For the first time, Army to spend more on pensions than on salaries - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Monday 3 February 2020

For the first time, Army to spend more on pensions than on salaries

By Ajai Shukla
Business Standard, 4th Feb 20

For the first time ever, the defence budget for 2020-21 allocates more money towards pensions for retired army soldiers than for salaries for soldiers still in the standing army.

Scrutiny of the defence budget reveals that Rs 111,294 crore have been allocated for army salaries, including civilian employees. The Rs 113,278 crore allocated for army pensions surpasses that.

There are slightly under 13 lakh soldiers serving in the army, including officers. Meanwhile, 20.63 lakh individuals, including army widows, are drawing pensions, according to the defence ministry, in answer to a parliamentary questionin November 2016.

The pension budget has steadily risen since the grant of one-rank-one-pension (OROP) in 2015-16. That year, it was Rs 60,000 crore for the entire military. For 2020-21, it will stand at Rs 133,825 crore.

Army planners are increasingly worried about this drain on funds that could otherwise go towards equipment modernisation. However, there is no going back from the political commitment for granting OROP, which the Bharatiya Janata Party gave in the run-up to the 2014 general elections.

The Navy and the Indian Air Force (IAF) too are facing this problem, but not to the extent the manpower-heavy army does. The Navy’s salary allocations stand at Rs 13,059 crore for the coming year, while its pension liability is Rs 7,234 crore.

IAF salaries for next year are projected to be Rs 17,939 crore, while its pension allocations stand at Rs 13,313 crore.

The Chief of Defence Staff (CDS), General Bipin Rawat, who was the army chief until he was elevated on the New Year, had grappled with this problem while heading the army. He initiated four studies that aimed primarily at reducing the army’s salary and pension bill.

While the recommendations have not yet been implemented, pensions are sought to be reduced through measures like recruiting soldiers for shorter tenures and discharging them from service before they qualify to earn a lifelong pension.

The budget highlights another key area that would require the CDS’s focus: the need to prioritise between the army, navy and IAF.

Disaggregation of the budget reveals a pattern of fund allocation that has continued over the years, with each service getting a standard share, instead of allocations being made according to operational priorities identified each year by the higher defence planners.

Stretching back for several years, the army has been allocated a standard two-third of the services’ budget, while the navy gets 13-14 per cent and the IAF about 20 per cent.

Analysis reveals that the services’ capital budget is also allocated pro forma, with the army getting a standard one-third, the air force a little over 40 per cent, while the navy gets the remaining 26-28 per cent.

With each service strongly lobbying for a larger share, the defence ministry tends to avoid controversy by sticking to an existing pattern, rather than evaluating operational needs and spending priorities, which can then govern the allocation of funds.

It remains to be seen whether the appointment of a CDS changes this pattern.

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