Agnipath: Breaking the Accountants Ambush

By Lt Gen P R Shankar (R)

When the OROP was announced it was known that the defence expenditure will skew towards ballooning salaries and pensions with a proportional decline of military modernisation. It was always the devil in the Accountants mind. The exercise to rein in the manpower costs commenced in Dec 19. The Army toyed with the idea of extending service of Jawans by two years. In Nov 2020, the Chief of Defence Staff, late General Bipin Rawat  wanted to increase retirement ages in some categories. It was not pursued beyond a point. Interestingly the justification of the Army was that “It takes a minimum of three years to train a soldier. We allow him to leave once he achieves proficiency in his stream. The aim is to retain trained manpower”.

In April 22, one and a half years later, the situation flipped completely. The Tour of Duty proposal (Agnipath Plan) was put out in the media sketchily. 25% of the soldiers would be discharged from service after three years, and another 25% after five years. The remaining 50% were to complete pensionable service. The subtext was always manpower costs. A trial was to be carried out. Many articles and views appeared related to capacities of recruitment, training and discharge, unit level problems, operational efficiency, age profile and technological capability and so on. Despite this, the military grapevine indicated that the hierarchy was adamant about this transformation due to one single fact – reduction in manpower costs. Indications of a trial emerged. So far so good. There was no doubt that something had to be done to reduce increasing manpower costs; failing which modernisation and induction of technology were at huge risk. Also, the age profile of the Forces was creeping up. Around the same time, news also filtered out that patriotic, disciplined and well trained youth exiting the Agnipath would serve the society as role models to further national goals. A new factor in the intended transformation emerged. However, from then till now, there has been no evidence of a concept paper /study or of a road map. To that extent it is indeed strange that such a wide-ranging transformation is being undertaken without a transparent public document or a public debate or parliamentary consultation.

A few days before the formal announcement of the Agnipath Scheme, news filtered out that the service period would be 4 years including training. Training would be cut by half. Retention would be only 25% as against 75% exit. During the announcement and thereafter, the hitherto dominant manpower costfactor became insignificant. The emphasis shifted to younger profile, technology adaptiveness and improved training methods including an occasional mention of simulation. Overall it was being assured that the operational effectiveness of the Armed Forces will increase despite a shortened  period of training and limited period of availability of ‘Agniveers’ in units. The flip from ‘It takes a minimum of three years to train a soldier’ in Nov 20,  to a ‘soldier can be trained in six months’ is baffling.What are the major technologies which are being inducted in each Arm / Service and at what stage of procurement/ induction are these?How can a Xth pass Agniveer adapt to technology not yet on the horizon? What are those special training systems/ simulators which are being procured to make training more effective than before to justify shortened training periods? What are the factors which made a proposal of  exit of 50 % Agniveers in April to culminate into an exit of 75% in June? How is 4 years better than 5 years of service?It is a game of smoke and mirrors where a lot is left for imagination.

It can only be concluded that as reported widely in all media that the entire exercise commencing from Nov 20 was financially driven overruling other issues. That has been almost proven by the fact that the only cogent reason to explain 4 years’ service period of Agniveers is that, if they complete 5 years of pension, they will have to be paid gratuity. In a recent discussion with very senior veterans of high repute, who held important assignments during their careers it emerged that 4 years is too short a period of service for an Agniveer and 75% is too harsh an exit. Many recommend going back to the 7 year service model of the yore. The current scheme puts operational effectiveness at risk and does not meet youth aspirations. A similar view has been expressed by a living PVC awardee in an interview to NDTV. I am confident that the serving officers are also convinced about this in their hearts. Why has this come about? The Accountant has ambushed the system completely with his dark picturisation of dire financials. The political hierarchy has accepted it as gospel for  transformation.

