaram said policy changes were already in place which allow private sector participation in the defence sector with 100 per cent equity ownership. This will help develop linkages to enable scaling up of production capacity, transfer of technology and modernisation of infrastructure, he said.

Mr Chidambaram said the role of the private sector is changing from that of a supplier of inputs, raw materials, parts and components to a manufacturer and systems integrator of complete systems and platforms for the Defence Services, Mr Chidambaram said.

He said the defence sector also needs to improve its ompetitiveness by reducing costs and enhancing productivity. "The argument that government in all circumstances must support loss-making undertakings or inefficient ordinance factories because of their strategic importance is difficult to sustain when there are many efficient alternatives," he warned.

''Efficiency, productivity and true competitiveness have to be the underpinning of a strong and vibrant defence industrial base.'' The Minister said the reform agenda of the defence sector has to be worked out with a view to modernising and gearing the military to meet real and potential threat.

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