India   Indian Air Force (IAF) • Bharatiya Vayu Sena (BVS) • भारतीय वायु सेना
Republic of India (Bharatiya Ganarajya / Bhārat Ganarājya)

Indian Air Force  •  Naval Air Arm  •  Army Aviation & AD  •  Coast Guard Aviation  •  Border Guard Aviation  •  Police Aviation  •   • 

Indian Budget 2012-13: Aerospace and Defense Highlights

Indian Budget 2012-13: Aerospace and Defense Highlights

The Indian Defense Budget allocation for 2012-13 is INR 1,93,407.00 Crore (USD 37.58 Billion), which will cater to needs of the Armed Forces (Army, Navy and Air Force) and other associated defense departments, such as the Defense Research and Development Organization (DRDO) and Defense Ordnance Factories.

Analysis of India’s 2012-2013 Defense and Aerospace Budget:

This allocation includes expenditure on land, housing and accommodation. This does not include expenditure on Assam Rifles, Coast Guard, etc.

This is an increase of INR 28,992 Crore (USD 5.63 Billion), representing an increment of over 17.63 percent compared to the allocation for 2011-12. The increasing military expansion by neighboring countries has ensured that the budget outlay does not suffer cutbacks. The share of the capital expenditure is at INR 79,579 Crore (USD 15.46 Billion) at 41.14 percent of the total budget allocation.

Economic and Tech Analysis

There has been a continuous growth in the budget allocation, which in 2008-09 stood at INR 105,600 Crore (USD 20.52 Billion) to INR 193,407 Crore (USD 37.58 Billion) in 2012-13.

The capital outlay has increased by INR 10,380 Crore (USD 2.02 Billion) to INR 79,578 Crore (USD 15.46 Billions). This is an increase of 15.7 percent over last year's allocation of INR 69,199 Crore (USD 13.45 Billions). This can be inferred as the commitment to the policy of defense equipment modernization, development of technologies and investment in defense infrastructure. The increase is expected to support ongoing acquisition programs as well as new acquisition contracts to be signed in this fiscal.

Capital Budget allotted to Navy for Aircraft & Aero engines have grown by 78.26 percent over the previous year. This can be attributed to the ongoing naval aircrafts acquisition plans, both for Fixed wing and Rotary Wing ( to replace the ageing Sea Kings) and the Indian Navy's commitment to the marine gas turbine version of indigenous Kaveri engine. The Navy has projected its requirement to 40 marine gas turbines over the next 15 years and has agreed to fund 25 percent of the development cost to the Gas Turbine Research Establishment (GTRE) which is developing on it.

Capital Budget allocation for naval fleet has increased by 86.03 percent compared to previous year to support the upcoming fleet acquisition programs such as Project 15B (Guided missile destroyers), Project 17A (7 Stealth Frigates) and Project 28A (8 Anti-Submarine Corvettes). This is expected to provide a boost to the Public sector Shipyards such as Garden Reach Shipbuilders and Engineers (GRSE), Mazagon Dock Ltd (MDL) and private ones such as ABG Shipyard Ltd, L&T Heavy Engineering Division and Pipavav Defense & Offshore Engineering Company Ltd.

Army's Capital Budget allocation for Heavy and Medium vehicles has also more than doubled compared to the previous year. The increased allocation is expected to cater to the development of Futuristic Infantry Combat vehicle (FICV). The tender for this INR 50,000 Crore (USD 9.72 Billion) program is expected to be awarded this year. The development alone is expected to cost about INR 300 Crores (USD 58.3 Million) and the Army has agreed to provide 80 percent of the development cost to the winning vendors. There is allocation for the ongoing modernization of the Infantry, through F-INSAS program.

Market Driver: Share of Capital Outlay - The IAF and Indian Navy

More than 60 percent of the capital budget allotted for each armed force goes towards payment of installments of previously concluded deals. The remaining will be utilized for signing new contracts.

Largest share of capital budget will go to the Air Force- INR 28,504 Crore (USD 5.54 Billion). Major procurements that this budget will cater to are:

-- 126 MMRCA (Medium Multi-Role Combat Aircraft) for which Dassault Rafale was selected in early 2012
-- 75 Pilatus PC-7 Basic Trainer Aircraft
-- 64 Light Utility Helicopters (Bidders include Eurocopter AS550 and Kamov Ka-226) for which field trials have been completed and report is awaited
-- Annual payments for C-130J Super Hercules and C-17 Globemaster-III transport aircraft bought from the United States via Foreign Military Sales (FMS) route

The Navy is a close second with INR 23,252 Crore (USD 4.52 Billion). This is expected to support ongoing and new programs such as:
--Project 28- 4 Anti-Submarine Corvettes
--Project 15B- 3 Kolkata Class Destroyers
--Project 75- 6 Scorpene Submarines being built at Mazgaon Dock Ltd
--Project 17A- 7 Shivalik class Stealth Frigates
--Indigenous Aircraft Carrier (IAC) - 3 vessels being built at Kochin Shipyard Ltd
--Advanced Technology Vessels (ATV) - 5 Arihant-class Nuclear Submarines being built at Ship Building Center, Vizag
--A deal for 16 Multi-Role Helicopters to replace the aging fleet of Sea-King helicopters is also expected to be signed in this fiscal

