The government has “recalibrated” the management of an account, which was used to pay the US under the Foreign Military Sales programme, after a review showed that nearly $2.3 billion had piled up without earning any interest, defence minister Manohar Parrikar said on Saturday.
India and the US have now fine tuned the FMS procedure whereby rather than raising bills case-wise every quarter, funds against various cases have been pooled together in a corpus. The corpus was created in September last year, defence sources said.
A statement released by the ministry said that as and when funds are required to be paid per case, fulfilment of contractual liabilities, the said amount is being withdrawn from the corpus.
“Consequent to this creation of the corpus in consultation with the US government, no payments have been made in the last two quarters of the financial year 2015-16, against cases which necessitated payments, against the said contracts,” the ministry said.
“Instead, payment is being effected from the corpus of 2.3 billion US dollars. It is hoped that no payments shall be required to be made till the amount of 2.3 billion US dollars is depleted and there is a necessity for us to replenish certain amount as required,” it said.
It said this has happened through “scrupulous and holistic financial management”.
Consequently, while the US government will continue to meet their contractual obligations, there will be no additional burden on the Indian government on this account.
It enables utilisation of scarce funds on other projects and hedges the country against adverse exchange rates, the ministry said.
Earlier in the day, Parrikar, who had put the corpus figure at about $3 billion, countered reports that the ministry has failed to utilise about Rs 11,000 crore from the capital budget of 2015-16. He said the country has actually saved money.
He said that even though the provision of capital acquisition in the budget was around Rs 77,000 crore, the actual anticipated spending will be around Rs 66,000 crore.
“We have taken measures by which Rs 11,000 crore saving appears there,” Parrikar said while briefing reporters about the ddefence budget for the next fiscal.
The minister also said the defence budget for the next fiscal of “nearly Rs 2.59 lakh crore” sans the pension allocation, was adequate and as per the ministry’s requirement.