The Government of India has finally, after 250 years, proposed to introduce new rules that will impact the usage of the lands allocated to the armed forces. The Government of India has recommended a dedicated fund for the capital expenditure on Defence and internal security. This Fund will be under the Public Accounts, and its sources for incremental funding would be by monetisation of surplus defence lands and proceeds of receipts from defence land likely to be transferred to State Governments and for public infrastructural projects in the future such as metros, flyovers, railways and, others. 

Defence Lands and their Management

The Ministry of Defence (MOD) has the largest landholding in the country’s Government, with 17.31 lakh acres of land. The lands are classified accordingly and are occupied by the Air Force, Navy, Army, State and Central Government organisations, general population, et al. Out of the total land holding of the MOD, approximately two lakh acres are inside 62 Cantonments located in various parts of the country. The Cantonment board controls the common use of lands in Cantonment. A total area of 15.3 Lakh acres of land is occupied jointly by Air force stations, Military stations, Naval Bases, firing ranges, DRDO labs, et al., outside of these Cantonments. Among the three services, Army occupies 13.79 acres which is almost 80 per cent of the total land holding of the MOD.[i]

Based on their classification, the defence lands are managed by different organisations. Most of these categories of defence lands are managed by the Directorate General of Defence Estates (DGDE), an inter-service organisation under the MOD. The offices of the DGDE are headed by six Principal Directors/ Directors Defence Estates (PDDEs/DDEs) at six Army Commands. Under the PDDEs, 40 Defence Estates Officers (DEOs)/ Assistant Defence Estates Officers (ADEOs) are responsible for maintaining the General Land Register (GLR) for lands inside the Cantonment and the Military Land Register (MLR) for lands outside the Cantonments.[ii]

Irregularities in the management of the Defence Land as per the Performance Audit Report No.35 of 2011

Land Audits help assess the extent/ efficiency of use of the defence land by the User Organisations. It is primarily like an internal audit designed to help the User Organisation achieve an efficient land management system.

In December 1992, the MOD had instructed the DGDE to conduct a land audit with the primary focus on the existing land use vis¬-à-¬vis its land holdings and specific requirements. In September 1995, the first Report was submitted by the land audit cell of the office of the DGDE in respect of selected locations which brought out many irregularities. However, the Army HQ suggested to the Ministry to amend land rules before the continuation of the land audit. While the MOD and DGDE never discontinued the land audits was asked to submit a preliminary audit report of the defence land holdings in January 2002. However, DGDE allowed the land audit to lapse.[iii] Hence, a vital internal mechanism to identify the mismanagement of Defence land was not allowed to function.

After a long lapse, a Performance Audit was taken up in June 2009 and was concluded in September 2010 by the office of the Comptroller & Auditor General of India. The Performance Audit was conducted in the MOD office of the DGDE, all six PDDEs/ DDEs at Command level and 20 selected DEOs at circle level. The Audit covered a period of five years from 2004-2005 to 2008-2009.[iv]

This Performance Audit of Defence Estates Management was done to examine whether

1. The requirement of Defence land was accurate, and the land was utilised prudently and effectively according to the norms set by the MOD;

2. Land could be put to some other constructive use if not required urgently for any purpose;

3. Management of hiring/acquisition/requisition of land was done judiciously;

4. Resources available with DGDE and its subordinates were adequate and managed efficiently; and

5. Adequate measures came into being to prevent encroachments and eviction of encroached land.

The Audit Report observed numerous irregularities in the Defence Estate Management. The Audit Report noted that there is a lacuna in the application of land norms. The Audit Report found that in many urban agglomerations, a significant amount of land would be rendered surplus if the norms of the MOD were applied to these stations. These would also make a significant amount of land available for housing and other development.[v] The Defence Estates Organisations was acquiring land without making an independent assessment of the actual requirement based on the approved norms of 1991. These proposals were initiated for future expansion plans. However, if these expansions did not occur as planned, land acquired was kept unutilised for decades, making them vulnerable to encroachments. There has been an inordinate delay of more than ten years in acquiring lands such as RCI Hyderabad, Air Force Station, Pune under urgency clauses. The Audit even highlighted significant discrepancies in the land records maintained by the DEOs and the records available with the Local Military Authority (LMA)[vi].

