Context

• The inter-governmental transfer of disaster-relief resources in India shows a growing asymmetry between the Union and the States, reflected in the widening gap between assessed needs and actual disbursements.
• The Centre’s response to the Wayanad landslides has intensified concerns about whether India’s fiscal federal structure is shifting from a cooperative model to a more centralised and conditional regime of disaster-risk finance.
• As climate shocks intensify, these tensions expose weaknesses in the fiscal foundations of India’s disaster-response system.

Growing Strain in India’s Disaster-Financing Framework

• Greater Central Control
  • The Wayanad tragedy of July 2024, which killed nearly 300 people and damaged thousands of homes, illustrated this imbalance starkly.
  • Against Kerala’s recovery needs of ₹2,200 crore, the Union approved only ₹260 crore, roughly 11% of the requested amount.
  • Similar shortfalls in other States indicate a pattern where cooperative federalism is weakening, and disaster situations have become fiscal stress tests for State budgets.
  • India’s disaster-response financing, established under the Disaster Management Act, 2005, is built on a two-tier structure.
  • The State Disaster Response Fund (SDRF), funded largely by the Centre, supports immediate relief, while the National Disaster Response Fund (NDRF) supplements it when calamities are classified as severe.
  • Although this design appears balanced, practice reveals a shift toward greater central control.
• Outdated and Rigid Relief Norms
  • Compensation ceilings, ₹4 lakh per life lost and ₹1.2 lakh for a fully damaged house, have seen minimal revision in a decade, failing to match rising reconstruction costs.
  • A second issue is the ambiguity in classifying disasters as severe, giving the Centre wide discretionary power over access to NDRF support.
  • Third, aid releases are procedural rather than automatic, requiring multiple approvals that delay relief during critical moments.
  • Finally, the Finance Commission’s allocation criteria focus on population and area rather than actual hazard exposure, creating allocations that do not reflect vulnerability to floods, landslides, or cyclones.

The Drift Toward Centralisation

• The Wayanad case highlighted how institutional weaknesses shape outcomes.
• The Centre pointed to Kerala’s unspent SDRF balance of ₹780 crore and an earlier interest-free loan of ₹529 crore as grounds to limit additional aid.
• However, SDRF balances often represent ongoing commitments rather than idle funds, especially because fund instalments arrive late in the fiscal year while disasters are seasonal.
• SDRF rules also restrict spending to immediate relief, not reconstruction or livelihood restoration, compelling States to retain reserves to address future shocks.
• Delays in classifying the Wayanad landslides as a severe disaster further restricted Kerala’s access to NDRF funds.
• Other States, including Himachal Pradesh, Uttarakhand, and Assam—received larger packages for comparable disasters, exposing inconsistencies in disaster categorisation.
• Similar mismatches emerged after Cyclone Gaja (2018) in Tamil Nadu and the 2019 floods in Karnataka.
• Across these instances, the combination of slow approvals, rigid norms, and inadequate allocations reflects a move from cooperative federalism toward bureaucratic negotiation.

The Way Forward

• Learning from Global Models
  • International best practices show how data-driven and rules-based systems can reduce delays and improve accountability.
  • The United States’ FEMA uses per-capita damage thresholds to determine federal support. Mexico’s former FONDEN triggered instant payouts when rainfall or wind-speed thresholds were crossed.
  • The Philippines relies on rainfall and fatality indices, while African and Caribbean regional insurance pools use satellite-based parametric triggers for rapid disbursements.
  • Australia links federal relief to the proportion of State expenditure relative to revenue. These mechanisms demonstrate that clear, objective triggers can minimise discretion and speed up relief.
  • India could adopt triggers such as rainfall intensity, fatalities per million, or loss-to-GSDP ratios to strengthen transparency and trust.
• Rebuilding the Federal Spirit
  • The Sixteenth Finance Commission has a crucial opportunity to redesign India’s disaster-financing architecture.
  • Key reforms include updating compensation norms to reflect current costs, revising allocation criteria through a comprehensive vulnerability index, and ensuring that assistance remains grant-based rather than debt-based.
  • States should have operational autonomy over disaster funds, with the Union focusing on post-audit verification instead of prior approvals.
  • Such reforms would not weaken central oversight but would reinforce a rules-based, cooperative federal system capable of responding swiftly and equitably.

Conclusion

• Disasters expose both physical and institutional vulnerabilities. When relief becomes a matter of negotiation instead of solidarity, fiscal federalism comes under strain.
• India’s system must evolve from procedural dependence to a rules-based partnership that delivers timely, predictable, and equitable assistance. If federalism fails during crises, it fails precisely when citizens need it most.
• The Wayanad tragedy underscores the urgency of rebuilding the fiscal foundations of India’s disaster-response framework before the next catastrophe strikes.