May 2, 2022

The Tour of Duty Proposal: Need For A Holistic Approach

Written By: Kapil Aggarwal and Dhruv C Katoch

Introduction

There has been a great deal of speculation in sections of the media as well as in the social media of a change taking place in the Army’s recruitment pattern. Termed as the Tour of Duty (ToD), it envisages recruiting soldiers for a short duration of three to five years’ service in the Army. It is believed that the proposal is under active consideration by the Ministry of Defence, but in the absence of any official statement from the government on the subject, the purpose of introducing such a concept, the broad contours it may follow, as also a discussion on the pros and cons of such a proposal can at best be based on certain reasonable assumptions. This paper aims to put across the likely thought process behind the proposal, the pattern it can take and the likely impact this proposal will have, if introduced.

Broad Contours of the ToD Proposal

The basic thought process behind the proposal is to reduce the expenditure on military pensions. On a fixed defence budget, reduction in revenue expenditure would make greater funds available for capital outlay, which in turn would facilitate new acquisition and military modernisation. India’s budget for FY 2022-23 allocated Rs 5.25 lakh crore for defence, which includes the defence pension component of about Rs 1.2 lakh crore. Obviously, a reduced pension component will lead to a larger capital outlay. With this in view, the proposal is believed to envisage recruiting personnel into the Army for short tenures, akin to conscription but on a volunteer basis.

One of the proposals is to induct personnel for both a three-year period as well as for a period of five years to eventually, say within 15-20 years, have an army strength that would comprise 25 percent personnel who would be below 3 years’ service and another 25 percent who would be between 3 to 5 years’ service. The rest of the component would be as presently existing. There could be different computations of the above, but the end objective is the same. On completion of ToD, some of these personnel would be absorbed in the Central Armed Police Forces (CAPF) or in the corporate sector while the rest would be free to seek employment elsewhere. Those who do not find employment will be encouraged and assisted to set up small scale individual businesses. The savings accrued during the ToD as well as the lump sum amount, they would receive on completion, would provide them the necessary capital for the same.

The individuals serving for periods below five years would not be eligible for pension, so the scheme is slated to reduce the pension bill of the Army. Some of the other benefits envisaged are as under:

  • It would reduce the age profile of the Army.
  • It would create a large work force of disciplined individuals, who would then be an asset when employed in either the CAPFs or by the corporate sector.
  • Those individuals who cannot get employment will be encouraged to set up small scale private enterprises, which could give them an alternate livelihood. This would also give a boost to the economy.
  • It would lead to increased employment opportunities for the youth.

Earlier Proposals

One of the earlier proposals of the Army was lateral induction of short service commissioned officers into other services. For the jawans who retire after 15 to 17 years of service, it was recommended that they be employed thereafter in the CAPF (Border Security Force, Central Industrial Security Force, Central Reserve Police Force, Indo-Tibetan Border Police, Sashastra Seema Bal, National Security Guards) or in the para military forces (Assam Rifles). This proposal found little favour with the Home Ministry and was shelved.

In 2019, an army veteran, Lt Gen P. Menon, along with Pranay Kotasthane, both from the Takshashila Institute, wrote a discussion paper recommending an ‘inverse induction model’ to reduce the Army’s pension bill.[1] This was a modification of the earlier Army proposal and envisaged induction of army personnel into the CAPF. The recruitment would be done by the CAPF, but the recruits would be trained by the Army and would revert back to their respective CAPF after completion of 7 years’ service.

Analysis of the Inverse Induction Model

For the purpose of analysing the financial implications of the stated model, the assumptions made are as under:

  • For the period, annual pension liability of GoI is assumed to be constant for a fixed number of Other Ranks (OR).
  • The total Army authorisation of OR is ‘A’ and their total annual contribution towards future pension liability is ‘P’.
  • The No of CAPF recruits each year is x.
  • The annual pension contribution of x Army OR is X, ie X Rs saved each year in pension contribution (notional) by recruiting x number of OR into the CAPF.
  • All OR are assumed to retire after 19 years, with uniform rate of recruitment each year. Hence, the total annual training expenses for A/19 number of recruits is T =(A/19) *t, where t is the individual recruit training cost for one year. (See table below)
Service

(Year)

CAPF Recruits

(Total)

Pension Contribution

(Total Army)

Training Expenses

(Annual Total)

1 x P-X T=(A/19)*t
2 2x P-2X Higher
. . . .
. . . .
7 7x P-7X Higher
8 8x P-7X (as x No of OR have left for CAPF)  

 

The following inferences can be made from the above table:

  • There is saving in pension contribution from the defence budget for first 7 years and it peaks at 7X. From 8th year onwards, the saving remains 7X.
  • The pension budget of CAPF, however, goes up by an equivalent amount as 7 years of Army Service will be counted for CAPF pension also.
  • Net pension savings to the GoI is zero.
  • Training costs go up. When no CAPF, annual recruit training cost is At/19. With CAPF recruits, annual cost is (A-x) *t/19 + xt = At/19 + 18xt/19 – i.e. an increase of 18xt/19 in annual training budget.