An “Iffy Lie”

In addition, a large number of military lands were being used for Golf courses. These Golf courses were being operated by Army Zone Golf, a private registered society. The Course members were also Civilians, ex-servicemen and foreign nationals apart from service personnel. The membership for any individual member and life member was granted by payment of a prescribed fee at different rates. Hefty revenue was earned by Army Zone Golf without payment of lease rent and allied charges for using such Government assets. As of August 2009, there are 97 such Golf courses under the Army, with 79 Golf courses using 8,076.94 acres of public land. The details of the remaining 18 Golf courses were not made available to Audit. The rules governing the running of such golf courses are yet to be framed by the MOD and the rules governing the treatment of the revenue generated from the golf courses. The revenue generated is not credited to the Government Account and is presumably credited to the Regimental Fund.[vii]

It was also found that 32 acres of Defence land at Bhatinda and Bangalore was used for opening public parks without the approval of the MOD. In Bhatinda, the Chetak Park was used for commercial activities. A total of land measuring approximately 122.58 acres is located in 4 stations: Lucknow, Agra, Secunderabad and Pune in Southern and central commands have been leased out at nominal rates to various clubs and was being held utilised for unauthorised commercial purposes like marriages, parties, exhibitions et al. A sum of Rs.2.14 crore for the years 2004-05 to 2009-10 (up to September 2009) was outstanding for recovery from the four clubs.[viii]

Seven Defence Buildings involving an area of 1.81 acres at Bengaluru under the custody of the Local Military Authority had been used for non-defence purposes since 1994-1995, such as Institute of Hotel Management, Girls and Boys Hostel, et al. – without the authorisation of the MoD. The accrued rent up to March 2009 was Rs.6.45 crores.[ix]

Similarly, Air Force Authorities were using Defence land for unauthorised purposes such as running shopping complexes, private engineering, colleges, cinema hall, banks, et al.- without proper sanction. Ten of their buildings, which are under the control of Headquarters Training Command, Bengaluru, were re-appropriated between 1983 and 1993 for use as Student Study Centres/ AFWWA Hostel for children of the Defence Personnel. In addition, Belgaum Cantonments was under the illegal occupation of Indian Oil Corporation and Karnataka State Road Transport Corporation.[x]

The C&AG Audit discovered that as of March 2010, 2500 acres of land valuing Rs.11,033 crore was on lease for an annual rent of Rs.2.13 crore, which is negligible in light of the present market value of the land. Moreover, there was no progress in the renewal of 3780 leases nor where eviction of lessees was being pursued.[xi]

The Government has suffered a tremendous loss due to delays in fixation/non-recovery of rent from private parties such as Hotel Clark Shiraz in Agra Cantonment, Grand Hotel in Agra, et al., resulting in a loss of Rs.8.08 crores.[xii]

Old grant sites are a bequest from the pre-independence land policies that intend to provide military officers accommodation. With the spread of urbanisation, most of the Old Grant Bungalows (OGB) sites are now prime real estate. There is a total of 46,043 OGB sites in the country as of March 2009. As per the land policy laid down by the MOD in 1995, the OGB sites were to be converted into leaseholds with Government sanction unless these were desired to be resumed. However, in gross violation of the land policy of 1995, these OGBs are being used for commercial purposes like restaurants, hotels, marriage halls, educational institutions. This has resulted in the loss of revenue to the Government.[xiii]

The Performance Audit disclosed the mismanagement of the defence lands and that no agency of the MOD accepted its responsibility. The Audit stated dismal performance on account of determining the requirements of land with keeping land records properly and mutation of land in possession of the defence services in favour of authorities. There was little progress on the policies of the Government for the computerisation of land records. In conclusion, the Audit stated that there is surplus land in possession of the Services and Cantonments. Land arrangements have to be made in order to avoid encroachment. Moreover, the lack of updated records and mutations in favour of the Ministry has created a situation where there is zero accountability. It highlights that unauthorised sale/transfer of the government assets was being made right under the nose of the DEOs, and no steps were taken to undo the same.

