The Union government approved only ₹260 crore against Kerala’s requested ₹2,200 crore for losses from the Wayanad landslides in July 2024, highlighting a growing asymmetry in disaster-response financing.
India's disaster-response financing framework, under the Disaster Management Act, 2005, includes the State Disaster Response Fund (SDRF) and the National Disaster Response Fund (NDRF).
Relief norms are outdated, with compensation ceilings at ₹4 lakh for each life lost and ₹1.2 lakh for a fully damaged house, unchanged for a decade.
The Sixteenth Finance Commission has the opportunity to reframe the disaster-financing architecture by updating relief norms, revising allocation criteria, and ensuring grant-based assistance.
Detailed Insights:
The mismatch between assessed needs and actual disbursements signals an erosion of cooperative federalism, with disasters acting as fiscal stress tests for States.
The SDRF is financed jointly by the Centre and States in a 75:25 ratio (90:10 for Himalayan and north-eastern States), while the NDRF is fully funded by the Union government.
Ambiguity in classifying a disaster as ‘severe’ allows discretion in deciding eligibility for NDRF aid, and aid releases depend on sequential clearances, causing delays.
Finance Commission allocation criteria use population and total geographical area, ignoring actual hazard patterns and using poverty as a proxy for disaster vulnerability.
Global practices, such as those in the U.S. (FEMA), Mexico (FONDEN), and the Philippines, use data-driven, transparent disaster financing with objective triggers.
The Centre cited Kerala’s unspent SDRF balance and an earlier interest-free loan to justify cutting aid, but these balances often reflect committed works, not idle funds.
States must have operational control over their disaster funds, with the Union’s role confined to post-audit verification instead of prior approval.
Key Concepts Involved:
Fiscal Federalism: Division of financial powers and responsibilities between the central and state governments in a country.
Disaster Management Act, 2005: Indian law that provides the legal and institutional framework for disaster management in India.
State Disaster Response Fund (SDRF): Primary fund available with State Governments for providing immediate relief to victims of notified disasters.
National Disaster Response Fund (NDRF): Fund constituted to meet the expenses for emergency response, relief and rehabilitation.