The government's plans to acquire a host of arms systems and the advanced jet trainer within this financial year will be reviewed in October when defence and finance ministry officials meet to discuss how these purchases will be financed.
According to current estimates, the government will overshoot its budget for new projects and might have to defer some purchases till April, 2004.
Although Finance Minister Jaswant Singh has said time and again that funds will not be a constraint when it comes to India's defence, this is an election year and the 2003-04 Budget is likely to be a voter-friendly one. Purchase of expensive defence equipment is likely to be low priority especially if it can be deferred.
By the end of the year, if all the defence ministry's acquisition targets are met, out of a capital defence budget of Rs 20,500 crore (Rs 205 billion), between Rs 15, 000 crore (Rs 150 billion) and 16,000 crore (Rs 160 billion) will have gone towards meeting contractual liabilities.
And Rs 1,500 crore (Rs 15 billion) will be needed to pay for the projects that the Department of Research and Development Organisations is working on. Out of the Rs 3,000 crore (Rs 30 billion) allocated for new projects, the first tranche of the payment towards the AJT is likely to be around Rs 1,800 crore (Rs 18 billion).
The Cabinet Committee on Security has already approved purchases like executive jets, electronic warfare systems and night vision devices for the Army. This adds up to around Rs 2,200 crore (Rs 22 billion).
In addition, the purchase of the Israel-developed anti-missile missile Phalcon has been cleared, price negotiations are at an advanced stage for the Admiral Gorshkov, the retrofitted aircraft carrier meant for the Navy, (advance required -- around Rs 500 crore) and CCS is considering the proposal to add six Scorpene submarines to the Navy.
To be built jointly by France and India at the Mazagon dockyard with technical assistance and equipment from French companies, these submarines are to be delivered between 2010 and 2015 and will be armed with Exocet anti-ship missiles.
Last year the defence ministry had plugged a potential hole in the budget by returning Rs 9,000 crore (Rs 90 billion) to the finance ministry as unused funds, after the finance minister asked for this money in writing.
"We won't return any money this year. In fact, not only will we use what we have been given, we are going to need more money. The chances are that this will be available to us at the Revised Estimate stage. This is what the meeting (in October) will discuss," a top defence ministry source said.
This meeting will be the second after Defence Minister George Fernandes and Finance Minister Jaswant Singh met earlier in the year to discuss how, if all the intended purchases by the defence ministry were cleared, the money will be found for them.
On that occasion the finance minister had said he could provide the money only after contracts had been signed.
The AJT contract will be signed by the end of the year."If necessary, we will have to schedule payments in such a way that they come up in April 2003," the source said.