Article Posted on : - Jul 11, 2014

Finance and Defence Minister Arun Jaitley presenting the Union Budget 2014-15 in the Lok Sabha in New Delhi on Thursday. Photo: PTI.

NEW DELHI (PTI): As part of military modernisation drive, Government on Thursday allocated Rs 2.29 lakh crore for the Defence Ministry in the Budget, marking an increase of around 12.5 per cent from the last fiscal as it raised the FDI limit in the defence sector up to 49 per cent from 26 per cent now.

The Ministry was allocated Rs 2,03,672 crore in 2013-14 and was provided Rs 2,24,000 crore in the interim budget presented by the UPA government in February this year.

"There can be no compromise with the defence of the country. I, therefore, propose to allocate an amount of Rs 2.29 lakh crore for the current financial year," Finance and Defence Minister Arun Jaitley said, presenting the general budget.

For the modernisation of the armed forces, the Finance Minister allocated an additional Rs 5,000 crore above the Rs 89587.95 crore provided for the acquisition of new weapon systems for the Ministry in the interim budget last year.

"I propose to increase the capital outlay for the defence by Rs 5,000 crore over the amount provided in the interim budget. This includes a sum of Rs 1,000 crore for accelerating the development of railway system in border areas," Jaitley said adding that acquisition processes would be streamlined for making it speedy and more efficient.

The Government has also set aside a sum of Rs 1,000 crore for this fiscal to do away with anomalies in pensions paid to ex-servicemen under the One Rank One Pension policy, which was accepted by the new government.

"We propose to set aside a sum of Rs 1,000 crore to meet this year's requirements," he said.

Jaitley also announced the construction of a War Memorial and museum at the Prince's Park near the India Gate here and allocated a sum of Rs 100 crore for it as the government also earmarked Rs 1,000 crore for modernisation of border infrastructure.

On increasing FDI limit to 49 per cent through the Foreign Investment Promotion Board (FIPB) route in the defence sector with full Indian management and control, Jaitley said, "India today is a largest buyer of defence equipment in the world and domestic manufacturing capabilities in this area are still in a nascent stage.

"We are buying substantial part of our defence requirements directly from foreign players, companies controlled by foreign governments and foreign private parties are supplying our defence requirements to us and at a considerable outflow of foreign exchange," he said.

"Currently, we permit 26 per cent FDI in defence manufacturing. The composite cap of foreign exchange is being raised to 49 per cent with full Indian management and control through the FIPB route," Jaitley said.

The last government had allowed FDI limit to 26 per cent through FIPB approval route and allowed FDI up to 100 per cent through the Cabinet Committee on Security-approval route.

For providing resources to public and private sector companies including small and medium enterprises to support research and development in developing defence systems, Jaitley proposed a Rs 100 crore Technology Development Fund to support the objective.

He said a separate fund in this regard was announced in 2011 by the previous government "but beyond the announcement, no action was taken."

Defence forces are working towards modernising their assets and look towards finalising major deals such as the 126 multi-role combat aircraft contract, which is expected to be worth over Rs 60,000 crore.

The other major acquisitions expected to be finalised in next few weeks include the deals for 22 Apache combat choppers, 15 Chinook heavy-lift helicopters and six mid-air refuelling aircraft.

The ministry has been seeking additional funds of Rs 40,000 crore since last few years.