The armed forces have agreed to return Rs 10,000 crore (Rs 100 billion) from their unspent capital outlay for 2002-03 against the finance ministry's demand of Rs 14,000 crore (Rs 140 billion). This is about half the services' capital outlay of Rs 21,411 crore (Rs 214.11 billion) in the current fiscal.
Government sources told Business Standard that the finance ministry had written to the defence ministry two months ago, asking it to cut expenditure by 15 per cent.
This was followed by unconfirmed reports that the services were going to return Rs 14,000 crore because they had not spent the money. It now transpires that they are returning Rs 10,000 crore "because they have been asked to".
The Rs 10,000 crore to be returned represents 15.3 per cent of the Rs 65,000 crore (Rs 650 billion) defence budget for 2002-03.
If this is the money the forces are returning unused, they are not expecting a significant hike in next year's outlay, which might go up by about Rs 3,000 crore (Rs 30 billion) to touch Rs 69,000 crore (Rs 690 billion), far short of the prescribed 3 per cent of the gross domestic product.
One fallout is that the government will have to put off the purchase of the advanced jet trainer. The armed forces have a reputation for returning unspent money to the finance ministry -- the Rs 5,000 crore (Rs 50 billion) returned in 2002-03 plugged a big hole in last year's Budget.
In 2001-02, the government had earmarked Rs 62,000 crore (Rs 620 billion) for defence but the services spent only Rs 57,000 crore (Rs 570 billion).
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