The official machinery in our nation carries a lot of inertia that makes officials adhere to precedents. It is in fact a perfect risk transfer strategy where the burden of failure can easily be passed on to those setting the precedent. This makes innovations hard to come by, and this has also been the case with disaster financing.
All the previous Finance Commissions (FCs) though suggesting innovations followed time tested methodology of expenditure based resource allocation wherein expenditure incurred by the state during the previous years on post-disaster relief, and restoration was the criteria for determining the size of Calamity Relief Fund (CRF) or State Disaster Response Fund (SDRF).
The approach adopted by the XV FC was thus revolutionary, and path breaking as it not only accepted the need of pre-disaster interventions, together with holistic post-disaster recovery for realising the goal of disaster risk reduction (DRR), but also for the first time made funds available for these. The XV FC however could not completely do away with the expenditure bias of the previous FCs, and not only took cognizance of the expenditure incurred by the states on disaster relief but also gave maximum (70%) weightage to it. Despite this the XV FC was bold enough to introduce weightage for area, population, and risk profile of the individual states while finalising State Disaster Risk Management Fund (SDRMF) allocations of the states.
For finalizing the figures related to expenditure on disaster relief, the XV FC considered the expenditure booked by the states under major head (MH) 2245 during previous seven years (2011-12 to 2017-18). For the states debiting a portion of disaster relief expenditure directly from SDRF maintained in the Public Account, the XV FC added this expenditure to MH 2245. The NDRF releases for each year were then subtracted from these values. The resultant expenditure was thereafter adjusted for inflation, and thus an average expenditure figure was determined for each state.
For apportioning expenditure between the reorganized states of Andhra Pradesh, and Telangana for the period 2011-12 to 2014-15 (up to June 1, the date of bifurcation), the methodology similar to the one suggested by the XIV FC was utilized.
The expenditure of erstwhile Andhra Pradesh, along with district-wise expenditure was obtained for the period 2011-12 to 2014-15 (up to June 1) from the Accountant General, Andhra Pradesh. From the district-wise expenditure, the share of expenditure for the reorganized states of Andhra Pradesh, and Telangana was calculated for each of these years, which was then used to apportion common expenditure booked through transfer entries and under the Pay and Accounts Officer, Hyderabad in the same ratio between these two states. The NDRF releases to erstwhile Andhra Pradesh during the same period were also apportioned in the same ratio between the reorganized states.
The XV FC assigned 70% weightage to expenditure; 70% of average expenditure (AE70) was thus taken for further calculations for each state.
The XV FC came up with area, and population based weightages for assessing vulnerability of different states. For this the XV FC considered Maharashtra a reference state because of some peculiarities that include (i) highest SDRF allocation in 2019-20, the last year of the XIV FC allocations, (ii) average size; Maharashtra being neither the largest nor the most populous state provided a good statistical fit for working out unit value, (iii) being exposed to multiple hazards in different geographical settings, (iv) having the largest urban sprawl in the country, which is exposed to various hazards, (v) having districts that fall in rain shadow areas, making them highly drought-prone, (vi) being regularly affected by floods, landslides, and earthquakes, (vi) having better governance track record, and (vii) having responded to previous disasters with considerable efficiency and resources.
Given the state’s SDRF allocation, area, population, capacity, and efficiency, Maharashtra provided the most appropriate reference.
Based on the SDRF allocation of Maharashtra the XV FC calculated per-capita, and per sq km allocation. These unit values were then applied to the population, and area of all the states.
The XV accorded weightage of 15% each to area and population, and therefore 15% of both these values were calculated to assign a total of 30% weightage to area, and population; A15 + P15.
Maximum score of 15 was assigned to each of these four hazards, and depending upon the level of probability of a hazard, states were assigned the scores of 0, 5, 10 and 15 in an increasing order. In addition, all states have their share of smaller hazards, which affect communities on a local basis. In view of their continuous impacts, all the states were assigned an equal score of 10 for these smaller hazards, bringing the maximum score to 70.
In order to assign weightage relating to the risk of disasters faced by individual states for the purpose of resource allocation the XV FC developed a Disaster Risk Index (DRI) by adding hazard, and vulnerability scores of the states.
Amongst the states Odisha with a score of 90 stands at the top while Goa with score of 35 is at the last place. Uttarakhand with a score of 50 is at the 21st place.
The values calculated previously for expenditure, area, and population were added for each state;
W = AE70 + A15 + P15
Thereafter, this value (W) was multiplied by the Disaster Risk Index (DRI) score for each corresponding state;
Y = W * DRI
Finally, the product of these two values (Y) was added to the sum total of values obtained previously to arrive at the base value for each of the states;
Z = Y + W = W*DRI+W
From the base value, the allocation for 2020-21 was calculated after considering the standard 5% annual inflation.
An additional allocation of 11% was provided for ten North-Eastern, and Himalayan states to pay greater attention to infrastructure resilience in these states in view of the continuous disruption of their transport network by flash floods, landslides and other mountain hazards.
This was the first attempt to objectively include disaster risk faced by the states in resource allocation, and address a serious deficiency in the allocations of previous FCs.