India considering creation of 'Non-Lapsable Defence Modernisation Fund' to boost resources

The Indian government has proposed the creation of a Non-Lapsable Defence Modernisation Fund (DMF). The development came in Lok Sabha, when the Minister of State for Defence Ajay Bhatt informed of the DMF in a written reply to Mr Balashowry Vallabhaneni. The government’s latest bid for the allocation of a Non-Lapsable Defence Modernisation Fund will significantly supplement the regular annual budgetary allocations, the Indian Ministry of Defence stated in a press release.

The DMF is aimed at the modernisation and enhancement of the Indian Armed Forces and will eliminate “any uncertainty in provisioning of adequate funds”, the Ministry of Defence added. Notably, the DMF will be specifically aimed at projects pertaining to infrastructure and defence capability development. The Indian Ministry of Defence is currently working on a suitable mechanism to operationalise the DMF in collaboration with the Finance Ministry.

DMF to bolster national security

The DMF is considered "non-lapsable" because any unspent funds in a financial year are carried forward to the next financial year, rather than being returned to the government's general revenue. This ensures that the fund has a steady stream of resources to support the long-term efforts of the Indian government to modernise India's defence services. The fund also helps boost the indigenous defense industry in India by financing research and development programs and encouraging domestic production of defense equipment.

The purpose of the Non-Lapsable DMF is to provide sustained funding for the acquisition of critical defence equipment and infrastructure, as well as research and development programs. The fund is intended to reduce the dependence on annual budgetary allocations for defence modernisation, which can be unpredictable and subject to political pressures. Notably, the Indian Defence Ministry’s Defence Acquisition Council (DAC) recently approved proposals worth Rs 70,500 crore to acquire BrahMos missiles, Shakti EW systems and Utility Helicopters for maritime use by the Indian Navy.

The Indian Air Force is also set to acquire Long Range Stand-Off Weapon to be integrated into SU-30 MKI aircraft. Meanwhile, the DAC acquisition bid added 155mm/52 Caliber ATAGS in addition to High Mobility and Gun Towing Vehicles for the Indian Army. Notably, 99% worth of defence equipment will be sourced from Indian industries, the Ministry of Defence stated.