Defence Minister Rajnath Singh on Wednesday batted for a fool proof system of internal and external audit for defence expenditure and called for devising innovative ways to maximise the value of money spent on India’s security needs. He underlined the importance of a robust defence finance system for a strong military and highlighted the need for comprehensive ‘Blue Books’, codifying the rules and procedures for military procurements.
In an address at a conference, Singh called for judicious use of financial resources and said that the rule of competitive bidding through open tender must be followed in defence procurement.
Reducing chances of corruption and wastage leads to positive public opinion due to the confidence that public money is being spent optimally and prudently and this increases the possibility of greater funding by the legislature, the defence minister said.
Singh said, with this vision, the government has formulated ‘Blue Books’ in the form of Defence Acquisition Procedure 2020 for capital acquisition and Defence Procurement Manual for revenue procurement besides delegating financial powers to the 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,” he said after inaugurating the three-day conference on defence finance and economics.
The defence minister said 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.
Singh batted for a foolproof system of internal and external audit which would tackle the instances of wastages, pilferage and corruption, if any, while following the principles of financial prudence and propriety.
The role of auditors is that of a watchdog or a sentinel, he said.
Singh asserted that a legal and procedural defence-finance framework is an integral part of a mature state system for ensuring prudent management of defence expenditure.
The defence minister was of the view that it is difficult to apply the economic concept of the full value of money in defence expenditure as there is no visible revenue stream in the sector 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 and equipment, either under capital or revenue route, the gold standard of open tender should be adopted to the extent possible,” he said.
“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,” Singh said.
At the same time, he said 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.
To the international delegates, Singh also put forth the idea of shared security.
“In the spirit of collective security of the whole world as one family, we are all partners in the path towards a secure and prosperous future for the entire humankind,” he said.
The defence minister also elaborated on the need for a sound system of accounting, clearing of bills and payment, salary and pension disbursal as it would free 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 justified confidence that public money is being spent optimally and prudently,” he said.
“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 increase pari-passu (Latin for equal footing),” he said.
Singh asserted that the central idea is that defence establishments like Army, Navy, Air Force and 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 the Financial Advisor (Defence Services), he said.
Chief of Defence Staff General Anil Chauhan, Chief of the Army Staff Gen Manoj Pande, DRDO Chairman Samir V Kamat and a number of senior officials of the defence ministry attended the conference.
Among the participants are policymakers, academics and government officials from India and abroad, including from the US, the UK, Japan, Australia, Sri Lanka, Bangladesh and Kenya.