The Indian Air Force stands to gain the most from the hike in defence spending in the Budget for 2004-05. It received Rs 12,825 crore (Rs 128.25 billion) this year, a Rs 8,000 crore (Rs 80 billion) increase over last year.

With just seven months left for the fiscal year to end and hardly any fresh systems in place to circumvent the long gestation period that characterises defence acquisitions, the services seem set to use the Rs 17,000 hike in the capital outlay for defence to pay off existing liabilities.

The size of the defence budget this year is Rs 77,000 crore (Rs 770 billion), up from Rs 65,300 crore (Rs 653 billion) in the Budget Estimate of 2003-04 and Rs 60,300 in the Revised Estimate.

This works out to an increase of around 17 per cent over last year, without adjusting for an inflation of 6 per cent.

On Saturday, Defence Minister Pranab Mukherjee sounded a note of warning when he said he would have to go to Finance Minister P Chidambaram to ask for more as the money would not be sufficient for fresh acquisitions.

Purchases of advanced jet trainers (AJTs), VIP jets, and the Phalcon air warning and control radar system (AWACS), along with the imminent delivery of 10 Mirage 2000 aircraft, have pushed up the IAF's capital requirements.

However, the IAF's record suggests that it may have to return part of the money.

In the Budget for 2003-04, the Air Force was given Rs 5,726 crore (Rs 57.26 billion), but couldn't spend all the money. Its outlay in the Revised Estimate for 2003-04 was nearly Rs 1,500 crore (Rs 15 billion) less.

In this Budget, it has received an allocation of Rs 12,825 crore. Of a Rs 17,000 crore (Rs 170 billion) hike in defence spending planned for this year, IAF received Rs 8,000 crore.

In the defence budget, Rs 33,482 crore (Rs 334.82 billion) has been set aside for capital expenditure, up from Rs 20,952 crore (Rs 209.52 billion) in the Budget Estimate and Rs 16,906.32 crore (Rs 169.063 billion) in the Revised Estimate for 2003-04.

This means that even after the formation of a non-lapsable fund for capital expenditure, the services were unable to spend all the money allotted to them. Instead of going into the fund, the money has once again been routed to the services.

The government has already paid an advance for the Hawk trainers purchased last year.

However, the remaining payments will have to be made for the acquisition of five Legacy aircraft from Brazilian firm Embraer meant for VIP travel, as well as the Mirage 2000s, contracted two years ago and scheduled for delivery this year.

The MiG 21 BiS upgrade of 36 aircraft are among the big ticket items that the IAF will have to finance from the money it has received. Fresh expenditure like the Green Pine technology system, which is a ground version of the Phalcon AWACS, may have to be postponed.

The Budget has increased the allocation for other equipment for the Army to Rs 6,521 crore (Rs 65.21 billion) from Rs 3,973 crore (Rs 39.73 billion) in the Budget Estimate  for 2003-04.

The Revised Estimate, the actual amount of money spent by the Army, was just Rs 2,910 crore (Rs 29.10 billion) in the last fiscal.

The Navy had sharply exceeded its expenditure from Rs 387 crore (Rs 3.87 billion) (Budget Estimate) in 2003-04, to Rs 1,019 crore (Rs 10.19 billion) in the Revised Estimate, reinforcing the general view that of the three services it is the most disciplined one when it come to utilisation of resources allotted to it.

However, the outlay meant for the Navy has come down to Rs 496 crore (Rs 4.96 billion) in this Budget. The Navy has also received Rs 1,450 crore (Rs 14.50 billion) for aircraft and engines, against a Budget Estimate of Rs 650 crore (Rs 6.50 billion) and a Revised Estimate of Rs 922 crore (Rs 9.22 billion).

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