The Army, which has been allotted INR 13,552 Crore (USD 2.63 Billion) for capital acquisitions, is likely to conclude deals such as:
--Indigenous program to develop and build Tactical Communication System
--133 Light Utility Helicopters for Army Aviation Corps (Bidders include Eurocopter AS550 and Kamov Ka-226)
--Program to Design and build 2600 Futuristic Infantry Combat vehicle (FICV) to replace the aging BMP-II infantry carrier vehicles fleet.
--Artillery Modernization program which includes purchase of 400 towed 155mm/52 caliber artillery guns, 140 ultra-light 155/39 howitzers and 100 155mm self-propelled tracked guns

The DRDO's capital budget has increased marginally from INR 4,628 Crore (USD 899.3 millions) in 2011-12 to INR 4,640 Crore (USD 901.7 millions) in 2012-13.

Market Challenges: Funds Surrendered

The track record of the Indian defense forces to utilize the allotted funds within the time frame continues to remain poor due to procedural delays and the constant irritant of the sniff of a scandal. Last year alone, the armed forces surrendered INR 3,052 Crore (USD 593.1 million) of unspent funds.

There is a need for greater accountability for the delays and improved coordination between the stakeholders in the procurement process. The selection process for MMRCA, which has been lauded by all stakeholders, is a welcome example, which needs to be adopted by other service arms as well.

Growth Opportunities

With a sizable growth in capital budget, all major modernization programs are expected to continue to be on track and not suffer from any fiscal constraints. This means the Indian defense market will continue to grow at a good pace. It's a positive sign for the global defense majors that India continues to be an attractive destination amidst defense budget cutbacks in most parts of the world.

Growth opportunities will arise from the new acquisition programs financed by an increase in capital budget as well as from upgrade and maintenance of existing inventory, which will be financed by revenue expenditure.

The domestic defense industry is expected to gain access to advanced defense technology and capital in the form of direct orders as well as Defense Offsets.

Aerospace Sector: Highlights

The Government has permitted domestic airlines to access External Commercial Borrowing (ECB) for working capital requirements for the period of one year. This will be subject to a total ceiling of USD 1.00 billion. The move is expected to be a significant boost for some major airlines in India, which are in dire need of working capital.

FDI in domestic airlines up to 49 percent is under active consideration by the Government. Once approved, it is expected to provide the much needed investment for the realignment of the sector.

The Government also announced exemption for aircraft parts and testing equipment from basic customs duty and both new and re-treaded aircraft tires from basic customs and excise duty. The move is expected to provide a much-needed boost to the 3rd party MRO service providers in India, which have been unable to realize their full potential due to unfavorable taxation.

Source: Frost & Sullivan; issued Apr 25, 2012

Photo: The Indian Air Force HAL Tejas (Photo by wikipedia)


India AF


American Air Force News
African Air Force News
Asian Air Force News
European Air Force News
Middle Eastern AF News
Ocean Air Force News

• IAF's Sukhoi Su-30 MKIs to take on French Air Force's Rafale jets during Garuda VI air exercise

The Garuda VI air exercise in July 2019 will see IAF's frontline fighter Sukhoi Su-30 MKI taking on the Rafale multirole jets of the Armée de l'Air (French Air Force)....>>

• Indian Air Force to equip 40 Su-30 MKIs with BrahMos cruise missile in next 3 years

"As for the plans, the serial production has been launched and rearmament will be carried out, as our Indian colleagues have promised on many occasions. About 40 planes as the firs...>>

• Lockheed Martin says F-21 won't be sold to Indian Air Force (IAF)

US aerospace giant Lockheed Martin says it will not sell its newly rolled out F-21 fighter jet to any other country if India places an order for 114 planes, in an offer aimed at pi...>>

• Indian Air Force Gets Its First AH-64E (I) Apache Attack Helicopter At Boeing Plant In US

IAF Boeing AH-64E (I) Apache Guardian is an advanced attack helicopter that can engage both air and ground targets with relative stealth using low-altitude obstacles like trees and...>>

• Indian Government Justifies Higher Cost of Locally-Developed Su-30s

Disagreeing with the opposition's interpretation of an audit report that found that Su-30 fighter jets supplied to the Indian Air Force by the local firm HAL are costlier that thos...>>

• Indian HAL HTT-40 Conducts Two-Turn Spin and Recovery Test

India’s HAL HTT 40 turboprop trainer aircraft has begun the most awaited phase of the spin tests by successfully entering in to two turn spin and subsequently recovering with the a...>>


 Webmaster: REFLX DESIGN - © 2011 xairforces / Aviation Society,