• The 15th Finance Commission has recommended the constitution of a dedicated non-lapsable Modernisation Fund for Defence and Internal Security (MFDIS) to bridge the gap between projected budgetary requirements and the allocation for defence and internal security.
• The indicative size of the MFDIS for 2021 to 2026 is Rs. 2,38,354 crore and the maximum recommended is Rs. 51,000 crore a year, the Commission said in its report.
• However, the unutilised amount from the normal budgetary allocations to the Defence Ministry and the Home Ministry for capital expenditure shall not be part of the fund.
• The Defence Ministry has for long been demanding a non-lapsable fund, keeping in view the long trajectory of military modernisation.
• In the action-taken report tabled in Parliament, the government said it had “in principle” accepted the creation of the fund in the Public Account of India.
• The Commission said the fund will have four specific sources of incremental funding, which include:
  • transfers from the Consolidated Fund of India,
  • disinvestment proceeds of defence public sector undertakings (DPSUs),
  • proceeds from the monetisation of surplus defence land, including realisation of arrears of payment for defence land used by the State governments and for public projects and
  • cost recovered from encroached land and proceeds of receipts from defence land.
• The proceeds will be utilised for:
  • capital investment for modernisation of the defence services,
  • capital investment for the Central Armed Police Forces (CAPF) and
  • modernisation of State police forces as projected by the Home Ministry and
  • a small component as welfare fund for soldiers and paramilitary personnel.
• The Defence Ministry would have exclusive rights over the use of the amounts deposited in the fund from the specified sources of revenue. The Home Ministry will only be permitted to use what is earmarked for it from the source of revenue.

https://www.thehindu.com/todays-paper/tp-miscellaneous/tp-others/non-lapsable-fund-for-modernisation-mooted/article33722666.ece

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