UNIT 8 FUNDING ARRANGEMENTS FOR

RECONSTRUCTION
Structure

8.0 Learning Outcome

8.1 Introduction
8.2 Reconstruction Requirements
8.3 Funding Arrangements
8.3.1 Calamity Relief Fund
8.3.2 Natural Calamity Contingency Fund
8.3.3 MPLADS
8.3.4 Prime Minister's National Relief Fund
8.3.5 Insurance Schemes
8.3.6 District Level Funds

8.4 Fiscal Discipline

8.5 Role of International Donor Agencies
8.5.1 International Monetary Fund (IMF) and World Bank
. 8.5.2 United Nations
8.5.3 Asian Developlnent Bank
8.5.4 Bilateral and Multilateral Donor Agencies

8.6 Mobilisation of Community for Resource Generation

8.8 Key Concepts

8.9 References and Further Reading
8.10 Activities

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8.0 LEARNING OUTCOME
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After reading this Unit, you will be able to:

0 Understand the requirements of recoi~structionand its significance in post-disaster phase

@ Discuss the nature of funding for reconstruction

m Get an overview of issues and challenges associated with funding by intelnational agencies; and
8 Tlirow light on the role of com~nunityin reconstruction and resource rnobilisation.

8.1. INTRODUCTION
Reconstruction is the core concern in the disaster aftermath. A systematic and well-designed
reconstruction package requires enormous financial support and resources from the governmental,
 102 Rehabilitation, Reconstruction and Recovery

non-governmental and international agencies. This Unit focuses on reconstruction, particularly

from the point of view of funding arrangements. It throws light on the limited extent of
resources available for reconstruction, and the different ways of resource generation. The Unit
exanlines the major processes and considerations involved in funding for reconstruction. It also
looks at the funding and resource arrangements at the national and international levels. In this
context, it highlights the way disaster management projects are funded at'different levels, and
discusses the role of the community, which is of great significance in ensuring accountability
of the agencies involved in funding.

8.2 RECONSTRUCTION REQUIREMENTS

The common characteristics of the disaster-affected site are: a sudden and violent disruption
of the social system caused by the disaster aftermath, large number of distressed people in
need for b a s i ~life support components such as food, clothes, shelter, medicine, etc., severe
shortages of relie5 material and medical aid; and medium and long-term repair of physical,
social and economic damage. The reconstruction efforts aim at restoriiig the affected structures
to a condition equal to or better than what existed before the disaster. They also aim at
construction of permanent housing and full restoration of basic services. The concern with
reconstruction is central to developing nations where disasters are common occurrences and
resources available to withstand them are alwa'ys limited. Some important questions in this
regard relate to:

e Conditions wherein development in general is rather neglected, disasters only aggravate the
woes. The rqconstt-uction process needs to take into account the generation of resources and
address some tHe fundamental development concerns
--
a Mobilisation of resources; and

o Equitable utilisation of resources for reconstruction,

In countries wherein a balanced and just pattern of development is generally neglected, disasters
only worsen the situation. In these cases, the reconstruction process needs to address some
of the development concerns. A national/local disaster could have political, economic or natural
causes. Such a disaster has immediate effects on food and nutrition, and if it is a slow-onset
disaster, there- can be long-term effects on the population, as the toll would be higher on the
social and economic system.

To assess the potential immediate and long-term effects of a disaster, both quantitative and
qualitative data, as well as an assessment of the likely duration of the disaster are needed. The
quantitative data would include the number and characteristics of the people affected as well
as the size of the disaster-affected area, Qualitative data would include assessment of the
severity and nature of disruption to services and supplies, and also the likely (and actual) type
of injuries to humans and livestock. These would then be combined with the assessment of h e -
duration and the scope of a disaster.
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One of the most important components of reconstruction is that of infrastructure development.
An important step towards the reconstruction of infrastructure is the 'feasibility study'. The
basic objective of a 'feasibility study' is to generate the data necessary to have a complete plan
for reconstruction vis-2-vis its economic viability. It also helps to complete the application of
formalities for construction grant for an 'infrastructure rehabilitation programme' after any
disaster or even in normal times.
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A 'feasibility study', for example, may be conducted for improving thl water supply system :
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 Funding Arrangements for Reconstruction 103

in an urban area. Eligible feasibility studies include studies of proposed projects that replace,
rehabilitate or restore existing damaged water distribution systems that deliver water for domestic,
municipal or industrial uses. Eligible components may include pipelines, tanks, pump stations,
valves, flow meters, and all other water delivery facilities. Eligible feasibility studies may also
include studies of proposed projects that replace failing water distribution system components,
, such as tanks or pump stations, which threaten the health, safety, welfare and economy of the
area relying on the system. These failing components need not be in a position of disrepair:
However, the applicant must provide documentation of the component's potential for failure.

