Economy

Centre to give states Rs 42,000 crore from FY21 budget to fight coronavirus outbreak

Updated : March 31, 2020 06:28 AM IST

The Home Ministry has already categorised Covid-19 under Disaster Management Act.

Under SDRF, the centre-state contribution is 75:25 while for hilly states and North East its 90:10.

The government has budgeted a total of Rs 42,000 crore towards disaster relief in the FY21 budget. From April onwards, these budget lines will be available to states to fight against COVID-19 among other calamities.

CNBC-TV18 has learnt that the states will get at least 20,000cr as central share of the SDRF or State Disaster Response Fund. While the National Disaster Response Fund, or NDRF, which is assistance provided by Centre to States, has an allocation of Rs 22,000 crore for the new fiscal.

The Home Ministry has already categorised COVID-19 under the Disaster Management Act, for which states are entitled to use the SDRF, subject to certain limitations. For instance, expenditure on relief operations by states is capped at 25 percent of the SDRF.

It’s also to be noted that the centre doubled the NDRF allocation in the revised estimate this year from approximately Rs 10,000 crore to Rs 20,000 crore. Similarly, the SDRF has been almost doubled from Rs 10,937 crore in FY20 budget to Rs 20,000 crore in FY21 budget.

Under SDRF, the centre-state contribution is 75:25 while for hilly states and North East its 90:10. The entire Rs 20,000 crore under SDRF is the centre’s contribution as per Finance Commission rules.

However, one issue that crops up is that some states show unspent balances in SDRF. For instance, as per April 1 estimates of 2019, states like Gujarat, Punjab, Haryana, Jharkhand among others, had sizeable unspent money in SDRF. The revised position of the SDRF unspent balance of each state will be known after April 1 now.

The norm is that states are encouraged to utilise the SDRF first, before seeking central assistance from NDRF. Hence the centre, while releasing money from the NDRF, adjusts the amount against 50 percent of the unspent balance in SDRF. In such cases, 100 percent assistance from NDRF to states is not possible.

In the meanwhile, the centre expects funds allocated in FY21 to be used quickly on covid-19 related relief operations, given the fact that spend on relief work is capped at 25 percent of the SDRF.