Explainer: What are the disaster relief funds SDRF & NDRF?
Sai Krishna Muthyanolla
July 26, 2022
Disaster relief is now a critical area of governance as climate change-induced disasters increase. We look at disaster relief in India and the funding mechanism & explain the details of such funds, along with the funds disbursed in the last few years.
In the wake of the recent heavy rains & floods, leaders from various political parties have been blaming each other for the release of disaster relief funds. Statements accusing partiality and inequity by the Union Government have also been made. A recent answer to a question in the Lok Sabha regarding the assistance of the Union Government to Telangana in the form of an NDRF release has sparked the debate once again. In this context, we explain the issue of disaster relief, the various funds available and the rules surrounding their release, and use.
Why disaster relief?
Disasters destroy prosperity. It kills hope. And when hope is diminished, nothing else can be sustained. Disaster relief can bring back this hope, a hope for a better and resilient future. Relief is not only used to cope with the disaster, but also to recover and resume their livelihoods. Hence, the size and the timing of the relief are also significant.
Irrespective of the type of disaster, the potential loss of lives, livelihoods, and assets cannot be underestimated. A timely and proportionate disaster relief aids in the restoration of economic health, as well as the aspirations of the populace.
Disaster Management in India
Disasters in India are governed by the Disaster Management Act, 2005. It mandated the creation of the National Disaster Management Authority (NDMA) and respective State Disaster Management Authorities (SDMAs). Accordingly, as per sections 46(1) and 48(1)(a) of the above act, National Disaster Response Fund (NDRF) and State Disaster Response Fund (SDRF) are established. The financing pattern of these funds is explained in detail below.
What type of incidents qualify as a disaster?
The Disaster Management Act, 2005 defines a disaster as ‘a catastrophe, mishap, calamity or grave occurrence in any area, arising from natural or man-made causes, or by accident or negligence which results in substantial loss of life or human suffering or damage to, and destruction of, property, or damage to, or degradation of, environment, and is of such a nature or magnitude as to be beyond the coping capacity of the community of the affected area.’
Disasters such as cyclones, drought, earthquakes, fire, flood, tsunamis, hailstorms, landslides, avalanches, cloud bursts, pest attacks and frost and cold waves are considered for the utilization of SDRF, while for NDRF releases to be made, these disasters must be of ‘Severe nature’ and require the expenditure in excess of the balances in SDRF as per the guidelines on the constitution and administration of State and National Disaster Response Funds.
How do governments fund disaster relief?
Financing disaster relief is a challenge for governments. Disaster relief should be looked at from two perspectives – one, how they impact public finances by causing contingent liabilities, and two, whether they aid in minimizing the risks and vulnerability of the population. Disasters impose contingent liabilities on the governments. Since these liabilities are uncertain, and in the future, the State and the Union Governments maintain a corpus to deal with these contingent liabilities.
As per the answer provided in the parliament, funds under the NDRF and SDRF are allocated based on the recommendations of the successive Finance Commissions, set up under Article 280 of the Constitution. The Union Government contributes entirely to NDRF, while the States and the Union share the funding for SDRF in the ratio of 75:25 for general category States and 90:10 for North-Eastern and the Himalayan States. Any disbursals from these funds are governed by the ‘Guidelines on constitution and administration of SDRF/ NDRF’ and items and norms issued by Ministry of Home Affairs (MHA)’ The norms of assistance and revised list of items for relief under SDRF/NDRF is available here.
How and when are NDRF and SDRF funds disbursed?
State Governments are primarily responsible for disaster management. The Union Government supplements the efforts of the state by providing logistical and financial support. When disaster happens, the State Governments undertake relief measures using the SDRF available at their disposal. However, this amount may not be sufficient to carry out any relief work for disasters with high intensity. Whenever this happens, the Union Government releases additional financial assistance to the states from NDRF, provided the disaster is of a ‘Severe nature’. The criteria for considering a disaster as a disaster of ‘severe nature’ is unclear. It is important to understand that the contribution to SDRF from the Union and State Governments is a constitutional mandate which is not at the discretion of any government, whereas the release of funds from NDRF is dependent on the nature of the disaster and based on the recommendations of the High-Level Committee.
The mechanism for NDRF disbursal for additional financial assistance
The guidelines provide for a clear and established procedure for additional financial assistance under NDRF. Disaster-affected State Government shall submit a memorandum as per the guidelines showing the detailed sector/item-wise damage caused, along with the justification for additional financial assistance under NDRF. If the Ministry of Home Affairs or the Ministry of Agriculture assessment reveals that the funds in SDRF are adequate to provide relief, the State Government is advised accordingly.
Else, an established three-tier mechanism is followed for the calculation of disbursal of additional financial assistance to the states from NDRF. The first step is the on-spot assessment done by the Inter-Ministerial Central Team (IMCT) consisting of officials from the relevant State as well as representatives from sectoral Ministries and Departments. The report prepared by IMCT is considered by the Sub-Committee of the National Executive Committee (SC-NEC) presided over by the Union Home Secretary and consists of representatives of the other Ministries concerned. The recommendations of the SC-NEC are considered by the High-Level Committee (HLC), presided over by the Union Home Minister, and includes the Union Finance Minister, Union Agriculture Minister, and Vice-Chairman, NITI Aayog as members. Accordingly, the recommendations are either approved or rejected. Approval from HLC paves way for the release of funds from NDRF. Additionally, the financial aid provided under the SDRF and NDRF in the wake of declared natural disasters is offered as a form of relief rather than as compensation for losses incurred or claims made.