There are some special considerations in the case of a long-term disaster, as in such a situation,
nutritional surveillance of the population is very important. Again, water and food are important,
and as there may be a long duratidn of reliance on food relief, it is important for this food to
be acceptable culturally. The priority is the food and not the nutrients. There may be a need
for nutrient supplements, and requirements for certain nutrients may be increased due to the
effects of malnutrition. However, the food should be what the victims are used to eating. It
should be as' p$r the climatic and cultural conditions of the affected areas.
->;+.-:
In slow-onset' diitisters, the priority groups for food distribution are the same as those for
cataclysmic disasters, plus~w'~pecial
consideration for health and nutrition needs to be paid in this
regard, The treatment of lnalnutiition and associated secondary diseases as well as social and *
econoinic rehabilitation are the priolity areas. Taking into account the perception of the affected
community also becomes important for launching specific reconstri~ctionprojects/ programmes.
Usually, people are sentimentally attached to the land whcre they stay and therefore havc
preferences fof design, layout, use of material and technology in reconstruction.

Though the issue of reconstn~ctionand the allied problenls and challenges is the pertinent
theme all through this Course, a mention of reconstruction requirements is made in this Unit
in order to understand the financial aspects of these requirements. Where does the lnoney
come to finance these disaster management or reconstruction schemes? How does the
governmental finance ~nobilisationgeneration set-up operate? What types of agencies are
involved in funding for disaster reconstruction etc? We will now draw our attention to these queries.

8.3 FUNDING ARRANGEMENTS

Government at the central as well as state levels have specific schemes / strategies for
providing funds for disaster management activities, be it relief, rehabilitation or reconstruction.
The Calamity Relief Fund (CRF) is one such arrangement at the central level. Even though,
the disbursement by the CRF is meant to supplement relief funds, a sizeable portion is earmarked
for all phases of disaster management pertaining to six natural cala~nitiesnamely, cyclone,
drought, earthquake, flood, fire and hailstorm. Other financial arrangements include ~ a t i o n a l
Calamity contingency Fund, Prime Minister's Relief Fund, and National Fund for Calamity
Relief etc. Let us now take a look at these arangements:

8.3.1 Calamity Relief Fund

The Calamity Relief Fund (CRF) is a centrally sponsored scheme of. the Government of India.
The central government plans and approves every centrally sponsored scheme relating to
investment or disbursement of funds in identified sectors in the states in order to achieve
defined objectives. Ministry of Home Affairs of Union Government is the nodal authority for
this scheme. The implementation, however, remains with the respective state governments.
I

The funding pattern of the CRF, as envisaged by the Ninth Finance Commission, ever since
its inception in 1990-91, has been dependent on the central government. Every year, centsal
 104 Rehabilitation, Reconstruction and Recove?

government contributes 75 per cent of the funds for a state and the rest 25 per cent comes
from the respective state governments. One of the most significant features of the CRF
scheme is that the funds are to be used for meeting expenditure for the provision of immediate
relief to the affected population, and the nature of expenditure should be of a short duration.

Ln India, the Centre's share of CRF released in 2002-03 was Rs. 1,600 Crores, in 2003-04 it
was Rs. 1,700 crores, and in 2004-05, it became Rs. 1,787 crores. The funds released from
National Calamity Contingency (NCCF) Fund for 3 years were to the tune of Rs. 5,800 crores.
Additional financial assistance is provided from the NCCF in the wake of calamity of severe
nature (Parsai, 2005).

