A continuing cold war between Prime Minister Manmohan Singh and Finance Minister Pranab Mukherjee has stalled India's plans for a two-front war if necessary with Pakistan and China despite the government's recent announcements of progress.

In fact India's defense acquisitions are moribund and Indian defense preparedness is at an all-time low. Insiders say Mukherjee's ministry has vetoed virtually every defense acquisition proposal on one pretext or another. India imports 70 percent of its defense armaments.

The antipathy between the two goes back to 2004, when Congress President Sonia Gandhi found the low-key Singh more suitable as Prime Minister than Mukherjee. Gandhi also in 2007 thwarted Mukherjee's ambition to become India's president, ostensibly because Mukherjee couldn't be spared as the workhorse of the party and the government. Today the political grapevine says Gandhi may consider Manmohan Singh for the president's job in 2012, by which time Rahul Gandhi would be ready to take over as the Prime Minister, once again spoiling Mukherjee's ambitions.

When the portfolios of the United Progressive Alliance government headed by Gandhi's Congress Party were being finalized, Mukherjee told Sonia point-blank that he would not take any other ministry except Finance. Singh did not want that, as Mukherjee had been his boss a quarter century ago when Singh was the Reserve Bank of India Governor and Mukherjee was the Finance Minister. Singh lobbied hard for his chum Montek Singh Ahluwalia instead. But Gandhi was well aware that that she could no longer deny Mukherjee. Since then, Mukherjee has been paying Singh back in the same coin. In many cases, the Finance Ministry has "advised" the Defense Ministry about the efficacy of a different sets of weapons systems than those chosen by Defense.

The result of the rivalry is that personal squabbling and ego trips have taken primacy over issues of national interest. India's military capability has declined, adversely affecting combat readiness despite a government projection that defense needs have increased markedly in the past 18 months or so since the November 2008 Mumbai terror strikes. Unprecedented air incursions by the Chinese in 2009 and Beijing's blunt warning to India on the issues of Arunachal Pradesh and the Dalai Lama have added to the threat perception.

Whether it is submarines or aircraft carriers for the Indian Navy, fighter aircraft or mid-air refueling aircraft for the Indian Air Force, bullet-proof vests or artillery deals for the Indian Army, the government is showing no anxiety to get its act together, knowing full well that even if orders for various defense systems were to be placed today it would take half a decade for the first supplies to begin trickling in.

Throughout 2009, just two procurement-specific meetings of the Cabinet Committee on Security (CCS) were held, 26 procurement proposals were examined by the Ministry of Defense and 11 proposals. Of these, not a single procurement deal was completed.

Some foreign manufacturers reportedly have threatened to either completely withdraw from India, or equally worse, sell the same negotiated wares to Indian rivals. Though India has bought the naval version of the MiG-29K for carrier-borne operations, it is not clear how and when these aircraft are going to be used as the refitting of the ageing Admiral Gorshkov aircraft carrier, now supposed to go into service in 2012, has been that of constantly shifting goalposts. (Asia Sentinel, 25 April 2010)

Several big- ticket defense deals, such as for Scorpene submarines, continue to remain in limbo because of various objections from the Ministry of Finance. Hanging fire is a huge US$12 billion contract for 126 advanced jet fighters with the possibility of buying 60 more. This gives rise to the question that if the Finance Ministry were to critically examine and override the opinion of the Ministry of Defense on each procurement deal, then what is the use of the defense ministry having a Defence Acquisition Council and a price Negotiation Committee? The idea of introducing these two institutionalized mechanisms in the defense ministry was to put the process of defence acquisitions on a fast track. With the Ministries of Defense and Finance working at cross-purposes, this process is having just an opposite effect.

On the other hand, the US is being given a special treatment as every single deal with the US is being done through the Foreign Military Sales route. The P-81 long range maritime reconnaissance aircraft deal is a case in point. There are no field trials and no offset obligations for the American vendors under the FMS route – an unfair trade practice that also breeds corruption and favoritism for India.

The FMS is a program of the US Department of Defense which facilitates sales of US arms, defense equipment, defense services, and military training to foreign governments. The purchaser does not deal directly with the defense contractor. Instead, the Defence Security Cooperation Agency serves as an intermediary, usually handling procurement, logistics and delivery and often providing product support and training. FMS is based on countries being authorized to participate, cases as the mechanism to procure services, and a deposit in a US Trust Fund or appropriate credit and approval to fund services.

In the fiscal year 2009-10, the defense ministry returned as unspent the equivalent of US$1.59 billion to the Finance Ministry, the fourth consecutive year when the defense ministry returned allocations to the Finance Ministry. As a result, the Finance Ministry allocated only the equivalent of US$13.51 billion as capital outlays for the three armed services during 2010-11, which in effect means just an increase of US$ 1.17 billion over the previous fiscal year for the purchase of new weapon systems and spare parts for maintenance support.

The cancellation of the US$1.5 billion mid-air refueller deal with European Aeronautic Defence and Space Company (EADS) for six A-330 Multi Role Tanker Transport aircraft is a classic case of defense diplomacy gone awry. The United Progressive Alliance canceled the deal, ostensibly because of the high price factor but actually to accommodate late entrant Boeing Company of the US. Four European ambassadors in New Delhi have registered their protests. Germany, where the A-330s are built, has protested angrily. German ambassador Thomas Matussek remarked that the cancellation of the deal came as a "nasty surprise."

The writer is a New Delhi-based author and commentator who writes on foreign policy, security and terrorism. He has published five non-fiction books, the last being "Global Jihad: Current Patterns and Future Trends", published in 2006.