Non-lapsable Defence Modernisation Fund

The idea of setting up a non-lapsable defence modernisation fund is off the table for now as creating a non-lapsable pool affects parliamentary scrutiny and accountability.

The 15th Finance Commission has recommended constitution of a Modernisation Fund for Defence to bridge the gap between projected budgetary requirements and allocation for defence and internal security.

Articles 112-114 & 266 of the Constitution provide that no money can be spent by the Government from Consolidated Fund of India without authorisation through an Annual Budget presented before the Parliament.

Since authorisation under the Appropriation Act is meant for that particular financial year, the same does not allow operationalization of a Public Fund which is non-lapsable in nature.

In this regard, separate mechanism is being worked out by Ministry of Finance in consultation with MoD, to explore a special dispensation to MoD to operationalize a Non-lapsable Defence Modernisation Fund.