The Conclusion from the above analysis is as under:

  • The saving in defence pension budget peaks after 7 years (can be        construed from 1-7 years or alternately from 20 to 27 years, when          actual pension disbursal commences).
  • There is a corresponding increase in CAPF pension budget.
  • Net saving to GoI is zero.
  • There is increase in annual training expenses in Army.
  • Net no savings to GoI while there is increase in Army training budget.

The above analysis indicates that the Inverse Induction model does not result in financial savings to the GoI.

The Tour of Duty (ToD)

The ToD concept envisages recruitment of soldiers for a short duration, much like the conscription model existing in some countries. Romantically called ‘Agnipath’, the soldiers recruited in this proposal will be known as ‘Agniveers’, following the classic business model of giving a high-sounding name for standard military jobs.[2] The fundamental flaw in this proposal is that it gives primacy to finances over operational effectiveness. It is true that no nation can wish away the larger macro-economic financial constraints, but at the same time, it would be unwise to barter national security and defence preparedness for purely financial reasons. While it is essential to look at optimisation of available resources, it simply cannot be done without holistically looking at all aspects of defence preparedness. This would include the nature of threats we are currently faced with and the force levels required to deal with them, to include the entire gamut of force structuring, weapons and equipment holding, logistic support infrastructure as also the state of morale, training, and a host of other battle winning factors.

Be that as it may, it is debatable whether the ToD concept will lead to financial savings which are of such great account that it will give a tremendous fillip to capital acquisitions and force modernisations.

Analysis of Financial Implications of ToD

The analysis of the concept of ToD is being restricted to OR; the OR pension budget being the major component owing to large number of OR in the Army. In any case, the officer cadre already has a Short Service Commission entry where officers can exit at 5/10/14 years’ service without any pension obligation to GoI.

For the purpose of analysis, it is assumed that the men on ToD of 3/5 years, have the same entry level qualification, same selection criteria, same training duration, same posting profile and salary as the regular Army recruit. It is also assumed that the strength of regular Army will be offset in same numbers as the number of men on ToD. However, what is not clear is the number of men who will be absorbed in the CAPF after the termination of ToD.

With respect to the men who may be absorbed in the CAPF or PSUs, the earlier financial analysis of Inverse Induction Model will apply, albeit for a 3/5-year duration instead of 7 years. Thus, there will be no overall financial savings to the GoI while training budget of Army will go up. The other collateral effects, ie impact on operational effectiveness and unit cohesion will have to be studied separately with appropriate models once details of the employment, manning and posting profile which is envisaged for the men on ToD is known.

In case, these men are to be let off after 3/5 years with a severance package, then this amount, handed over on an annual basis, has to be compared with the annual pension contribution for those numbers of regular Army OR, to determine the savings, if any to the GoI. However, the future career prospects of these ex-ToD personnel, with most of them likely to be only matriculates (10th) will remain. The jobs which can be made available to such personnel in the private sector will perforce be restricted to those at the lowest rung of the ladder, and the pay and emoluments they will receive will be far lower than what they were authorised while in ToD service.

There is also a possibility of these men being let off without any absorption and severance package, which will restrict their ability to start small scale enterprises on their own. The popularity of such a scheme will hence be eroded and may become unsustainable after a few years.

Concept of ToD: Is it borne out of the Myths of Defence Budget

From the analysis above, it is evident that the concept of ToD is unlikely to result in considerable revenue savings to the GoI, unless the ToD personnel are left to fend for themselves after termination of their 3/5 years tenure or are given lower emoluments as compared to regular army recruits. Even in the latter case, there is going to be a tradeoff between limited savings (computation has to await full clarity on the concept) and the operational effectiveness, motivational levels and cohesion within a unit. In any case, even if savings are likely to accrue, that will only come about after 15 years, when the total number of pensioners will start to decline each year, and will eventually reach a constant after about 18 years.

There are several myths associated with the defence budget. In a developing nation, there will always be concerns that the defence budget is eating into the resources of the nation, which could be better spent on other sectors. However, for a nation facing all round security challenges, not taking adequate protective measures will be a sure long-term recipe for disaster and economic ruin.

