A growing debate has emerged around the 16th Finance Commission’s disaster funding formula, with experts and policymakers raising concerns that the current structure may not adequately support India’s most disaster-prone states.

The central issue lies in how disaster funds are allocated under mechanisms such as the State Disaster Response Fund (SDRF) and the National Disaster Response Fund (NDRF). Critics argue that the formula relies heavily on parameters like population size and past expenditure, rather than actual disaster risk and vulnerability.

Why Disaster Funding Matters

India is one of the most climate-vulnerable countries in the world, facing a wide range of natural disasters, including:

• Floods in states like Assam and Bihar
• Cyclones in coastal regions such as Odisha and Andhra Pradesh
• Droughts in parts of Maharashtra and Rajasthan
• Earthquakes and landslides in Himalayan regions

Given this diversity of risks, equitable and efficient disaster funding is critical for:

• Preparedness and mitigation
• Emergency response
• Rehabilitation and reconstruction

The Problem with Current Allocation Formula

The criticism of the 16th Finance Commission’s approach centres on its structural design.

1. Overemphasis on Population

A significant portion of fund allocation is based on population size, which may not reflect the actual exposure to disasters.

For example, a densely populated state with relatively lower disaster risk may receive more funds than a smaller state facing frequent natural calamities.

2. Historical Spending Bias

The formula also considers past expenditure patterns, which can disadvantage states that have historically lacked resources or capacity to spend on disaster management.

This creates a cycle where:

• States with higher spending continue to receive more funds
• Resource-constrained states remain underfunded

3. Limited Focus on Risk and Vulnerability

Experts argue that the formula does not sufficiently account for:

• Climate risk indicators
• Frequency and intensity of disasters
• Geographical vulnerabilities

As a result, hazard-prone states may not receive proportional funding.

Impact on Vulnerable States

States that face frequent and severe disasters are particularly affected by this approach.

Coastal States

Regions prone to cyclones and storm surges require continuous investment in:

• Early warning systems
• Coastal infrastructure
• Evacuation planning

Himalayan States

Areas vulnerable to landslides, earthquakes, and glacial floods need specialised funding for:

• Infrastructure resilience
• Disaster monitoring systems
• Emergency response capabilities

Flood-Prone Regions

States like Assam and Bihar face annual flooding, requiring sustained funding for:

• River management
• Flood control infrastructure
• Rehabilitation efforts

Without adequate funding, these states may struggle to build resilience and respond effectively.

Climate Change and Rising Risks

The issue becomes more critical in the context of climate change, which is increasing the frequency and severity of extreme weather events.

India has witnessed:

• More intense cyclones in the Arabian Sea and Bay of Bengal
• Unpredictable rainfall patterns
• Rising instances of urban flooding

This evolving risk landscape requires a forward-looking funding model, rather than one based solely on historical data.

Need for Risk-Based Allocation

Experts suggest that disaster funding should shift towards a risk-based allocation framework.

Such a model would consider:

• Hazard exposure
• Population vulnerability
• Infrastructure resilience
• Adaptive capacity of states

This approach would ensure that funds are directed to areas where they are most needed, improving overall disaster preparedness.

Global Best Practices

Many countries have adopted risk-informed financing mechanisms for disaster management.

These include:

• Insurance-based models
• Catastrophe bonds
• Dedicated climate adaptation funds

India can learn from these models to develop a more robust and flexible disaster financing system.

Role of the 16th Finance Commission

The 16th Finance Commission has a crucial role in shaping India’s fiscal framework for the coming years.

Its recommendations will influence:

• Intergovernmental fiscal transfers
• Disaster management funding
• State-level financial planning

Given the increasing importance of climate resilience, the Commission’s approach to disaster funding will have long-term implications.

Policy Recommendations

To address the current concerns, experts recommend:

1. Incorporating Risk Metrics

Include scientific risk assessments and climate data in the allocation formula.

2. Enhancing Flexibility

Allow states greater flexibility in using funds based on local needs and priorities.

3. Incentivising Preparedness

Reward states that invest in disaster mitigation and resilience-building measures.

4. Strengthening Data Systems

Develop robust systems for data collection and risk analysis to support better decision-making.

Challenges in Implementation

While reforms are necessary, there are challenges:

• Data availability and accuracy
• Balancing equity and efficiency
• Ensuring accountability in fund utilisation

Despite these challenges, a shift towards risk-based funding is increasingly seen as essential.

Broader Implications for India

The way disaster funds are allocated has far-reaching implications for:

• Economic stability
• Social equity
• Infrastructure development

Underfunding high-risk states can lead to:

• Greater economic losses
• Increased human suffering
• Slower recovery after disasters

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