The C&AG made several recommendations for effective management of the Defence Estates and submitted the same to the Public Accounts Committee (2012-2013).

Defence Estates Management Public Accounts Committee 89th Report

Basis the Performance Audit Report[xiv], the Public Accounts Committee (PAC) took up the subject for detailed examination and Report. The PAC took evidence of the representatives of MOD and Directorate General of Defence Estates on the subject at their sitting held on 11 June 2012. The PAC, in its Report, agreed with the recommendations made in the Performance Audit Report prepared by the office of the Comptroller & Auditor General and gave further recommendations[xv]

Actions taken by the MOD on the recommendations by the PAC

The PAC thereafter prepared another Report[xvi] on the actions taken by the Government on the Observations/Recommendations of the PAC contained in its 89th Report. The MOD accepted the recommendation of lacunae in the application of land norms in their ATR report on recommendations by PAC. However, regarding the use of surplus land issue, MOD stated that every piece of excess land is being used for their operational activities like Ammunition storage, training requirements, active mobilisation and its other needs. Surplus lands have all been earmarked for their particular uses and infect they are deficient of land for carrying out their operations. MOD accepted that they are in possession of surplus lands and added that they are aware of surplus land’s vulnerability due to encroachment cases but denied any new cases of encroachment, stating that nowadays, these cases are limited. Therefore, MOD has denied the non-usage of surplus land and rejected the idea of giving away these lands[xvii].

Transfer of the Defence Land

The transfer of a Defence land has been processed in a letter dated 11 July 1986[xviii] and by following the procedure laid out in the letter dated 11 March 2015[xix]. By its letter[xx], the MOD has additionally prescribed terms and conditions for different transfer modes of Defence Land for Public Utilities and Public Infrastructure Projects. The letter, among other things, provides that the defence land is usually not permitted to be transferred for non-defence uses. Thus, land may be transferred for public infrastructure/ utility projects such as roads, flyovers and roads over bridges, Airports, Railway lines, metro rail projects, Petroleum, Gas, water, electricity and sewerage pipelines by the Ministry. However, a land transfer may only occur after satisfying that the land can be alienated without compromising the essential functions of the user service or by making suitable alternative provisions to enable the user agency to carry on with its essential functions smoothly. 

This letter of 2016[xxi] provides the procedure to be followed for sale, lease, exchange of the defence lands, and giving a defence land on a license basis. One of the most important factors to be noted is that the MOD has the right to resume/ reclaim ownership of the land transferred if the land is kept vacant or not used for five years for the purpose for which it was transferred on refund of compensations initially received from the indenting agency in case of non-utilisation of land. 

The Fifteenth Finance Commission Recommendations

In February 2021, in its 15th Finance Commission Report, the Central Government has proposed to constitute in the public accounts of India a non-lapsable fund, modernisation fund for Defence and internal security (MFDIS) or ‘Rastriya Suraksha Naivedyam Kosh’. The objective was to bridge the gap between budgetary allocation and budgetary requirements for internal security and Defence. 

The proceeds will be utilised for three purposes: –  

(i) Capital investment for modernisation of defence services;

(ii) Capital investment for CAPFs and modernisation of state police forces, as projected by Ministry of Home Affairs; and

(iii) A small component as a welfare fund for our soldiers and para-military personnel.

The FundFund shall have the standard notified rules for its administration, public reporting and, Audit by the Comptroller and Auditor General. 

This Fund will have four specific sources of incremental funding:

(i) Transfers from Consolidated Fund of India;

(ii) Disinvestment proceeds of DPSEs;

(iii) Proceeds from the monetisation of surplus defence land, including the realisation of arrears of payment for defence land used by State Governments and for public projects and cost recovered of encroached land; and

(iv) Proceeds of receipts from defence land are likely to be transferred to State Governments and for public projects in the future. 

