Govt. agrees to 15th Finance Commission’s recommendations for a non-lapsable defence fund

Finance Minister Nirmala Sitharaman has said that the government has agreed to the 15th Finance Commission’s recommendations for a non-lapsable defence fund, a move which could see states indirectly paying for a part of the country’s defence needs. Defence and National Security are the centre’s responsibility as per the Seventh Schedule of the Constitution.

“We have agreed, in-principle to the Finance Commission’s recommendation for a non-lapsable defence fund. The modalities and the structure will soon be worked upon,” Sitharaman said in Lok Sabha while replying in a debate on Budget 2021-22.

In its report for 2021-22 to 2025-26, the 15th Finance Commission has said that it had re-calibrated the relative shares of the centre and states in gross revenue receipts by reducing its grants component by 1 per cent which would enable the setting up of the fund.

It recommended the government to set up a dedicated non-lapsable fund, Modernisation Fund for Defence and Internal Security, to bridge the gap between projected budgetary requirements and budget allocation for defence and internal security.