Cash-strapped India Suspends Defense Spending

SINGAPORE AIR SHOW » 2014

by  NEELAM MATHEWS

February 11, 2014, 5:00 AM

The Indian government last week stalled completion of several major military equipment deals until at least the end of the current financial year on March 31. “We have no money,” said defense minister A. K. Antony at the Defexpo show in New Dehli on Thursday.

Antony said 92 percent of the defense budget had already been used up this year. With around $1.2 billion diverted from the defense capital expenditure budget back to the central government coffers, nothing is left for the advance payments that will need to be made when the contracts are signed–and to make matters worse the Indian rupee has taken a beating in the past year, making imports expensive.

Some major deals in the final stages of being signed include 126 Medium Multi Role Combat Aircraft (MMRCA), the Airbus A330 Multi Role Tanker Transport Aircraft and a repeat order for six Lockheed Martin C130J transports. “The MMRCA will not be cancelled…it’s [only] a money issue,” insisted Antony.

In response to questions from AIN about the state of the next fiscal defense budget (April 2014 to March-2015), Antony could not confirm what reductions might be made. “At this stage, we cannot say how much we will get in the budget. Since a large number of proposals are in the pipeline, it will not be humanly possible [to clear them all],” he said. “We have asked the armed forces to prioritize their requirements.”

Following India’s impending general election, a new government is expected to be in place in May. Many industry observers say this change will delay already stalled defense projects further.

In response to last year’s cancellation of India’s order for AgustaWestland AW101 helicopters over allegations of corruption, the government banned parent company Finmeccanica from participating in Defexpo. “We have to take strong actions to end corruption and malpractices in the defense procurement process,” said Antony. “Sometimes this may lead to delays and setbacks but this helps us to streamline the system,” he said. “The guilty will be punished.”