Ms Shobhana Joshi, Co-Chairperson SAMDeS
The allocation for the financial year 2025-26 is Rs. 6,81,210.27 crores as against Rs. 6,21,940.85 crore of 2024-25 which is a year-on-year increase of 9.53%. The total allocation is 13.45 % of the Budget Estimates of the Union of India. Of this allocation, Rs 1,80,000 crore i.e. 26.43% will be spent on Capital outlay on Defence Services. Revenue Head allocation for the Armed Forces is Rs 3,11,732.30 crore which is 45.76% of total allocation. Defence Pension receives a share of Rs 1,60,795 crore i.e. 23.60% and balance Rs 28,682.97 crore i.e. 4.21% is for civil organisations under MoD. Grant wise details are tabulated below:
Allocations for Defence Services
The allocation for the Defence Services is 8 % more than BE 2024-25. The Revenue Capital breakup for BE and RE 2023-24, BE 2024-25 and RE 2024-25 and BE 2025-26 are given below to bring out the trends (Values in crore).
Capital Budget
The 3rd Report of the Standing Committee on Defence (2024-25) states that re-structuring of the capital budget has been done with effect from FY 2024-25 wherein budgetary allocation of the three Services under common minor heads has been clubbed under the newly introduced Sub Major Head 09 i.e. Defence Services. Allocation under other minor heads which are not common to the Services has been kept as it is.
The allocation for Capital head is Rs. 1,80,000 crores but further analysis of the break up shows that for the Defence Services, the allocation is only Rs 1,61,528.02 crore and also includes allocation for Land and Construction Works, ECHS, and NCC. The allocation for Capital Acquisition is 1,42,107.38 crore. While the adequacy of this amount for the modernisation of the armed forces continues to be debated by analysts, there is also the paradox of unutilized allocations. A comparison of the BE and RE 2024-25 brings out that against a BE 2024-25 of Rs. 1,55,475.52 crore the RE 2024-25 was Rs. 1,43,778.60 crore, a surrender of Rs. 11.696.92 crore. However, the heads ‘Aircraft & Aero engines’, and ‘Naval Fleet’ incurred excess over their BE allocation whilst ‘Other Equipment’, ‘Land’ ‘Construction Works’, ‘Naval Dockyard’, and ‘Special Projects’ surrendered sizeable portions of their allotted budgets.
The allocations between capital and other than capital acquisition and the slippages at RE stage in 2024-25 are given below.
The surrender of funds due to non-utilisation of the allocated budget in the ‘Capital Acquisition’ segment has been to the tune of Rs. 6922.75 crore. It is noted that there was an additional allocation of funds at RE stage in the following heads;
- Rs. 6314 crores in ‘Aircraft &Aeroengines’,
- Rs. 1805 crore, in ‘Naval Fleet’ and
- Rs 1112 crore in ‘Joint Staff’.
Whereas in the heads ‘Heavy & Medium Vehicles’ and ‘Other Equipment’ there was a surrender of funds amounting to Rs.16,153 crore. As the head ‘Other Equipment’ is very generic it is difficult to assess from the budget documents where exactly the slippages have taken place.
In the ‘Other than Acquisition’ segment there has been surrender of funds of Rs. 4777.17 crore as follows:-
- ‘Land’ amounting to Rs.1486.41 crore,
- ‘Construction Works’ Rs. 1455.13 crore,
- ‘Naval Dockyard’ Rs. 1412 crore,
- ‘Special Projects’ 423.63 crore.
Revenue Budget
Sustenance of Weapons and Equipment
Rs 3,11,732.30 crore has been allocated for Defence Services (Revenue) which is 10.24% higher than BE 2024-25. Out of this, Rs 1,14,415.50 crore has been allocated on account of non-salary expenditure of ration, fuel, ordnance stores and maintenance/repair of equipment etc. Rs 1,97,317.30 crore has been allocated for the salary expenditure of the three services.
The Revenue budget does not show separate allocations for maintenance and repair and revenue stores including ammunition, except Navy which has a separate head for repair and refits. It is pertinent to note that the Actuals for 2023-24 were Rs. 66,473.61 crore. The RE 2024-25 is Rs. 63,383.87 crore and BE 2025-26 is Rs. 67,628.09 crore. Therefore, effectively the increase is marginal.
Focus on Indigenous Capacity
The budget continues with the focus on building up indigenous production of weapons and systems and strengthen the domestic industries. Accordingly, a substantial share of the modernisation budget is being earmarked for the capital procurement from domestic industries. In order to encourage the private sector for manufacturing and technological development in the defence sector, a notable percentage of domestic share is further earmarked for acquisition from domestic private industries. As per PIB press release in 2025-26, Rs 1,11,544.83 crore i.e. 75% of modernisation budget has been earmarked for procurement through domestic sources and 25% of domestic share i.e. Rs 27,886.21 crore has been provisioned for procurement through domestic private industries.
Reforms in Budget structure
The Ministry of Defence has taken a decision to observe 2025-26 as ‘Year of Reforms’ and is aimed to simplify the Defence Procurement Procedure to ensure optimum utilisation of the allocation. This is a welcome move. However, the reforms should also cover the budget structure with a view to reflect the major trends in warfare.
Modern warfare in the aftermath of the Russia-Ukraine conflict, is increasingly defined by real time situational awareness and battlefield transparency. Unmanned systems and AI autonomy have redefined force structures to balance legacy and new age weapons. Man-unmanned synergy is the new doctrine. Some countries are planning for 30% unmanned forces. The budget documents which are available in the public domain, however focus on capability building of conventional weapon systems. Allocation of funds for the new systems should be shown under separate heads to better assess the trend of expenditure for the new age systems.
Another area which needs reform, is to replace the stores head in the Revenue Budget with separate heads. The allocations for the maintenance of weapon systems and repairs must be a separate head and ammunition and ordnance stores required for operations must be different head. This will provide a better understanding of the trends for sustenance of the weapon platforms.
Joint Staff is still a part of the Navy Budget. It is time that this ad hoc arrangement is changed to have a separate budget head especially now that there is CDS in place.