A more suitable metric is to view defence allocation as a percentage of GDP or as a percentage of total central government expenditure. For India, the defence allocation (excluding pensions) stands at approx 1.45% of GDP and has shown a gradual decline over the decades. This does not mean that in real terms, there has been a reduction in defence expenditure. An analysis of the defence budget over the last few decades indicates that the defence budget has been continuously rising in real terms, even if the rise is not very substantial. This is simply indicative of a higher rate of growth which enables high allocation to defence in real terms. Instead of fixing defence expenditure to a percentage of GDP, it is for consideration whether keeping defence expenditure constant as a total of overall government expenditure would be a better and more viable option.

With respect to the salary and pension bill of defence personnel, It is also to be understood that defence pensions rise in the same manner as other central government employees, the salary and DA structure being largely common. Thus, when experts talk of not enough funds left for modernisation of defence forces due to ever increasing revenue expenditure, they miss the essential point that the real reason is continuous compression of defence budget as a percentage of GDP or as a percentage of total defence expenditure. One may recall, that during the UPA regime, the then Prime Minister, Shri Man Mohan Singh made a statement that endeavour of his government will be to raise the defence allocation to 3% of GDP. But despite such a declaration, there was no real push for force modernisation and the military suffered great neglect during the ten years that Dr Singh was at the helm of affairs as Prime Minister—that is the period 2004-2014.

As far as pension budget is concerned, it is worthwhile to mention that average per capita pension of defence personnel is much lower than a central government civilian employee. The defence pension budget, however, is big in absolute numbers due to large number of retired personnel, which itself is a function of soldiers being compulsorily retired early from 36 years age onwards owing to the need to meet the requirement of maintaining a young and physically fit Armed Forces.

If we look at the overall revenue expenditure on salary and pension bill of defence personnel, a study has shown that life time earnings (pay and pension till average life expectancy of 70 years) of a civilian central government employee is about 60% higher than a corresponding pay grade defence employee. This simply indicates that the pay and pension bill of the Armed Forces cannot be construed to be exorbitant and a factor in constraining the modernisation effort. Clearly the cause lies elsewhere.

Another myth which abounds is that defence personnel get pension from the government, while civilians (post 2004) are on National Pension Scheme (NPS) and do not contribute to pension liability of the government. The fact is that the government contributes to pension of defence personnel as well as civilian employees (10% of basic pay every month). The difference is only conceptual; while the defence pension system is on “Cash Accounting System,” the NPS is based on the “Accrual System”. Defence pensions have to continue in its existing form as NPS is not suitable for employees who start retiring from the age of 36 years onwards. However, another study on NPS vs defence pension system has shown that if defence personnel also serve for 54 years age or more, NPS may be a preferable system to even the OROP which they are presently entitled to.

With all the data-based studies pointing to the inferences outlined above, the question arises that is there a requirement of conceptualising schemes like ToD or are there better alternatives available within the existing paradigm? But before a holistic view of the issues involved is taken, it is essential to correct the misperceptions on defence budget and revenue expenditure including salary and pensions. Evidently, there is a parallax error in the popular perception about the Defence Budget and its constituents.

Optimising Defence Expenditure

Perhaps a better course of action would be to have a holistic overview of the entire defence expenditure, with a view to determining how this expenditure can be optimised, instead of keeping the focus on just reducing the pension component of the budget. Some of the factors which lead to rising costs are poor decision making, wasteful production techniques, reliance on imports, enabling the private sector, strengthening the defence industrial base, emphasis on quality control, opening up the entire defence sector for exports and privatising at least some of the defence public sector undertakings.

The Ordnance Factory Board (OFB) has been done away with and in its place, the 41 Ordnance Factories (OF) which it controlled have been converted into 7 Defence Public Sector Undertakings. This step was long overdue but was resisted by the unions. The various governments at the Centre, over the years, bowed to the wishes of these employees. This civilian component, by itself constitutes a sizeable chunk of manpower and resources which could be privatised. The OF were a loss-making enterprise, producing shoddy goods at inflated cost and employing manpower, far in excess of requirement. The government now needs to go beyond the bold decision it has taken as far as corporatisation of the erstwhile OFB is concerned. Some of these unproductive units need to be closed down or privatised, some could be retained and some could be handed over to the Ministry of industry, where these units could compete with the private sector on a level playing field. Reforms here, by themselves will do much to reduce costs, making more money available for the modernisation effort.