The total indicative size of the proposed MFDIS over the period 2021-26 is Rs.2,38,354 crore. It is pertinent to note that except funds from the source at point (i) above, the funds made available from the sources shall be used for Defence. 

The maximum size of the recommended FundFund is Rs.51,000 crore per annum. Any amount exceeding the same shall be deposited into the Consolidated Fund. 

This Amount shall be maintained by the Public Accounts and shall be operated through the extant procedures for operating such accounts. 


This decision of the Central Government by monetising the surplus lands held by the Defence and using them for public projects has paved the way for the infrastructural development of the country. Though it does seem like a positive move, many concerns have also been raised. The Defence lands for years have never been easily accessible to the general public for security reasons. The properties of the Defence have always been exclusively for the usage of the Defence and its personnel. It is pertinent to note that these norms were introduced during the British regime in India, i.e., before India’s independence and are still in practice. The reason for such norms was that the British wished to distance themselves from the local population. When these military stations/ Cantonments were planned, they were at the outskirts of the town; however, due to urbanisation, these lands are now in the heart of the city and are prime properties. The MOD had accepted in the land audits of the past few decades that it owns surplus lands. The Land Audits of these Defence lands have also witnessed many anomalies in the management of the Defence Estates. It was noticed that the responsibilities and consequences of accountability were blurred on many aspects of the management of the lands managed by the Defence. The new policy will be a potential game-changer not just in the country’s infrastructural development but also in effecting better management of the Defence lands. 

About the Authors

Samridhi Lodha is an Associate at Kanga & Co., Mumbai.

Kshitij Pandey is a 3rd year Law student at the Dr. Ram Manohar Lohiya National Law University (RMLNLU), and an Associate Editor at IJPIEL.


The views and opinions expressed by the authors are personal.

Editorial Team

Managing Editor: Naman Anand

Editors-in-Chief: Akanksha Goel & Aakaansha Arya

Senior Editor: Gaurang Mandavkar

Associate Editor: Kshitij Pandey

Preferred Method of Citation 

Samridhi Lodha and Kshitij Pandey, “The New Defence Land Policy: A Game Changer” (IJPIEL, 15 September 2021)



[1] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, Para 1.1, 35 (2010-2011).

[2] Defence Estates Management Ministry of Defence Public Accounts Committee15th Lok Sabha, 89th Report, (2013).

[3] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, Para 3.6, 35 (2010-2011).

[4] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, Para 1.4, 35 (2010-2011).

[5] Comptroller and Auditor General of India, Land Norms, Record and Ownership of the Performance Audit Report on Defence Estates Management Report, 35 (2010-2011).

[6] Comptroller and Auditor General of India, The Performance Audit Report on Defence Estates Management Report, Paragraph 2.3, 35 (2010-2011).

[7] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, Para 3.8.1, 35 (2010-2011).

[8] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, Para 3.8.3, 35 (2010-2011).

[9] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, Para 3.9, 35 (2010-2011).

[10] Id.

[11] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, Para 4.1, 35 (2010-2011).

[12] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, Para 4.4, 35 (2010-2011).

[13] Comptroller and Auditor General of India, Management of Old Grant Bungalows of the Performance Audit Report on Defence Estates Management Report, Chapter V, 35 (2010-2011).

[14] Comptroller and Auditor General of India, Performance Audit Report on Defence Estates Management Report, 35 (2010-2011).

[15] Public Accounts Committee, 15th Lok Sabha, 89th Report, (2013).

[16] Public Accounts Committee, 16th Lok Sabha, 113th Report, (2014).

[17] Id.

[18] Ministry of Defence, Letter ID no.11015/2/86/D (Land), (1986).

[19] Ministry of Defence, Letter ID no.11015/2/2012/D (Land), (2015).

[20] Ministry of Defence, Letter ID no.11015/2/2012/D (Land), (2016).

[21] Id.

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