Non-lapsable Defence and Internal Security Modernisation Fund

Non-lapsable Defence and Internal Security Modernisation Fund

Subject: Security

Context: The 15^th Finance Commission (FC) recommended Non-lapsable Defence and Internal Security Modernisation Fundin its report to ensure continuity in fund support.

Concept:

• The 15th FC has recommended ₹1.5 lakh crore be shifted from the Consolidated Fund of India over five years.
• The commission has suggested this to come from Gross revenue receipts and not Gross tax revenue, thus not impacting divisible pool of tax or cess, surcharge or defence tax.
• It is to fix mismatch between the procurement cycle and the financial allocations for defence on an annual basis.
• To provide stability on availability of resources for meeting capital expenditure for Defence and thus strengthening security.
• Apart from the Consolidate Fund it will be boosted by monetisation of idle assets of the defence ministry (It holds huge parcel of land and other assets)

Other focus areas of 15^th FC:

Focus of 15th FC has been on equity, need and efficiency as well as continuity and stability:

• Continuity of the 41% share (factoring in J&K’s change in status)
• New criteria of demographic management by assigning a 12.5% weightage, and if States still suffered, mitigation by a revenue deficit grant which covers many of the States like Andhra Pradesh, Kerala and Telangana
• Percentages assigned to different weights at more or less what they were, with very marginal change by increasing the forest cover criteria
• Reprioritization of the expenditure pattern: Ex- Specific treatment of the resources to urban local bodies towards improving health infrastructure of primary health centers and district hospitals keeping threat of pandemic in mind
• Flexibility in fiscal deficit target: Fiscal deficit target for states saw one percentage point more — 4% instead of the 3% of GSDP, and an additional 0.5% for undertaking power sector reforms
• If any of the States have to undertake fresh borrowing on account of liabilities arising out of the GST compensation cess, that would be over and above the flexibility
• New fiscal consolidation plan, a new debt trajectory, formation of a new inter-governmental body to look into Central govt fiscal target with aim to achieve targets in medium term