An important lesson of the Kargil conflict was that conventional capability had not not lost its relevance despite nuclear capacity, Vajpayee told the combined commanders' conference of the Army, Navy and Air force here.

Noting that the coup in Pakistan had increased the possibility of proxy war in J and K, he asked troops to maintain constant vigil.

He said the country's defence needs would be met and no shortage of funds would be allowed to come in the way of defence preparedness.

Defence Minister George Fernandes, who also addressed the conference, underscored the need for raising the budgetary allocation for defence proportionate to rise in the gross domestic product.

There should be no overlooking of the needs of defence and the necessary resources should be made available, Fernandes said.

The annual conference was also attended by Home Minister L K Advani, Army chief Gen V P Malik, Navy chief Admiral Sushil Kumar and chief of the Air Staff A Y Tipnis, Cabinet secretary Prabhat Kumar and principal secretary to Prime Minister Brajesh Mishra besides top commanders.

Referring to India's relations with its neighbours, Vajpayee, who addressed the commanders jointly for the first time since the Kargil conflict, said there had been improvement in relations with China despite certain outstanding differences.

He expressed concern over the situation in Taliban-controlled Afghanistan where terrorism and extremism had affected India's security environment.

Outlining New Delhi's stand, he said ``outside interference in Afghanistan must stop''.

Reaffirming India's commitment to peace and development and a more just international economic order, Vajpayee said there should be global nuclear disarmament while pointing out that as a sovereign nation India would make its own assessments about its security concerns.

The Prime Minister called for a detailed study of the country's security needs on the basis of which India's defence policy should be formulated.

``A new approach in this regard has been made with the formation of the National Security Council," he said.

He stressed the need for high-technology equipment and force multipliers and said necessary funds would be allocated and a high state of operational preparedness should always be maintained.

Emphasising that indigenous defence production was vital to ensuring self-reliance, Vajpayee commended the role of the defence undertakings during the Kargil operations.

In his address, Fernandes said that there should be ulitisation of funds in a cost-effective manner for which joint planning by the services, the ministry and the Defence Research and Development Organisation (DRDO) was essential.