The budget allocation for the Navy in FY 2020-21 is Rs 49,623 crores consisting of a revenue component of Rs.22,935 crores and capital of Rs.26,688 crores. The  percentage share of  the Navy allocation (including Joint Staff) out of a total defence budget  of Rs.3,23,053 crores, works out to 15.34%.

Data from the XII Plan indicates that there have been no major spikes in the allocations, which have by and large remained static. On the other hand,  the  share of the Navy  as a percentage of total defence budget shows a  decline in the Navy share from 18.12 % to 14.55% during the plan period.

Naval Budget XII Plan           (Rupees in crore)

Year           Defence BE    Navy BE     %age share

2012-13      1,93,406       35,044           18.12%

2013 -14      2,03,762      34,212           16.79%

2014 -15      2,29,000       35,191           15.37%

2015 -16      2,46,727       37,807           15.32%

2016 -17      2,49,099       36,239           14.55%

( Source: Report of Standing Committee on Defence and DSE)

   The allocations to the Indian Navy from 2017-2018 onwards indicate that in absolute terms the allocations increased from 2018-19, but its  share in the overall defence budget has however remained at practically  the same level.

YEAR       Defence BE         REV             CAP            TOTAL    %age share 

2017-18     2,59,262             18,494      19,348            37,842      14.59

2018 -19     2,79,305             19,571       20,848           40,419      14.47

2019 -20     3,05,296             22,212       23,156           45,368      14.86

2020 -21     3,23,053             22,935       26,688           49,623      15.36

(Source: Report of Standing Committee on Defence and DSE)

Revenue Capital Ratios

     The revenue to capital ratios of  allocations in FY 2020-21, for the three services brings out that for the  Navy the ratio is 46 : 54. Incidentally, the revenue allocation of Rs 22,935 crs for the navy comprises a salary component of  Rs.10,526 Crores and a non salary component of Rs.12,409 Crores. An analysis of the breakup between salary and non-salary component of the Revenue allocations between the three services shows that the allocation for salary is 70% for Army, 60% for Air Force and 46% for Navy. The Navy allocations, therefore, have a more equitable distribution between the salary and non-salary components and is a pointer to the fact that there is less scope for manpower reduction in the Navy.  Further, the Navy has optimised the service to civilian manpower ratio by allocating salaries to civilians of Rs 3094 crores and to naval personnel Rs 7432 crores.

Revenue and Capital Expenditure of Army, Navy and Air Force, 2020-21

 ArmyNavyAir Force
Revenue Expenditure (Rs in Crore)1,46,94122,93529,963
Capital Expenditure (Rs in Crore)32,47426,68843,282
Total (Rs in Crore)1,79,41549,62373,245
Revenue Expenditure as % of Total824641
Capital Expenditure as % of Total185459
Table 1: Revenue to Capital Ratios

Source IDSA Issue Brief and DSE

Indigenization

      Navy was the first service which took up the indigenisation program long before it became a buzz word. The Indian Navy  transformed from a ‘Buyers Navy’ into a ‘Builders Navy’, and a range of platforms from indigenous aircraft carrier, destroyers, stealth frigates, corvettes, submarines and other minor war vessels are being manufactured  in the country. According to information provided to the Standing Committee on Defence the Navy incurred an expenditure of Rs. 43,296 crores during XI  Plan and Rs. 54,540 crores during XII Plan on indigenous acquisitions. The initiative of indigenisation has had a very positive impact on the Indian industry and  resulted in the involvement of a number of MSMEs  in the projects of the Navy .Apart from  creation of jobs in the country it also promoted skill development in the workforce.

New  Financing Options

      It is evident that the  resources from budgetary sources will not be able to keep pace with the requirements of the Defence forces and the gap between resource requirements and allocations in the current FY is in the range of 25%.Therefore it is imperative to look beyond the traditional approach to building a defence capability. Once again Navy has shown that it is willing to find out of the box solutions and it  was the  first service to implement the Leasing provisions which have been recently incorporated in the new DAP 2020.According to reports Indian Navy has inducted two Sea Guardian unarmed  drones on lease from the USA for surveillance in the IOR.

     Navy also needs to adopt an  innovative approach  for financing its shipbuilding programs with models like a Finance Corporation  which will raise money from the market through bonds and provide resources. At the same time the duplication of resources with  four public sector  shipyards for Defence needs to be rationalised.    


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