The main objectives of tlie CRF Scheme are to:

o Enable the states to incur requisite levels of expenditure on calamity relief

e Avoid delays in a state government's response to the damage caused by a natural calamity
e Discourage the states from inflating their demands for funds regarding relief

e Ensure against wasteful expenditure by the states

@ Provide greater autonomy and responsibility to the states in relief operations; and
-,

e Make the states more accountable for their actions in the area of calamity relief.

The CRF has been functioning well but for certain drawbacks that have been pointed out by
the Draft Report on "Natural Disasters and Relief Provisions in India: Commitments and .
Ground Realities". As per the Report, one of the major problems with the CRF scheme is the
lopsided method of determination of the CRF's size for different states. The allocations of the
CW's share to the stales (during 2000-01 to 2004-05) by the Eleventh Finance Commission
(EFC) have been made, based on the ability of the states to spend the amount allocated to
them. As it emerges from the analysis of the allocation, better-off states, which have incurred
higher expenditure in the past, have been given higher allocations by the EFC. Yet, the increased
allocations have not been able to empowcr the states to carry out effective relief operations.

Moreover, the CRF is limited to only six natural disasters. As per the Draft Report, the
damages caused by other natural calamities such as heat wave, cold wave, landslides, avalanches
and high tides every now and then cannot be ignored. There is a need to increase the quantum
of allocation for relief work as well as reconstruction and rehabilitation. A part of the blame
for deficiency of relief activities also, however, falls on the states. If the CRF is to play an
' effective role, it shonld,be vested with responsibilities for relief in a larger sense by including

measures for enabling the affected population, especially those living below the poverty line to
regain normalcy.
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The CRF should try to strengthen the access to livelihood, rehabilitate the entire affected I
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population and provide for assistance to the economically backward states for repairs of public
properties and buildings in the calamity-affected areas. The states need to be much more I
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responsible in using the CRF money for tlze intended purposes. The method of determination I
of the quantum of the CRF for a state should take into account the vulnerability of a state to .
I
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natural calamities, the magnitude of loss caused by calamities in the recent past, and the I
frequency of natural calamities in a state. 1
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The formula for contribution to the CW, which at present is 75:25 for the Centre and every 1
state, needs to be.changed keeping in mind the varying abilities of the different state governments j
 Funding Arrangements for Reconstruction 105

to spend money on relief. A quantum raise in the allocations combined with more realistic and
just distribution of the funds among the states would be worthwhile. Civil society organisations
need to monitor relief work. The result of the assessment made by such groups should have
a bearing on the allocation as well as release of funds to the states in the subsequent years.
Before moving on to other funding alrangements, let us take a look at the funding mechanism
that existed prior to the establishment of the CRF:

e Margin Money Scheme

The Second Finance Commission, while estimating the state's committed expenditure (for the
5 years of its recommendation period of 1955-56 to 1959-60) included in their annual revenue
a margin for enabling the states to set apart sizeable sums of money for accumulation in a fund
for meeting expenditure necessitated by natural calamities. This Scheme was later named Lhe
'Margin Money Scheme'. State government had to set up separate funds and transfer the
amounts calculated for each of them to such funds annually. The Margin Money Scheme was
in operation all through the recommendations of Second to Eighth Finance Commissions.

, The amount of assistance given from the Centre, under the Margin Money Scheme, was
always far short of what the state governments actually needed. Therefore, during the occurrence
of natural calamities, the state governments used to approach the Centre with a claim for
immediate financial assistance for meeting the relief expenditure. At that time, the assistance
amount from the Centre was determined on the basis of the assessment of damage in the
affected area by the central team.

In comparison to the Margin Money Scheme, the states under the CRF now get a higher
asiistance from the central government for relief expenditure, and the response of the state
governments to natural calamities can be quicker than before. The CRF Scheme does give
greater autonomy and responsibility to the state governlnent along with the increase in
accountability for their disaster response activities. Thus, CRF scheme is definitely an
,inlprovement over the Margin Money Scheme.

e National Fund for Calamity Relief

The Tenth Finance Commission considered the issue of a calamity of 'rare severity'. It stated
that a calamity of rare sevelity would be adjudged on a case-to-case basis taking into account
the intensity and magnitude of the calamity, level of relief assistance required, capacity of the
recipient state to tackle the problem, as well as the alternatives and flexibility available within
the plans to prbvide relief. Once a calamity is deemed to be of rare severity, it really ought
to be dealt with as a national calamity requiring assistance beyond what is envisaged in tlie
CRF Scheme.

