Delegation of financial powers by MoD leads to significant increase in cases

From the data provided by the SHQs regarding the impact of the delegation of powers, it is observed that there has been a clear surge in the cases being finalized at the level of SHQ and other formations leading to a decrease in the time taken to finalize the procurement cases.

The delegation of enhanced financial powers by the Ministry of Defence (MoD) to the Services has led to a significant increase in both value and number of cases processed at the Service HQ, command and lower formation levels across the three Services.

From the data provided by the SHQs regarding the impact of the delegation of powers, it is observed that there has been a clear surge in the cases being finalized at the level of SHQ and other formations leading to a decrease in the time taken to finalize the procurement cases. This has resulted in the optimal use of the budgets allocated to the MoD.

During the period 2016-18, the Defence Services were progressively delegated higher financial powers for both routines as well as emergency procurements with the aim to reduce procurement time-frames and enhance defense preparedness.

On the capital side, the Services now have powers to accord Acceptance of Necessity (AoNs) for individual schemes costing up to Rs 300 crores, a sharp jump in two stages from Rs 50 crores during 2015-17 to Rs 150 crores during 2017-19 and to Rs 300 crores in 2019-20. On the revenue side, the Services are now authorized to clear proposals amounting up to Rs 500 crores at their level. This dispensation came about in October 2018 and replaced the earlier limited delegation of Rs 200 crores.

The MoD undertook a review in July 2019 to assess the impact of the higher delegation of financial powers to the Defence Services. The review concluded the following:

With regard to the Army, as against a total of 327 cases referred to MoD for the grant of AoN between April 2012 to 31st March 2015 only 132 cases were referred during 2015-17.

Similarly, during FY 2016-17 and up to 31st December 2018, there was a steady decline in AoNs accorded and contracts concluded by the Navy with MoD approval and a corresponding increase in the number of AoNs accorded and contracts concluded under financial powers of the NHQ.

As far as the Air Force is concerned, around 80 – 85 percent of the contracted value is now sanctioned at the Air HQ itself.

The value of AoNs accorded and contracts concluded under delegated financial powers of Commands and lower formations have also increased steadily during the period.

On Capital side, the AoNs by SHQ has gone up substantially from 21 percent in 2015-17 to 67 percent in 2019.

(With Inputs from PIB)