Defence Minister Rajnath Singh on Wednesday called for devising innovative methods to maximise the value of money spent on the security needs of the country, terming a robust defence finance system as the backbone of a strong military.

Inaugurating a three-day International Conference on Defence Finance & Economics, Rajnath Singh asserted that a legal and procedural defence-finance framework was an integral part of a mature state system, which ensured prudent management of the defence expenditure.

He stated that such a framework, which included expenditure control as per guidelines, financial advice by professionals, audit, payment authentication mechanism, etc., ensured that the defence spending was well within the allocated budget and the full value of money was realised.

Singh emphasised that while the armed forces required a superstructure of defence ecosystem, involving R&D organisations, industries, soldier welfare organisations, etc., they also needed a well-funded system with a robust architecture to ensure the optimum and judicious use of financial resources.

The defence minister was of the view that it was difficult to apply the economic concept of full value of money in defence expenditure, as in this sector, there was no visible revenue stream and no easily identifiable beneficiaries. To maximise the value of money spent, he stressed that the rule of competitive bidding through open tender must be followed in defence procurement.

“In the case of procurement of defence platforms/equipment, either under capital or revenue route, the gold standard of Open Tender should be adopted to the extent possible. A competitive bid based procurement process, which is open to all, is the best possible way to realise the full value of the public money being spent. There would be some rare cases when it may not be possible to go for an open tender process. Such instances should come under exceptions and exceptions should not become the rule,” he said.

Rajnath underscored the importance of comprehensive Blue Books, codifying the rules and procedures of procurement of defence equipment and systems for a fair and transparent system. With this vision, the government has formulated Blue books in the form of Defence Acquisition Procedure 2020 for capital acquisition; and Defence Procurement Manual for revenue procurement and Delegation of Financial Powers to Defence Services.

“These manuals play a very important role in ensuring that the process of defence procurement is rule-bound and follows the principles of financial propriety. Since these manuals are critical, they need to be carefully crafted by defence finance and procurement experts in consultation with all the stakeholders. This needs to be a continuous exercise, so that these documents are dynamically updated, incorporating new rules and procedures as and when required,” he said.

The minister also emphasised on the role of expert financial advice to the Service personnel in day-to-day financial matters. He said, the system of Integrated Financial Advisor (IFA) has been created to provide financial advice to the Competent Financial Authority (CFA) in order to help them in avoiding the wastage of public money.