The Tenth Finance Commission placed the urge for national solidarity in a moment of distress
on a more formal basis. The National Fund for Calamity Relief (NFCR) was to be managed
by a National Calamity Relief Committee, which would have representatives fronz the Centre
as well as the states. At the national level, it was to be managed by a sub-committee of the
~ a h o n aDevelopment
l Council. The Committee, the Finance Commission recommended, would
? b e headed by the Union Minister of Agriculttire comprising of Deputy Chairman of Planning
' Cbmnission, two Union Ministers and five Chief Ministers to be nominated by the Prime
Minister annually by rotation. The Eleventh Finance Commission (EFC), on the recom~nendation
1 of the Ministry of Agriculture, discontinued the NFCR in its present form as it thought it had
:eroded the discipline and economy in expenditure.
The EFC noted that the anticipation and provision for a calamity of rare severity in terms of
intensity and magnitude, prior to its happening, was impossible through the CRF or regular
 106 Rehnbilitcltion, Reconstruction and Recovery

budgetary mechanism. It was of the opinion that it is difficult to pre-determine the extent of
funds required to meet a severe calamity; additional financial support from the central government
becomes necessary for such severe calamities. ~ssessmkntof damage could be undertaken
by an independent body of experts. For this pulpose, it recommended the establishment of a
National Centre for Calamity Management (NCCM) for monitoring the natural calamities. The
NCCM was assigned the task to assess whether the state will be in a position to provide relief
in a specific case of calamity of severe nature from the CRF and its other resources. It spoke
of crediting the surcharge collections to a separate fund known as the National Calamity
Contingency Fund (NCCF).

8.3.2 Natural Calamity Contingency Fund

b

Another Scheme interlinked with CRF is thus that of Natural Calamity Contingency Fund
(NCCF). As we mentioned, the central government set up the NCCF as per the reco~nmendations
of the Eleventh Finance Commission, replacing National Fund for Calamity Relief that existed
for 5 years (between 1995 and 2000). The NCCF is a central government find maintained for
providing additional grant for incyrring expenditure on relief in excess of the Centre's coiltribution
from the CRF to that state. Such assistance is considered by the central government only when
the.natura1 calamity is of rare severity. The expenditure on a calamity relief is to be incurred
as per the approved items and norms of assistance from CRF/NCCF schemes. In case, any
state government exceeds the amount prescribed, as per the approved norms of'assistance, the
excess expenditure is to be borne from the normal budget of the concerned state government
and not from the CFWNCCF.

8.3.3 MPLADS
Another funding arrangement called the Members of Parliament Local Area Development
Scheme (MPLADS) was started in December 1993. Under the Scheme, MPs are allotted
funds annually to pursue development works in their constituencies. Each MP gives a choice
of works, to be undertaken in hisker constituency to the concerned District Heads, who get
them implemented by following the established procedures laid down in the guidelines for the
improvement of their districts under MPLADS.

Implementing agencies can either be the government bodies or Panchayati Raj Institutions
(PHs) or any other reputed NGOs that are capable of implementing the works satisfactorily.
Even though, the Scheme has a lot of potential, as funds to the tune of Rs.2 crores are
earmarked per constituency, the Reports of Planning Commission and the Coinptroller and
Auditor General have brought out several analllolies such as overlapping of works, regional
imbalances and misutilisation of funds. At the level of administration, some mechanism should
be evolved so that provision of financial sanction and the administration of project can be
managed at one place. This will not only ensure control over accounts, but shall also lead to
speedy implementation of the projects.

There should be consistency in the provisions. Prompt action should be taken against District
Collectors who fail to obtain utilisation certificate for each sanctioned instalment. There is no
hann if a particular project meant for calamity preparedness is financed from MPLADS funds
and the labourlsalary component of the project is provided from CRF or any other Scheme.
This may provide enough funds to create durable assets for disaster mitigation and preparedness
without compromising on quality.