Labour productivity in all the DPSU’s need to be analysed. As an example, production costs of manufacturing indigenous fighter aircraft is abnormally high. The same goes for ship building, manufacture of heavy weapon systems, etc. Improved labour productivity will lead to dramatic reduction in costs, making more funds available for making up critical deficiencies.

A revamping of the total civil manpower on the rolls of the defence ministry would also be in order. It is not that well known that the defence civilian work force numbers around 4 lakh personnel.[3] Of the 1.2 lakh crore defence pension bill, a substantial part is paid out to these defence civilians. Reducing the civilian work force will ipso facto have an impact on reducing the revenue budget, making more funds available for force modernisation. This by itself will result in far greater savings than any other single measure. The civilian defence component of the Armed Forces is what can be called the tail in the teeth to tail ratio. However, the tail is wrongly construed to be the logistic component of the military. This must be corrected. As a start, it would be beneficial if the Ministry of Defence published yearly figures of the total number of defence civilians on its payrolls, the break-up of such a work force and the pension outlays to such personnel.

Savings can also be accrued with intangible factors such as improved decision making. Poor decision making has in the past led to production delays, delayed acquisitions and a phenomenal increase in costs. Within the military, improved logistic procedures will also do a world of good in bringing down holding costs of equipment, stores, spare parts etc.

Finally, there is a downslide in the ToD system, which needs to be factored in. This pertains to the state of morale of ToD troops, which could be a vital factor in war. In Afghanistan, the Afghan National Defence and Security Forces (ANDSF) fell like a house of cards to the Taliban, primarily because they were composed of conscripts, who had to serve a short time in the Army. When the chips were down, they exhibited no will to fight. We need to be careful of what we attempt to do with the troops of the Indian Army. This is the final bastion of the nation. If the Army fails, the nation does not survive and that is a possibility which we can never ever allow to happen. A sufficiently large percentage ToD soldiers, after their term is over are unlikely to find a job which they find suitable. What happens if some of them become soldiers of fortune, trying their luck with anti-national forces and organisations! We cannot wish such possibilities away. There will also be a separate set of challenges for the Commanding Officers, which need to be factored in.

Conclusion

The ToD concept can at best have a limited impact on defence pension outlays, which will start manifesting only after 15 years. The downside of such a proposal is the impact it will have on operational efficiency and the challenges which may accrue in dealing with a large number of trained military personnel, who have no suitable employment after their ToD has been completed. It would hence be better to look at the entire matter in a holistic manner, especially in terms of what Prime Minister Modi has consistently been emphasising and that is to strengthen the defence industrial base, making India truly atmanirbhar in defence production. Combine this with weapon exports and we have a total game changer at hand. Here, we also need to look into the German Mittelstand, which became a model of economic success. For something like that to succeed in India we need a very proactive bureaucracy which acts as an enabler, supporting such enterprises. Unfortunately, as of now, the private sector is hampered by India’s bureaucratic maze, which makes many entrepreneurs simply shut shop and move off to other countries where their talents are better appreciated.[4]

If the ToD concept has to be tried out, let us make a start with the Territorial Army.  That would be a better test bed than carrying out such experiments with the field force. We would do well to remember that while future warfare will have a large component of non-contact warfare, the physical blood and gore of war fighting will still remain a constant. For the non-contact part of warfare, getting individuals on short term contracts from the private sector at various levels may also be an option which could be examined, especially in the new emerging field of cyber warfare, artificial intelligence (AI) robotics, et al.

A holistic long-term view will give the Indian Armed Forces the capability and wherewithal to defend the nation against external threats. Fiddling with the system keeping only the financial aspects in mind could lead to unmitigated disaster in the long run. We have suffered foreign invaders ruling over our land over the last millennium. We cannot traverse that path again. Let us also remember that there is a cost to maintaining a young army. The nation has to be prepared to pay that cost.

Author Brief Bio:

Lt Gen Kapil Kumar Aggarwal, AVSM, SM, VSM retired as the Director General, Electronics and Mechanical Engineering. Earlier, he was the Chairman, Army Pay Commission Cell. He is a Post Graduate Engineer from IIT Kharagpur and also an alumnus of Defence Services Staff College, Wellington.

Maj Gen Dhruv C Katoch, is Director, India Foundation and Editor, India Foundation Journal.

References:

[1] https://takshashila.org.in/takshashilas-inverse-induction-model-being-considered-for-future-recruitments-in-the-army/

[2] https://www.sundayguardianlive.com/opinion/reducing-armys-pension-bill-proceed-caution

[3] 2016 data, available at https://doe.gov.in/sites/default/files/PayAllowance2016-17%28English%29.pdf

[4] Note 2.

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