Non-Lapsable Defence Modernisation Fund

March 18, 2023

The Ministry of Defence is reportedly considering the creation of a Non-Lapsable Defence Modernisation Fund (DMF) to modernize the defence forces. The fund is expected to supplement the regular yearly budgetary allocations and eliminate any uncertainty in provisioning adequate funds for various defence capability development and infrastructure projects.

The DMF, once operationalised, will ensure that the unspent budgetary allocation to the three services can be retained even after the end of the fiscal year. This initiative has been recommended by various parliamentary panels in the past.

The Need for Non-Lapsable Funds

In India, the defence budget is allocated on a yearly basis. At the end of each fiscal year, any unspent funds are returned to the government’s consolidated fund. This means that the defence services lose out on the opportunity to utilise the allocated funds for any unforeseen circumstances or future requirements.

The creation of a Non-Lapsable Defence Modernisation Fund would provide a solution to this problem. The unutilized funds would be transferred to this fund, ensuring that they are available for use in the future. This would eliminate the need to surrender unutilized funds at the end of the fiscal year, thereby creating a pool of funds that can be used to modernize the defence forces.

The Benefits of Non-Lapsable Funds

Non-Lapsable funds have several advantages over yearly budgetary allocations. Firstly, they provide certainty in the availability of funds for defence modernisation. This eliminates the need for the Ministry of Defence to constantly approach the Ministry of Finance for additional funds. It also ensures that the defence services have adequate funds to carry out their modernisation plans without any interruptions.

Secondly, Non-Lapsable funds provide flexibility in the utilisation of funds. They can be used for any unforeseen requirements or contingencies that may arise during the year. This ensures that the defence services are better equipped to deal with any challenges that may arise.

Thirdly, Non-Lapsable funds help to promote long-term planning. The defence services can plan their modernisation projects over a longer time frame, without the fear of losing out on unutilised funds at the end of the fiscal year. This would also help to ensure that defence modernisation is carried out in a systematic and planned manner, rather than in a haphazard and ad-hoc manner.

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