Evolution of Disaster Management Funding: Finance Commission Recommendations from 10th to 15th FC

India’s approach to financing disaster management has undergone a remarkable transformation over the past three decades. From ad-hoc relief measures to a structured, scientifically-driven funding system, the journey reflects how successive Finance Commissions have shaped the nation’s disaster resilience strategy. This evolution not only demonstrates fiscal prudence but also marks a shift from reactive response to proactive risk management.

The foundation: Tenth Finance Commission (1995-2000) 🔗

Under Chairman K.C. Pant, the Tenth Finance Commission laid the groundwork for structured disaster financing in India. The Commission established the Calamity Relief Fund (CRF) in each state with a 75:25 sharing ratio between the Centre and states. The total allocation amounted to ₹6,304.27 crores, with ₹4,728.19 crores contributed by the Central Government.

The 10th Finance Commission introduced two groundbreaking concepts. First, it created the idea of “Calamity of Rarest Severity” to address disasters beyond state coping capacity. Second, it established the National Fund for Calamity Relief (NFCR) with a corpus of ₹700 crores, aimed at creating national solidarity in disaster response. This fund represented a significant departure from the earlier margin money scheme that had been in place since the Second Finance Commission.

Building on the framework: Eleventh and Twelfth Finance Commissions 🔗

The Eleventh Finance Commission (2000-2005) maintained the CRF structure but discontinued the NFCR, replacing it with the National Calamity Contingency Fund (NCCF). This new fund had an initial corpus of ₹500 crores, recouped through special duties on select items including cigarettes, tobacco products, and cellular phones. The shift acknowledged that the NFCR corpus had been exhausted within three years and failed to meet requirements for rare severity calamities.

The Twelfth Finance Commission (2005-2010) enhanced the overall funding envelope and introduced innovative concepts like the “Earthquake Pool” to manage seismic risks. The Commission also broadened the list of covered calamities to include landslides, avalanches, cloud bursts, and pest attacks. During this period, the Central Government released ₹12,208 crores under CRF between 2005-2009, demonstrating the increasing financial commitment to disaster relief.

The paradigm shift: Thirteenth Finance Commission (2010-2015) 🔗

The enactment of the Disaster Management Act, 2005 necessitated a complete restructuring of disaster financing mechanisms. The Thirteenth Finance Commission merged the NCCF into the National Disaster Response Fund (NDRF) and the CRF into the State Disaster Response Fund (SDRF), effective from April 1, 2010. This alignment with the legal framework brought clarity and statutory backing to disaster financing.

The 13th Commission allocated ₹33,581 crores for SDRFs across all states for the 2010-2015 period. It maintained the traditional funding ratios while emphasizing that mitigation and reconstruction should be integrated into state and central development plans rather than relief funds. The Commission also introduced capacity building grants of ₹525 crores and a revolving fund of ₹250 crores for the National Disaster Response Force to maintain emergency equipment inventories.

Strengthening the system: Fourteenth Finance Commission (2015-2020) 🔗

The 14th Finance Commission period saw substantial increases in disaster funding allocations. The Commission recommended ₹61,220 crores for the 2015-2020 period, nearly double the previous allocation. This increase reflected both the growing recognition of disaster risks and the expanding scope of eligible relief activities. The Commission also provided states with greater flexibility in utilizing funds for state-specific disasters, allowing up to 10 percent of SDRF for local disaster categories.

Revolutionary changes: Fifteenth Finance Commission (2020-2026) 🔗

Chaired by N.K. Singh, the 15th Finance Commission introduced transformative changes in disaster risk financing. The Commission created a comprehensive framework through the National Disaster Risk Management Fund (NDRMF) and State Disaster Risk Management Fund (SDRMF), moving beyond mere response to encompass mitigation, preparedness, and capacity building.

Expanded funding architecture 🔗

The 15th Finance Commission allocated a total of ₹1,60,153 crores for SDRMF for 2021-2026, with ₹1,28,122 crores (80 percent) designated for response and ₹32,031 crores (20 percent) for mitigation. Similarly, ₹68,463 crores was allocated for NDRMF, split between ₹54,770 crores for response and ₹13,693 crores for mitigation. This marked the first time that dedicated funds for disaster mitigation were created at both national and state levels.

The contribution structure remained unchanged with general category states maintaining the 75:25 Centre-State ratio, while northeastern and Himalayan states received support at a 90:10 ratio. This differential recognized the limited fiscal capacity of special category states.

Innovative allocation methodology 🔗

Perhaps the most significant contribution of the 15th Finance Commission was its departure from the traditional expenditure-based allocation model. The Commission adopted a hybrid methodology combining three factors: capacity (reflected through past expenditure), risk exposure (area and population), and hazard vulnerability (disaster risk index). This approach addressed a critical flaw where states like Uttarakhand, despite high disaster vulnerability, received less funding than states with lower risk profiles.

Structured fund distribution 🔗

The 15th Finance Commission structured the response fund allocation into three distinct windows. Response and Relief receives 40 percent of the allocation, Recovery and Reconstruction gets 30 percent, and Preparedness and Capacity-Building receives 10 percent. This distribution ensures that funds address all phases of the disaster management cycle, not just immediate relief.

The Commission also recommended earmarked allocations from NDRF for expanding and modernizing fire services (₹5,000 crores) and resettling people displaced by erosion (₹1,000 crores). From the mitigation fund, specific allocations were made for drought-prone states (₹1,200 crores), seismic and landslide risk management in hill states (₹750 crores), urban flooding mitigation in populous cities (₹2,500 crores), and erosion prevention (₹1,500 crores).

Impact and implementation challenges 🔗

The evolution of disaster financing through Finance Commissions has significantly enhanced India’s disaster management capacity. The shift from ₹6,304 crores in the 10th Finance Commission period to ₹1,60,153 crores in the 15th Commission period represents a twenty-five-fold increase, reflecting both inflation and expanded scope. However, implementation challenges persist, including delays in fund release, inadequate mitigation spending, and gaps between assessed needs and allocated resources.

States have progressively established their disaster management funds, with all states except Telangana setting up SDMFs as recommended by the 15th Finance Commission. The annual releases occur in two equal installments, contingent on submission of utilization certificates and compliance reports, ensuring accountability in fund usage.

What do you think? How can the innovative risk-based allocation methodology introduced by the 15th Finance Commission be further refined to better address emerging climate-related disasters? Should disaster mitigation receive a higher share than the current 20 percent allocation given the long-term benefits of prevention over response?

References

1. https://www.gktoday.in/question/who-was-the-chairman-of-10th-finance-commission
2. http://www.arthapedia.in/index.php/National_Disaster_Response_Fund_(NDRF)
3. https://fincomindia.nic.in/asset/doc/commission-reports/13th-FC/english/Chapter11.pdf
4. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1947134
5. https://vajiramandravi.com/upsc-exam/15th-finance-commission/
6. https://ndmindia.mha.gov.in/ndmi/response-fund
7. https://ndmindia.mha.gov.in/response-fund