India’s capacity to withstand multiple, near-simultaneous shocks is being tested, with a Very Severe Cyclonic Storm, Yaas, striking Odisha, just a week after an even stronger Cyclone Tauktae wreaked havoc along the west coast.
GS-III: Disaster Management (Disaster Financing)
Dimensions of the Article:
- About India’s Vulnerability to disasters
- National Disaster Response Fund (NDRF)
- Problems with Disaster Financing in India
- Disaster Risk Insurance
About India’s Vulnerability to disasters
- India is very vulnerable to natural hazards because of its unique geo-climatic conditions. Almost 85% of the country is vulnerable to single or multiple disasters and about 57% of its area lies in high seismic zones.
- Approximately 40 million hectares (12%) of the country’s land area is prone to flood, about 8% of the total land mass is vulnerable to cyclone and 68% of the area is susceptible to drought.
- According to the Global Climate Risk Index published by Global Environmental thinktank ‘German Watch”, India is the 5th most vulnerable country.
- The report also noted that India lost more than 2,500 lives in 2017 due to disasters, second only to Puerto Rico, that saw almost 3,000 lives lost.
- Further, economic losses in India due to such calamities accounted for around $13,789 million, the 4th highest in the world.
National Disaster Response Fund (NDRF)
- National Disaster Response Fund (NDRF) is a fund managed by the Central Government for meeting the expenses for emergency response, relief and rehabilitation due to any threatening disaster situation or disaster.
- It is defined in the Disaster Management Act, 2005 (DM Act).
- It comes under the “Public Accounts” of Government of India under “Reserve Funds not bearing interest“.
- It was constituted to supplement the funds of the State Disaster Response Funds (SDRF) of the states to facilitate immediate relief in case of calamities of a severe nature.
- NDRF amount can be spent ONLY towards meeting the expenses for emergency response, relief and rehabilitation.
- For projects aimed exclusively at reducing the risk, impact or effect of a disaster or threatening disaster situation a separate fund called National Disaster Mitigation Fund has to be constituted.
- The requirement for funds beyond what is available under the NDRF is met through general budgetary resources.
- A National Calamity Contingency Duty (NCCD) is levied to finance the NDRF and additional budgetary support is provided as and when necessary.
- NDRF is financed through the levy of a cess on certain items, chargeable to excise and customs duty, and approved annually through the Finance Bill.
- Comptroller and Auditor General of India (CAG) audits the accounts of NDRF.
- Department of Agriculture and Cooperation under Ministry of Agriculture (MoA) monitors relief activities for calamities associated with drought, hailstorms, pest attacks and cold wave /frost while rest of the natural calamities are monitored by Ministry of Home Affairs (MHA).
Problems with Disaster Financing in India
- The large events like Kerala Flood, Chennai Flood or Cyclone Fani clearly show that one cannot depend on raising funds post the calamity.
- Less of private sector investment in providing relief and rehabilitation, construction of infrastructure projects leads to excessive reliance on Government’s funding.
- The Funding for disaster management in India is focussed more on Relief and Rehabilitation rather than Disaster Mitigation.
- Discouraging people from building houses in flood plain areas; Encouraging people to build disaster resilient infrastructure etc., should be focussed on more than damage repair.
Disaster Risk Insurance
- Disaster risk insurance is one of the financial tools available as a mitigation measure. It triggers a pay-out by the insurer when a disaster occurs, e.g., when a tsunami hits or rainfall falls below a certain threshold.
- Applicability of the insurance should include Government, Private Sector and Household sectors and for the poor households, Insurance premium should be entirely paid by the Government.
Benefits of such Risk Insurance
- Reliable and timely financial relief for recovery of livelihoods and reconstruction.
- prevent people from falling into poverty
- Diversification of risk from the Government towards the private sector
- Amount of premium depends upon the risk involved; hence, this will encourage people to construct disaster Resilient houses in safe zones.
- States which have limited capacity to deal with Disasters will have to start allocating finances meant for the purpose of development towards Relief and Rehabilitation. This will mean that there are Lesser funds available for development, causing a Growth Gap.
-Source: The Hindu