Kerala floods: What state is demanding is official transfer of money assigned for relief, and not charity

The massive floods in Kerala have killed nearly 400 people and 6,61,887 people are reported to be in relief camps (the total number is yet to be ascertained). Roughly speaking though, Kerala has to manage 25 percent of the total refugees who came to India after Partition; this is absolutely beyond the existing capacity of the state. Apart from that, around Rs 20,000 crore in losses has been estimated so far. And so, so the Government of Kerala is financially and institutionally not going to be able to manage disaster relief, and later, rehabilitation.

Evolution and challenges on disaster risk finance in India

It needs the active financial support of various institutions and sources, and most important among these is assistance from the Central government. In India, there is a history of managing disaster-related finance and rehabilitation expenditure. The Indian Famine Codes of 1883 in fact form the first code of conduct for disaster finance in India. It was meant to ease the colonial administration's involvement in famine relief. After Independence, the Second Finance Commission (1955-60) introduced the margin money scheme for disaster relief ie seed capital to meet the disaster expenses of the state government. If the cost exceeded the margin money, the Central government sanctioned 75 percent of the extra expenditure (of which, 50 percent was a loan and 25 percent was a grant).

Representational image. Reuters

Representational image. Reuters

The margin money scheme continued till the Eighth Finance Commission (1985-90). The Ninth Finance Commission introduced the Calamity Relief Fund (CRF) and later, the Tenth Finance Commission decided to ensure additional financial support for rare severity with an extra fund called the National Fund for Calamity Relief. The Eleventh Finance Commission again revised the CRF and introduce the National Calamity Contingency Fund by levying special surcharges on Central taxes. Moreover, an additional Central assistance scheme was also introduced.

Apart from that, the National Disaster Management Act of 2005 ensured the National Disaster Response Fund (NDRF), State Disaster Response Fund and District Disaster Response Fund. Each of these funds is operated under specific rules and regulations, but not every demand of the state government is fulfilled by it. Additional Central assistance is a highly-politicised source of funding for disaster relief. Every state government submits a detailed project report for Central government assistance after a disaster, however the allocation is driven by both politics and norms. During election time, the Central government sanctions huge sums of money to state governments under special Central assistance and declares such disaster as national calamities. Political preference often works effectively if the state government's demands are accepted.

The Centre-state relationship in disaster management is still operating on an ad hoc basis and the Central government rarely agrees to the demands of the state governments. The problem arises when the capacity of the state government becomes insufficient to meet the demand at the time of crisis. The table below depicts the details of statewise allocation of disaster relief funding. It is evident from the table that states like Assam, Bihar, Odisha, Gujrat, Maharashtra, Rajasthan and Tamil Nadu are receiving a higher share because of vulnerability to disasters.

It shows that Kerala received 1.62 percent of the total money allocated for the year 2018-19 at the national level. Central governments prefer to allocate under these norms, which provide a sum that is in no way close to the demand of the Kerala government. The Government of Kerala has asked for Rs 2,000 crore in special assistance and it is needed. The Centre allocated only Rs 100 crore at the start and later, when the floods made a statewide impact, the prime minister made a visit and announced Rs 500 crore in additional assistance. This still falls short of the cost of replacing the losses and the expenditures that will be incurred for relief operations.

This extreme dependency on the Centre on funds for disaster relief is an impediment on the long-term recovery of disaster-affected areas and communities. What the Kerala government is demanding is minimal compared to the demands of other states.

The missing links

The Fourteenth Finance Commission also recommended that the Centre can adjust the contribution made by it to the state's fund, ie the money given by the Central government is treated as a contribution. So, there is no additional support again because whatever offered, it is within the norms of the 2005 Disaster Management Act. What the Kerala government is asking for is not charity, it is the official transfer of money assigned for disaster relief from the Central to the state government. It should not be politicised. Further, the fact that GST has impacted the NDRF in a big way since the money for it used to come from cesses on Central government taxes means the Fourteenth Finance Commission must urge the Central government to look for sources to ensure the continued existence of the NDRF.

The Centre-state relationship with the transfer of disaster response fund should be delinked from political preferences. In this context, Kerala cannot raise money from its own sources which are smaller, so other sources are relevant. Public contribution is a minimum among them; the next option is to go for external aid (nearly 70 percent of the 2004 tsunami rehabilitation came from foreign aid). It is a practice that creates a debt burden on the state government as well. Such burdens further hamper the long-term recovery of disaster-affected areas and communities.


Updated Date: Aug 20, 2018 12:49 PM

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