Fiscal Federalism in Disaster Response
The inter-governmental transfer of resources for disaster response in India highlights a growing asymmetry between the Union and the States, particularly seen in disasters like the Wayanad landslides. This imbalance raises concerns about India's fiscal federal structure potentially shifting from cooperative to a more centralised model of disaster-risk finance.
Key Issues in Disaster Financing
- The tragedy in Wayanad in July 2024 claimed nearly 300 lives and led to significant property damage. Kerala's assessed loss was ₹2,200 crore, but the Union provided only ₹260 crore, highlighting a gap between expectations and actual aid disbursed.
- Disasters act as fiscal stress tests for States, and increasing climate shocks are exposing weaknesses in India's disaster-financing framework.
Disaster Response Framework
- India's framework is based on the Disaster Management Act, 2005, featuring a two-tier structure:
- State Disaster Response Fund (SDRF): Funded jointly by the Centre and States in a 75:25 ratio (90:10 for Himalayan and north-eastern States) for immediate relief.
- National Disaster Response Fund (NDRF): Fully funded by the Union for severe calamities.
- Although the design appears balanced, the practice leans towards central control, with relief norms being outdated, classification ambiguity, procedural aid releases, and weak allocation criteria.
Institutional Flaws and Comparisons
- Instances like Kerala's unspent SDRF and delayed classification of the Wayanad landslides by the Centre reflect deeper institutional flaws.
- Several countries utilize data-driven, transparent disaster financing systems, indicating that India could benefit from adopting objective triggers for aid release.
Recommendations for Reform
- The Sixteenth Finance Commission has an opportunity to revise relief norms, update allocation criteria, and ensure grant-based assistance.
- States should have operational control over disaster funds with the Union's role limited to post-audit verification.
Conclusion
Disasters reveal both physical and institutional vulnerabilities. India's disaster financing system must evolve from procedural charity to a rules-based partnership to ensure timely and equitable responses.
