Cabinet asks finance panel to consider securing funds for defence

In what could be a major change in how government allocates funds for national security, the Union Cabinet Wednesday asked the Finance Commission to consider if “adequate, secure and non-lapsable” funds could be provided for defence and internal security. It also extended the term of the Fifteenth Finance Commission by a month to November.

The decision buttresses the Union Government’s emphasis on national security which, both Prime Minister Narendra Modi and Union Home Minister Amit Shah have stated, is one of their primary areas of focus. The Finance Commission has been asked to examine whether a separate mechanism for funding of defence and internal security ought to be set up, and if so, how could it be operationalised.

If the recommendations made by the Finance Commission — which is constituted under Article 280 of the Constitution — are accepted, it will fundamentally alter the funding mechanism for defence and internal security.

The new mechanism is expected to ensure an assured allocation of resources towards defence and internal security imperatives. The new amended Terms of Reference will enable the Finance Commission to “address serious concerns regarding the allocation of adequate, secure and non-lapsable funds for defence and internal security of India”, a government statement said.

The extension of the term will allow the Commission to “examine various comparable estimates for financial projections in view of reforms and the new realities to finalise its recommendations for the period 2020-2025. It has been given in the “backdrop of various major fiscal/ budgetary reforms” brought in by the Government, replacement of the Planning Commission with NITl Aayog, removal of distinction between Non-Plan and Plan expenditure, advancing the budget calendar by one month, introduction of GST, and a new Fiscal Responsibility and Budget Management architecture.

The step gives the Finance Commission the mandate to give recommendations on security funding. The Commission has so far focused exclusively on arriving at the optimum formula for the distribution of funds between the Centre and the states. Besides this, it also reviews the status of government finances, fiscal deficit, debt levels and recommends a fiscal consolidation roadmap at both the Central government and state levels.

The 15th Finance Commission, headed by NK Singh was constituted on November 27, 2017 and was to submit its recommendations on October 30 this year for a five-year period starting April 1, 2020.