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By VIVEK RAGHUVANSHI
NEW DELHI — Despite calls by India’s new defense minister for a 20 percent boost in spending, sources in the Foreign Ministry say that number will more likely be 10 percent due to New Delhi’s financial conditions.
In a note to the Finance Ministry last week, the Defence Ministry sought a $7.5 billion jump over the existing allocation of $35 billion, announced by the outgoing United Progressive Alliance government in February.
The outgoing government allocated $14.93 billion in the Capital Head for fresh weapons and equipment. An MoD source said the bulk of the allocations in the Capital Head are used for paying for past contracts, leaving very little money for buying new weaponry and equipment.
Also, under Indian procurement norms, the government pays for 10 percent of a contract up front and the rest is spread over the following years. Since India needs to finalize $20 billion in contracts in the next year, it must spend $2 billion in additional money to cover its upfront costs.
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