The exercise of Command is to a large extent the exercise of financial powers. The recent DFPDS 2015, lays down the charter and mandate of the Defence Accounts Department (DAD) as well as delegated powers for military officers as Competent Financial Authorities (CFAs). The Finance Division of the MoD, through this policy effective from May 01, 2015, has laid out explicit provisions encapsulating a number of accounting and financial best practices in the Defence Services. In effect, however, it has eroded the functional autonomy of the Services to an unprecedented level despite objections by the Services to the arbitrary manner in which the policy has been enunciated. The rationale behind the issue of this policy, as highlighted in its provisions, is to embed an oversight mechanism over decentralisation of decision-making, based on the principle of reasonable assurance to the executive at the highest level, in this case, the Raksha Mantri (RM) in whom the financial powers are vested. In practise, it emasculates commanders and gives unreasonable powers to the financial advisors, without appropriate levels of accountability being built into the system.
The policy highlights the need to strengthen the Integrated Financial Advisor (IFA) system from the “service availability” and “service delivery” concept. In practise, this will lead to inordinate delays in all procurements, and will put commanders in a position of subservience to those that are mandated to look after the Services. Even now, the IFA systems at Command Headquarters have become so complex and unmanageable that the Army has appointed its own higher Defence Management Course (HDMC) qualified officers as Colonels (Financial Planning) to assist the CFAs. The requirement of trained IFAs to execute this policy will run into thousands which the IDAS will not be able to meet from their meagre cadre strength.
The policy proposes a collegiate mechanism to speed up the various stages of all procurement cases to hasten the procurement cycle, which is indeed a better system from the prolonged movement of files between the IFA and the CFA being currently followed. The timeline for the implementation of the above, given past experience, is however unrealistic. A Procurement Committee (PC) is proposed to be formed by all CFAs within their domain for carrying out procurement, with the IFA or his representative as a part of this committee. This experiment will not be a success at both Service HQ level as also at lower formations namely Divisional and Brigade HQ because of the sheer quantum of cases and the time required to deliberate upon these cases, an aspect which the policy surprisingly discounts. In effect, the DFPDS 2015, instead of “Delegation of Financial Powers to the Defence Services,” will result in centralisation of delegated financial powers from the lower CFAs. The manner in which the DFPDS 2015 has been issued lacks transparency as, unlike its previous version, the minutes of deliberations leading to the issue of this policy have not been made public. The motive of its issuance is hence suspect. More alarming is the fact that this policy has the potential to exponentially increase the equipment hollowness of the field Army and result in budget surrenders. The aim seems not so much to render financial advice to the Armed Forces, as to achieve financial control. It is also worth a mention that a matching efficiency is conspicuously absent in handling the other charters mandated to the IDAS, namely, accounting and payments, manifested in the services provided, for instance, by, say, the Principal Controller of Defence Accounts PCDA (Pensions) which suffer from major functional inefficiencies and a minimal application of Information Technology (IT).
One of the compelling provisions of the DFPDS involves striking down the inherent financial powers for procurement delegated to military officers across the board which now stand withdrawn. Military officers can now exercise the financial powers for procurement vested in them, irrespective of the monetary value, only in consultation with the ‘integrated finance’ staffed by the IDAS or the subordinate cadre of the Defence Accounts Department (DAD). The more perilous provisions inserted in the policy define the new scope of a “single transaction” linked to the “same prospective bidders” which will make the powers of lower CFAs redundant and whose full impact the Army has not even fathomed as yet.
The singular provision of withdrawal of the inherent powers of military officers has resulted in the clock being set back by almost two decades since the New Financial Management Strategy (NFMS) was first implemented post the Arun Singh Committee report. The NFMS first recommended delegation of financial powers to the executives at the “functional level” to cut down delays in routine procurement. The provision for withdrawal of the inherent financial powers of military officers, coupled with flawed bidding formats, successfully institutes the same level of bureaucratic red tape in revenue procurement that the government has been trying without much success to undo in the capital acquisition process for years. The major implications of this policy are given below.
Firstly, no unit or formation commander at Brigade, Division, Corps or Command level, their staff or their logistic stocking echelons, even hospitals, shall be able to procure routine requirements without passing the scrutiny of an archaic IFA system involving multiple sequential sanctions from an official from the IDAS or the subordinate cadre of the DAD designated by the office of the CGDA.
Secondly, the values indicated in the procurement powers are in reference to a single transaction, in a particular subschedule. This has serious implications as it means that the same supplier will supply that item to the Forces. This will be unmanageable and Units and formations will have difficulty in procuring even routine requirements through the annual training grants and the like.
Thirdly, the much hyped provision that the military CFAs will continue to exercise inherent powers up to Rs one lakh in case the IFA is not co-located ceases to have any meaning.
Fourthly, it embeds the IFAs in the budgeting and planning process of the Services, which will lead to even greater delays as procurement agencies in the divisional levels will have to get their provision reviews and procurement plans vetted by the IFA at every stage.
Finally, the policy in effect will adversely impact on the operational preparedness of the Services for which the Service Chiefs are accountable but the Financial Advisors will have no liability. We are looking at a potential disaster and it is surprising that the Service Chiefs have not objected to the proposal in a more forceful manner. The critical hollowness of the Army will now further increase, which has the potential to jeopardise national security.
What needs to be done is to change the structures currently in place. There is a need to take a relook at this policy based on data collected in the Service HQ and lower formations on the losses caused in the last five years due to delay in finalisation of cases under the existing IFA system. It would also be preferable to post on deputation logistics officers from the Army who are adept at financial management and from the accounts branch of the Indian Air Force (IAF) to work as IFAs at all levels on deputation. While the stated aim is to achieve best practises, the existing corruption in the PCDA, the Regional CDAS, and in the DAD has not been sought to be corrected. This policy will not lead to financial savings but will increase bureaucratic control with the attendant corruption that it entails. Tragically, it will increase the hollowness level of the Armed Forces which would be disastrous for National Security. Sadly, it is the Armed Forces that will have to face the consequences and not the financial advisors. We are destined to have a repeat of 1962 yet again.