Union Budget 2025: Meagre hike for new procurements as MoD fails to utilise capital head in earlier allocation

The allocation for the Indian Coast Guard (ICG) saw a significant jump year on year, 26.5% overall and even higher 43% in the capital budget. 
| Photo Credit: The Hindu

The capital allocation for the Defence Ministry saw a meagre 4.65% increase to ₹1.8 lakh crore from the previous estimates, important considering the inflation and the currency fluctuations, as the armed forces are likely to return ₹12,500 crore from the budget estimates to the revised estimates of 2024-25. The total allocation to the Defence Ministry for 2025-26 stood at ₹6,81,219 crore which represents a year on year increase of 9.53% and constitutes 13.45% of the Union Budget, the highest among the Ministries.

Of the ₹6,81,219.27 crore allocation for the next fiscal, revenue allocation was ₹3,11,732.30 crore, capital was ₹1.8 lakh crore, defence pensions stood at ₹1.6 lakh crore, and civil – ₹28,682.97 crore.

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“Of the ₹1.8 lakh crore, ₹1,48,722.80 crore is planned to be spent on capital acquisition, termed as modernisation budget of the Armed Forces and remaining ₹31,277.20 crore is for capital expenditure on Research & Development and creation of infrastructural assets across the country,” the Defence Ministry said. Of the total capital allocation, ₹1.12 lakh crore earmarked for procurement from domestic industries.

The money to be returned by Service highlights the long drawn and often protracted delays in the defence procurement process. Before March 31, two major defence deals are set to be concluded with France, 26 Rafale-M fighter jets to operate from aircraft carriers and three more Scorpene-class conventional submarines, together to cost over $10bn. The deals are likely to be concluded around the visit of prime Minister Narendra Modi’s visit to Paris on February 10-11.

There are few other deals likely to be concluded this fiscal including the one for 307 Advanced Towed Artillery Gun Systems for the Army estimated at ₹8,000 crore.

Major hike for Coast Guard

The allocation for the Indian Coast Guard (ICG) saw a significant jump year on year, 26.5% overall and even higher 43% in the capital budget. “This increase is primarily in line with the focus of the Government on capability development of ICG and equipping them with modern equipment. The ICG not only strengthens coastal security, but also provides assistance to neighbouring countries and commercial ships during emergency through faster response,” the Ministry said on the increase for the ICG.

Specifically on the steep hike in capital budget from ₹3,500 crore year on year ₹5,000 crore, the Ministry said it will provide adequate financial space for acquisition of Advanced Light Helicopters, Dornier aircraft, fast patrol vessels, training ships, and interceptor boats.

Defence pensions got a 13.87% hike year on year going to ₹1.6 lakh core, which the Ministry said will take care of “inflationary trends and provide comfort to the Ex-Servicemen and their dependents for maintaining a better lifestyle”.

The Ex-Servicemen Contributory Health Scheme (ECHS) was allocated ₹8,317 crore which is 19.38% higher than  budget estimates of 2024-25. There are approximately 34 lakh defence pensioners and the One Rank One Pension (OROP) was implemented with effect from July 2014 meant to be revised every five years. “The third revision under OROP came into effect from July 2024 and it was timely implemented,” the Ministry stated.

In the interim budget of 2024-25, in a move to bring jointness in the procurements of the armed forces, the Government has decided to consolidate the demand of the three services in the capital head of the defence budget based on similar items of expenditure such as land, aircraft and aeroengines, heavy and medium vehicles among others.

The Border Roads Organisation (BRO) got ₹7,146 crore under the capital head, 9.74% higher than the budget estimates of 2024-25. The financial provision made for the FY 2025-26 for BRO will not only promote the strategic interest of the nation in border areas by constructing tunnels, bridges and roads such as LGG-Damteng-Yangtse in Arunachal Pradesh, Asha-Cheema-Anita in J&K and Birdhwal-Puggal-Bajju in Rajasthan, but will also boost socio-economic development, provide employment opportunities and encourage tourism, the Ministry said.

“The BRO has created substantial employment opportunities by employing 70,000 local youths and has contributed to the local economies fostering long-term employability and skill development,” it added.