Chief of Defence Staff and his control over capital expenditure.

Happy New year to everyone.

Chief of defence staff:

General Bipin Rawat has taken over as India’s first chief of defence staff. As per the business rules as amended by the government of India, his department shall not have control over capital expenditure.

Capital expenditure:

The term capital expenditure is a well known term in economics and accounts and is well understood by professionals from these faculties even if understanding of term capital expenditure may pose some problem to general public.

The term capital expenditure means those investments which are not current expenses. It does not mean that acquisition of a product which lasts for several years or decades would be called capital expenditure.

Capital expenditure is an investment which is used to produce something. The emphasis being on bringing returns to the investment.

For example, Bharat Dynamic Limited is a government company which is also listed on stock exchange and engaged in production of Brahmos missile. Investment in this company is a capital expenditure. However when the Government purchases Brahmos missile from the same company it is not a capital expenditure. Even if the purchased missile has a shelf life of 12 years or 20 years. Similarly the aircrafts, aircraft carriers, ships etc. are not capital expenditure even if these last for several decades.

False propaganda:

The need for explanation of capital expenditure arose due to a misleading propaganda which has been started by one propaganda artist and would soon be pickedup by other similar websites/media to create confusion. It is similar to the attempt that was used to spread panic over citizenship Amendment Act. The initiative for propaganda is taken by the website called The Print with its chief editor Shekhar Gupta creating the confusion in the following video:

In the aforesaid video Shekhar Gupta claims that the first acquisition of aircraft will be capital expenditure but subsequent purchase would not be capital expenditure. This is plain stupidity if not mischievousness. Capital expenditure and revenue expenditure are two well known streams. Only an ignorant would be confused.

I always wonder who is the financer behind all this false propaganda?

Arms vendors lobby?

I also wonder how long it takes for The Wire, The Quint and Carvan website to pickup this so called scoop and spread it around.

Please share your views.

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