In a significant legislative move, the Lok Sabha has approved a bill designed to strengthen the role of the Finance Commission in India's fiscal federalism. The proposed amendment grants the constitutional body explicit authority to recommend the allocation of financial resources specifically for state disaster management initiatives.
Key Provisions of the Amended Bill
The bill, officially titled The Finance Bill, 2023, was passed by the lower house of Parliament on Tuesday. Its core objective is to formally integrate the allocation of funds for disaster management into the Finance Commission's mandate. Previously, such allocations often fell under the purview of the Union government's discretionary grants.
This legislative change means that the 16th Finance Commission, and all subsequent commissions, will have the statutory responsibility to evaluate states' disaster mitigation and management needs. Based on this assessment, they will recommend how central funds should be distributed among states to build resilience and respond to calamities.
Finance Minister Nirmala Sitharaman, while piloting the bill, emphasized that this step brings more transparency and predictability to fiscal devolution. It ensures that funds for critical disaster preparedness are systematically allocated based on a formula recommended by an independent, constitutional body.
Rationale and Expected Impact
The government's push for this amendment stems from the increasing frequency and severity of natural disasters across India, from floods and cyclones to droughts. A structured, commission-led approach aims to move away from ad-hoc allocations and create a stable, long-term funding mechanism for states.
This is expected to empower state governments to plan and execute robust disaster management infrastructure and protocols with greater financial certainty. The move is seen as aligning with cooperative federalism, where states have a clearer claim to resources based on objectively assessed risks and needs.
The Road Ahead for the Legislation
With the bill's passage in the Lok Sabha, the focus now shifts to the Rajya Sabha. The legislation requires approval from the upper house before it can become law. Given the bill's focus on rationalizing fiscal federalism and disaster management—subjects of national importance—it is anticipated to see support across party lines.
Once enacted, the immediate task will fall upon the 16th Finance Commission, whose recommendations will cover the five-year period starting April 1, 2026. The commission will now have to develop specific criteria and indicators to fairly distribute the disaster management corpus among various states.
This legislative action marks a pivotal shift in how India finances its disaster response, institutionalizing the process and potentially making states more financially resilient in the face of environmental challenges.
