A brand new controversy has broken out regarding the allocation of disaster relief funds to States in the wake of the COVID-19 outbreak. The problematic issue seems to be the ‘paltry’ ₹157 crore Kerala has received, despite having a high number of cases.

However, this allocation was not made today but was made as per the recommendations of the 15th Finance Commission Report tabled in the Parliament on 1st February 2020. The ₹157 crore Kerala received is the first installment of the ₹314 crore which is the central share of the total ₹419 crore allocated to the State Disaster Relief Fund.

How was this allocation decided? This is based on the methodology employed by the Finance Commission. The Commission used a risk and vulnerability profile of each state to decide the allocation rather than an expenditure-based method. The State’s capacity, risk exposure and vulnerability to the disaster were the considerations here.

The vulnerability to disasters was calculated by assigning a score to the probability of disasters in each state. It has to be noted here is that a Pandemic does not fall within the purview of what was assessed here – but only natural disasters such as earthquakes, droughts, floods and cyclones.

From the above index, as well as the basis of this number, it is quite clear that the allocation for Kerala was based on its geographic and social conditions to respond to a disaster rather than subjectivity and bias.

Further, it should be noted that the Finance Ministry has also released ₹6,905 crore as “Post-Devolution Revenue Deficit Grant” to states, which includes ₹ 1,276 crore to Kerala, the highest amount so far. This Grant was also made according to the recommendations of the Finance Commission.

The allocations made by the Finance Commission did not anticipate the outbreak of a Pandemic of the Nature of COVID-19 pandemic. The Union Government and RBI have already announced a series of financial measures to combat the menace. There will certainly be more announcements as the situation evolves.

Opinion

Considering the exceptional circumstances and chaotic times, it would be advisable to avoid reaching quick conclusions based on data that is presented to you without proper context. The claim of bias towards states by the central government as argued by the The Wire, Mathrubhumi and other publications fails to hold true as shown above. The allocation was a predetermined sum that has been assigned on the basis of vulnerability to natural disasters, capacity and risk exposure. The amount was calculated on basis of a formula evolved by the Finance Commission, and not the indiscriminate or unsystematic directions of the Finance Minister or Prime Minister.

Additional Note: From this News report it seems that Kerala has ₹2,100 crore left in its SDRF kitty. [Thanks to twitter user @\Sidharthkini for pointing this out]

Further Reading

Annex 6.2 of the 15th Finance Commission Report

The Report is available here: https://fincomindia.nic.in/ShowContent.aspx?uid1=3&uid2=0&uid3=0&uid4=0

The Author would like to thank Aishwarya Ajayan for editing and inputs & Rohit Pathania for his inputs.