By Manjeet Negi: Union Minister for Defence Rajnath Singh stressed the need to devise innovative methods to maximise the value of money spent on the security needs of the country, terming a robust defence finance system as the backbone of a strong military.
Inaugurating the three-day International Conference on Defence Finance and Economics in New Delhi on Wednesday, Rajnath Singh asserted that a legal and procedural defence-finance framework is an integral part of a mature state system, which ensures prudent management of the defence expenditure.
The Defence Minister stated that such a framework, which includes expenditure control as per guidelines, financial advice by professionals, audit, payment authentication mechanism, etc., ensures that the defence spending is well within the allocated budget and the full value of money is realised.
He emphasised that while the armed forces require a superstructure of defence ecosystem, involving R&D organisations, industries, soldier welfare organisations, etc., they also need a well-funded system with a robust architecture to ensure the optimum and judicious use of financial resources.
The Union Minister was of the view that it is difficult to apply the economic concept of full value of money in defence expenditure, as in this sector, there is no visible revenue stream and no easily identifiable beneficiaries. To maximise the value of money spent, he stressed that the rule of competitive bidding through open tender must be followed in defence procurement.
“In the case of procurement of defence platforms/equipment, either under capital or revenue route, the gold standard of open tender should be adopted to the extent possible. A competitive bid-based procurement process, which is open to all, is the best possible way to realise the full value of the public money being spent. There would be some rare cases when it may not be possible to go for an open tender process. Such instances should come under exceptions and exceptions should not become the rule,” he said.
Rajnath Singh underscored the importance of comprehensive blue books, codifying the rules and procedures of procurement of defence equipment & systems for a fair and transparent system. He said, with this vision, the Government has formulated blue books in the form of Defence Acquisition Procedure 2020 for capital acquisition; Defence Procurement Manual for revenue procurement and Delegation of Financial Powers to Defence Services.
“These manuals play a very important role in ensuring that the process of defence procurement is rule-bound and follows the principles of financial propriety. Since these manuals are critical, they need to be carefully crafted by defence finance and procurement experts in consultation with all the stakeholders. This needs to be a continuous exercise, so that these documents are dynamically updated, incorporating new rules and procedures as and when required,” he said.
The Defence Minister also emphasised on the role of expert financial advice to the service personnel in day-to-day financial matters. He said the system of Integrated Financial Advisor (IFA) has been created to provide financial advice to the Competent Financial Authority (CFA) in order to help them avoid wastage of public money. In this system, the IFA and CFA work as a team towards utilising public money in a prudent manner, he said.
Rajnath Singh batted for a fool-proof system of internal and external audit which would tackle the instances of wastages, pilferage and corruption, if any, even after following the principles of financial prudence and propriety. The role of auditors is that of a watchdog or a sentinel, he said.
He also elaborated on the need for a sound system of accounting, passing of bills and payment, salary and pension disbursal, etc as it helps the armed forces personnel to concentrate on their core jobs. He added that the separation of functions of defence finance from the core defence organisations has multiple advantages.
“The chances of leakages, corruption, wastages are reduced. A positive public opinion is generated when there is a justified confidence that public money is being spent optimally and prudently. With greater public trust and confidence in the system of defence expenditure, the defence system benefits overall as the chances of greater funding by legislature increases pari-passu (Latin for equal footing),” he said.
Rajnath Singh asserted that the central idea is that defence establishments like Army, Navy, Air Force, Defence Research organisations require a specialised agency, which is dedicated to defence finance and economics. In India, this work is being done competently by the Defence Accounts Department under the leadership of financial advisor (defence services).
INTERNATIONAL CONFERENCE ON DEFENCE FINANCE AND ECONOMICS
The three-day conference, organised by the Ministry of Defence (Finance), will witness the participation of eminent policy makers, academics and government officials from India and abroad, including from USA, UK, Japan, Australia, Sri Lanka, Bangladesh and Kenya. It will provide a platform to them to share their insights and experiences on Defence Finance and Economics in the context of evolving security challenges and policies globally.
The conference aims to foster dialogue and collaboration among the participants and contribute to the country’s defence readiness with optimum financial resources and effective implementation of the Defence Budget. The objective is to disseminate best practices, experiences and expertise of various countries and align processes in the Indian context with international standards.
It also hopes to facilitate collaborations with foreign governments, international institutions and global leaders in the domain of Defence Finance and Economics to support the government’s ongoing efforts on indigenisation and self-reliance in the defence sector and to advance transformative reforms.