Finance Commissions and Disaster Risk Funding: A Paradigm Shift in Methodology by Fifteenth Finance Commission

Abstract

Disaster risk financing has been in practice since the Second Finance Commission in the form of a Margin Money Scheme. Later, it was replaced with a Calamity Relief Fund and a National Calamity Contingency Fund (NCCF)/National Disaster Relief Fund (NDRF). These funds were based on expenditure-based funding, from which a state is provided relief funds based on its past expenditure. There have been a lot of discrepancies as states like Uttarakhand, with high hazard risk vulnerability, received ₹1,158 crore, and Haryana, comparatively a less hazard risk vulnerability state, received ₹1,699 crore for 2015–2020 from the State Disaster Response Fund (SDRF). States and other agencies like National Disaster Management Authority (NDMA) have been demanding, for replacing this expenditure-based funding with a state-specific hazard/disaster risk vulnerability for a long time. The Fifteenth Finance Commission addressed this long-standing demand by incorporating an innovative methodology for disaster risk funding. It made a slight departure from the past method and included area, population and disaster risk index for calculating a state’s share in disaster risk funding. This article analytically examines the past and present methodologies of disaster risk funding by applying quantitative and qualitative research methods.