21.3.4 Prime Minister's National Relief Fund

The Prime Minister's National Relief Fund, created shortly after independence, provides
 Funding Arrangements for Reconstruction 107

immediate relief to people in distress. The Fund depends entirely on voluntary donations received
from the public. The Fund renders assistance to individuals facing disaster situations. Its
resources are utilised for the provision of immediate relief to the families of those killed in
natural calamities like floods, cyclones and earthquakes. It also grants assistance to families
affected by major disturbances, riots and accidents. Besides, the Fund extends assistance to
ailing persons in order to partially defray the cost of expensive medical treatment. Over the
years, lakhs of calamity-affected people have received assistance from this Fund. Apart from
this, there are Chief Minister's Public Relief Fund and Chief Minister's Disasters Relief Fund in
different states that are utilised Eqr fullding of disaster management works.

8.3.5 Insurance Schemes

Insurance is an important risk management technique.'Insurance provisions are very crucial to

meet the losses in the aftermath of disasters. The insurance cover, however, cannot be regarded
as a funding arrangement for disasters. Nevertheless it does act as a funding source to meet
the exigencies caused by a calamity. We need an insurance system that co~nlnonpeople,
especially the rural poor could afford. There is a need for an insurance scheme that compensates
for catastrophic income losses and is easily implemented.

The Eleventh Finance Commission noted that schemes such as crop insu'rance could help
individual farmers to recoup their losses better. Insurance brings quality consciousness in the
infrastructure and also a culture of safety. It insists on following building codes, norms, guidelines,
quality material in construction etc. It also enforces safety standards by bringing about
accountability. In the developing countries, the coverage of insurance sector is less due to
information failure, market lapses, low awareness levels, acute poverty, insufficient purchasing
power, lack of interest in reaching out to the vulnerable groups, as well as public apathy to
educate itself about the true risks posed by natural hazards. One major difficulty in promoting
disaster insurance is that those who are at highest risk have the least capacity to pay the
premium toward insurance.

Disaster insurance can also be possible through, a system of micro-finance. Many Micro-
I
finance Organisations (MFOs) are now working in disaster-prone areas. The success of MFO
services following a disaster depends on timeliness and ability of the MFOs to coordinate relief
organisations depending on the terms and conditions of the loans. Such MFOs are playing a
significant role in many countries e.g., Bangladesh, There are also various 'Catastrophe Funds'
in different countries to meet the financial burden of ^disasters. The insurance agency may
promote a community rating system to encourage communities to go beyond the required
standards of minimum safety. The incentives could be a reduction in insurance premium for
policyholders within cominunities that tdce appropriate actions to red~lcedisaster losses. Let us
look at the different types of insurance schemes on offer in India and other countries:

e Swarnajayanti Gram Swarozgar Yojana

This Scheme was launched in India on April 1, 1999. It aims at establishing a large number
of micro-enterprises in rural! areas, building upon the potential of the rural poor. The Scheme
is yet to meet the objectives it had set for itself due to lack of awareness on the part on
villagers and lack of will on the part of district administration.

e National Agricultural Insurance Scheme

_,ThisScheme is available to all farmers-loanees and non-loanees, irrespective of the size of

their holdings. It envisages coverage of all food crops and aims at providing insurance coverage
. - asid financial support to the farmers in the event of a failure of any of the notified crops as
a result of natural calamities, pests and diseases: he Scheme encourages the farmers to adopt
 108 Rehabilitatiort, Reconsfructiun nnd Recovery

progressive farming practices, high value inputs and higher technology in agriculture. These
types of Schemes, if promoted by the government, could help in stabilising farm incomes,
particularly in disaster years.

Seed Crop Insurance

A pilot scheme of Seed Crop Insurance has been launched to cover the risk factor i~ivolved
in production of seeds. The Scheme is yet to be implemented on a wider scale. The High
Powered ~oln&ittee(HPC) observed that grameen cattle and crop insurance are limited, ad
hoe and scattered in scale, which needs to be corrected.

Kisan Credit Card

A record number of 5,939,318 Kisan Credit Cards have been issued till March 2000, providing
flexibility and security in the flow of agriculture credit system. The Credit Card. Scheme has
benefitted a large number of farmers, but more awareness generation is required to promote
the Scheme. b

e SEWA Insurance

A cooperative group, Self-Employed Women's Association (SEWA) started its own Insurance
Unit called Vimo SEWA, which insures women for life, health, assets, widowhood and accidents.
The Scheme is a huge success in most parts of Gujarat.

