The Wayanad landslides (July 2024) exposed a widening gap between States’ assessed losses and the Union government’s disaster-relief disbursements. 

• Kerala sought ₹2,200 crore but received only ₹260 crore, highlighting fiscal asymmetry and weakening cooperative federalism.

Constitutional And Legal Framework

• Article 1 (Union of States): Disaster relief is a constitutional guarantee stemming from the principle of the Union of States, not charity or negotiation.
• Article 21 (Right to Life): The Right to Life and Personal Liberty.
  • Swaraj Abhiyan vs. Union of India: The Supreme Court noted that the Right to Life includes the Right to Relief.
• DPSP (Articles 38 & 39): The State shall protect the welfare of people and ensure adequate means of livelihood.
• Legal Basis: The Indian disaster management framework operates under the Disaster Management Act, 2005.

Disaster Financing Structure

The Indian disaster management framework operates under the Disaster Management Act 2005. It provides for two key funds:

• State Disaster Response Fund (SDRF): This acts as the state’s “first aid kit”. It is used for minor disasters, and the money is already available and can be used by the State without Centre approval.
  • Contribution: The Centre contributes 75% and the State contributes 25%, & for Special Category or Himalayan states, the Centre contributes 90% and the State contributes 10%.
  • Usage: SDRF funds are intended for immediate relief, such as providing food, medicine, and temporary shelter (tents).
• National Disaster Response Fund (NDRF): This is the response fund for critical disasters. 
  • Contribution: The NDRF is fully funded by the Centre.
  • Usage: Using NDRF funds requires permission from the Centre. These funds are needed for reconstruction efforts like building roads, bridges, and houses

Key Structural Problems

• Outdated, rigid norms: Compensation ceilings—₹4 lakh per death and ₹1.2 lakh for a fully damaged house—have barely been revised for a decade. 
  • These amounts may cover subsistence needs but remain far too low to support reconstruction or long-term rehabilitation
• Ambiguity in Defining a ‘Severe’ Disaster: The Disaster Management Act does not define what constitutes a “severe” disaster, leaving the classification entirely to administrative discretion. 
  • This ambiguity often restricts States’ access to higher NDRF assistance.
• Procedural Red Tapism: Relief from the NDRF is not triggered by objective indicators but depends on a sequential process involving State memoranda, central assessments, and high-level approvals. 
  • This results in delays even during situations where urgency is critical.
• Weak Allocation criteria: The Finance Commission uses population and total geographical area to allocate disaster funds, overlooking actual hazard exposure. 
  • Vulnerability is proxied through poverty instead of a scientific disaster-risk index, leading to allocations that do not reflect States’ real risks.

Findings of the Wayanad Episode

• Misinterpretation of Unspent SDRF Balances: Unspent SDRF balances often represent committed expenses, yet were used to justify reduced Central aid.
• SDRF Restrictions Force States to Retain Liquidity: SDRF allows only relief spending, forcing States to hold reserves for future events.
• Delay in Classifying Wayanad as a Severe Disaster: Delayed classification limited Kerala’s access to enhanced NDRF support.
• Bureaucratic Negotiation Replacing Federal Cooperation: Delays, discretion, and mismatches reveal a shift from cooperative federalism to bureaucratic bargaining.
• Centre’s Argument: The Central Government argued that Kerala still had ₹780 crore in its SDRF account and should use that money first.
  • However, it was argued that funds in the SDRF may already be booked for previous disasters or must be saved to provide basic first-aid relief throughout the year. 
  • The SDRF funds are for immediate relief, not the long-term reconstruction required in Wayanad, which necessitates NDRF funds.

Learning from Global Practices

• United States: Federal Emergency Management Agency (FEMA) allocates disaster assistance based on per capita damage thresholds. This system minimises discretion and ensures predictable and timely federal support.
• Mexico: Mexico’s former FONDEN (Natural Disasters Fund) mechanism released funds automatically when objective parameters such as rainfall or wind intensity crossed predefined limits. 
• Philippines: The Philippines uses rainfall and fatality indices to activate Quick Response Funds automatically. 
• African & Caribbean Insurance Pools: Regional insurance facilities use satellite and remote-sensing data to trigger rapid payouts. 
• Australia (NDRRA): Australia’s Natural Disaster, Relief and Recovery ties federal support to the proportion of disaster-related spending already incurred by States. 

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Recommendations of the 16th Finance Commission (chaired by Arvind Panagariya)

• Grant-Based Aid: Disaster aid from the Centre should be provided as grants, not loans.
• Updated Relief Norms: Relief norms must be updated to market rates (instead of the 10-year-old ceilings).
• Risk-Based Allocation: Fund allocation should be based on a risk index, rather than population.
• State Autonomy: States must be given autonomy in spending the money quickly; the Centre should conduct audits afterward rather than demanding prior approval.

Conclusion

India’s disaster financing framework must move from discretionary, negotiation-heavy processes to a transparent, rules-based federal system. Without this shift, the constitutional promise of cooperative and equitable relief will fail precisely when citizens need it the most.

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