The moot question is that -are the manpower costs so huge that the nation cannot afford an easier and smoother transition? Are the Rasputin-like predictions true? Hence a competing financial outlook is needed. There are three issues on defence expenditure which need focus. In the last decade (2011-12 to 2021-22), the budget of the Ministry of Defence has grown at an annual average rate of 8.4%, while total government expenditure has grown at 10.3%. During this period, defence expenditure as a proportion of central government expenditure decreased from 16.4%, to 13.7%. Defence expenditure as a percentage of GDP declined from 2.4% in 2011-12 to 2.1% in 2021-22. This is in contrast to the fact that India is the fastest growing economy and is projected to be a 5 Tn USD economy soon. Simply put, India has not and does not spend enough on defence. Manpower costs are almost fixed and predictable year on year despite inflationary trends. Hence, India scrounging on defence expenditure has impinged more on modernisation rather than manpower costs alone. Any analysis of government expenditure might indicate that increasingly populist schemes have hiked Government expenditure more than manpower costs of defence.  

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Turning to defence pensions. Between FY12 and FY21, defence expenditure increased at a nominal annual rate of 9.5%. In this period, pension expenditure ballooned 14% year-on-year, while spending on capital rose only 8.4%.One needs to rein in pensions. No doubt about that. However, is the situation so tight? To start with, defence pensions provide pensionary charges for retired military personnel of the three services, civilian defence employees and also employees of Ordnance Factories.  It covers payment of service pension, gratuity, family pension, disability pension, commuted value of pension and leave encashment. While the entire Agnipath focus has been on military manpower, the civilian element has not been dealt with by ‘Accountant Rasputin’. Secondly, there is no doubt that Defence pensions have witnessed a sharp hike since the introduction of OROP. However, the outgo on OROP is a reducing commitment. It is only for pre 2016 retirees. Financially the older veterans gain most from OROP. They are a dwindling number. With time, the reduction on OROP expenditure will be drastic. Thirdly, the pension liability on defence civilians is also a shrinking outgo since the introduction of the New Pension Scheme after 01 Apr 2004. The dip has already commenced as can be seen in the graph. It is a myth and a false notion propagated by ‘Accountant Rasputin’ that the defence pension liabilities will continue to increase exponentially every year due to increase in number of retirees, amount of dearness relief, gratuity, and other retirement benefits. In my opinion, due to the dwindling number of OROP beneficiaries and defence civilian pensioners, overall pension liability as a percentage of defence budget continues to reduce despite inflation.   

Agnipath: Breaking the Accountants Ambush
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Further, the government has undertaken reforms in OFB to make it into a corporate model. The aim was to increase productivity and rein in manpower costs. Part of this is ammunition management. Ammunition of poor quality has been a huge financial leak and operational detractor for a long time. It has  also been a huge repetitive and cancerous chunk of defence expenditure. A marginal improvement in quality of ammunition being produced and better inventory control will reduce this leak significantly. It should start showing results sooner than later with the new look defence production structure . Also, our defence exports are bumping up and bringing in more revenues. Further, reforms like the negative lists and increased capital expenditure for indigenous equipment will result in savings. That gives additional fiscal space.

From the foregoing, it can be surmised that while there is an undeniable need to reduce overall manpower costs the situation is not so dire that ballooning salaries and pensions will cramp defence modernisation or impinge upon security of the nation unless something drastic is done. It is a fallacy to fall prey to the Accountants ambush.Let me argue the other way around. Any significant reduction in financial burden will not accrue till the first Agniveer would have retired from service after 15 years. There is no immediate financial benefit. The Agniveer Scheme without a social parachute runs the danger of hiking up costs to society. The outpouring of public anger indicates so. The deeper and hidden costs are intangible and yet to surface. The operational costs of this scheme will manifest in greater turbulence at unit level, loss of experience, disrupting detachment/section level bonding and more in due course. Is all this required?Most of this can be resolved by keeping the Agniveer in service slightly longer and giving him a softer exit through implementable Government schemes. This much is affordable. 

The fundamental precept of the Agniveer Scheme is sound – to reduce manpower costs, to decrease age profile, to allocate greater resources to modernisation and technology induction. The problem is that the solution sought at this point of time seems to be doing exactly the opposite. This is due to the financial precept being based on popular misconceptions rather than fact. The nation and its Armed Forces need a change. However the change has to be softer, the rate of transformation slower and more absorbable. The nation can afford a slower rate of transformation which will be more sustainable and meaningful. It is time to break the Accountants Ambush.

(The author is PVSM, AVSM, VSM, and a retired Director General of Artillery. He is currently a Professor in the Aerospace Department of IIT Madras. He writes extensively on defence and strategic affairs Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)

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