However, as per the laid down procedure, the funds are released from NDRF subject to the adjustment of 50% of the balance available in the SDRF account of respective states as on 31 March of the preceding financial year. Hence, in some cases, where sufficient fund is available in SDRF, the net out go from the NDRF was ‘NIL’ against the amount approved by High-Level Committee.
However, this process could at times become cumbersome, making things worse for the victims of the disaster. To remove this, the Government of India, in August 2019, decided that the IMCT would be constituted immediately in the aftermath of any natural calamity of severe nature, even before receipt of the Memorandum from the state.
The state-wise details on assistance sought from NDRF, the assistance approved, and the funds released were provided in response to a question in the Rajya Sabha in December 2021.
Statistics of disaster relief
A recent answer in the parliament from July 2022 provides details of the allocation and release of funds under SDRF and NDRF from 2018-19. Another answer from July 2019 provides data from 2014-15 till 2018-19. A cursory glance at the graph below shows the increasing allocations under SDRF and the centre’s share in the SDRF released. However, the funds released under NDRF see a decline with few exceptions. The reasons for such decline are not clear. The state-wise details on fund releases can be accessed here.
Observations of 15th Finance Commission  on interstate allocations
The quantum of the SDRF and interstate distribution are two of the major concerns on the Finance Commission’s agenda. State governments expressed serious concerns about this since they view the SDRF as the main source of funding for disaster response.
The allotment of funding for disaster management to each state has been decided by successive Finance Commissions using an expenditure-based methodology. The better-off states, which can demonstrate higher expenditures, are likely to benefit from expenditure-based allocation as compared to other states. This disparity resulting from the expenditure-driven mechanism has been noted by some states who have received reduced SDRF funds. Such an approach will only make the inter-state allocation disparity worse if it is continued.
The drawbacks of this strategy have been recognised by many finance commissions, who have stated that they would prefer a system that considers the risk and vulnerability profile of each state. Actually, the 14th Finance Commission had recommended in its report that such a risk and vulnerability assessment be carried out for the whole nation. Considering this, a detailed methodology was chalked out aiming to promote equity and fairness and need-based allocation of funds to states for disaster management.
The revised methodology retains the weight given to state expenditures for disaster management. To determine the final allocation for each state, it also introduces weights for each state’s area, population, and risk profile. A composite score has been created for each state based on these two factors, with hazard having a weightage of 60, and vulnerability 30, out of a composite score of 100. This resulted in an index that ranks states according to their risk scores. Here, vulnerability is calculated based on the population below the poverty line and four major disasters are considered in the Hazards category. The allocation of resources based on state-level disaster risk scores is being attempted for the first time, and it overcomes a critical flaw in the preceding state-level disaster management allocations.
The annual allocations for the states for disaster management for 2021-22 is the same as 2020-21, while from 2022-23, it is set to increase by 5 percentage points every year.
The proposed national allocations for disaster management are as below,
Now, the basic fund for States is called State Disaster Risk Management Fund (SDRMF) which includes both SDRF and SDMF. Out of the state’s allocations, 80 percent is earmarked for SDRF, while 20 percent is for the State Disaster Mitigation fund (SDMF). Similar is the case with National allocations. Within this 80 percent, there would be three sub-allocations namely, Response and Relief (40%), Recovery and Reconstruction (30%) and Preparedness and Capacity Building (10%).
Systems under heavy stress
Disasters are here to stay. The growing threats of climate change, coupled with unplanned development strategies are keeping the system under pressure. This is evident in the increased expenditures of the states toward disaster management.
Some states have gone to the extent of allocating budgetary resources and availing loans from financial institutions for relief and recovery. This impacts the fiscal health of the states. It is therefore important and necessary for the Governments at all levels to identify and mobilize alternative funding mechanisms. Alternatively, State Governments must devolve the responsibility to the urban local bodies, owing to their proximity to the community. They must be made as the nodal agencies for relief and rehabilitation. Such devolution of responsibility brings the mitigation and preparedness strategies closer to society.
Additionally, states must track their disaster spending regularly, and assess its impact on relief, recovery, and sustenance. Without any such assessment, it would be hard to make informed choices for future contingencies.
Way forward
It is quite possible that no amount of money is enough to have to combat a disaster, as the threats of climate change & global warming continue unabated. Every small decision we make today is going to determine how far we tumble down the slope. The only sustainable way for the future is to invest in prevention, mitigation, preparedness, and response strategies. Incorporating technological innovations to support quick relief and rehabilitation measures is a must. As Phil McGraw says, ‘Don’t wait until you’re in a crisis to come up with a crisis plan’, prevention and mitigation is the best way forward.
Featured Image: Disaster relief funds