0 Insurance Pools

An often-used concept in natural disaster insurance schemes is the insurance pool, whicl~
involves every company to participate in disaster losses in proportion to ils market share in
premiums. This concept ensures that coinpanies avoid being too badly hit or even going
bankrupt because of a disproportionately high loss burden from specific events. Such pools are
operational in Switzerland, France and Spain and are sometimes supported by the State
reinsurance. They are also being considered in several other countries in Europe, Latin America
and Asia. The Turkish Catastrophe Insurance Pool represents an innovative concept for a less
developed market place where code enforcement is to be linked to the availability of insurance
protection andlor governmental disaster assistance. There is also a National Disaster Insurance
Scheme in Honduras, which addresses low-cost housing, public insurance and crop insurance.

There is a need to create awareness on insurance schemes. Hazards should be announced,

notified and publicly displayed so that people could be dissuaded from settling down in vulnerable
areas and insurance needs to be made mandatory in disaster-prone areas. Premiums can be
charged on the basis of intensity of risk involved. Since many areas are inultihazard-prone,
there should be conducive insurance provisions. Incentives need to be provided to insurers who
have followed building codes and other prescribed guidelines prevailing in the area. The services
of panchayats, local bodies, cooperative banks, and post offices could be used by insurance
agencies.

Government should also make provisions to incorporate identity cards, insurance policy number
etc., to create awareness and also facilitate insurance-oriented information. The landless,
shelterless, assetless and underprivileged people need to be insured by the govel-nlnent on a
' tapering basis. It should be ensured that there ire policies for personal property as well as

'disaster-oriented schemes. comprehensive Insurance Policy for covering all types of man-
made disasters must also be brought into place.
Funding Arraizgeinents for Reconstruction

8.3.6 District Level Funds

HPC recommended that there is a need for institutionalising a District Relief Fund at the
district level, based on the principles of CRF so that there is a ready availability of funds. The
District Level Relief Conilnittee under the chairmanship of the District Collector w o ~ ~evolve
ld
the guidelilles and nonns for expenditure going into the district level funds. At least fifty per
cent of the contribution to the funds could come from the public. In view of the fact that the
Eleventh Finance Commission did not recommend the creation of District Level CRF or
contribution thereto from State C W , the High Powered Committee or the HPC (2001) felt that
the Fund could be entirely created out of public contribution and donations. To take account
of disaster ~nanageinentcomponent in the development process, various instruments to ensure
preparedness and mitigation action are required for which it was proposed that 10 per cent
allocation from plan funds at all levels needs to be earmarked for disaster preparedness and
mitigation.

8.4 FISCAL DISCIPLINE

Apart from the CRF, NCCF, there are lunds that are available under Five Yeas Plan allocations
as well as under viirious schemes of Government of India, be it drinking water scheme,
employme~itgeneration scheme, inputs for agriculture and food control measures. Then there
are facilities for rescheduling of short-term loans taken for agriculture purposes upon certification
by the district or state administration. Central government assets or infrastructure are also to
be repaired/rectified by the respective Ministry/Department of the Government of India.

Besides at the occurrence of a calatnity, funds flow from donors, both local and international
for reconstruction. Based on the recommendations of the Finance Comlnission of the Government
of India, the Inter-ministerial Committee fixed the norms of assistance for cach of the eligible
team for which assistance could be given as well as the quantum of such assistance. In actual
practice, a number of states have been allocating funds at scales much higher than determined
by the Government of India, thus exhausting the CRF much earlier than they ought to and that
too on cala~nitiesof lesser magnitude.

It has been observed that while the Government of India remits its quarterly share of the CRF
on a regular basis, the stales sit over it and only when the calamity occurs, the machineiy at
the state headquarters, wakes up from its slumber, taking its own time in making funds available
to the district administration; thereby causing delay in rendering assiqtance and relief when it
is most needed. What is really required is proper financial discipline. There is no room for
tampering with the recommendations of Finance Commissions. The present funding arrangements
would suffice, if the fiscal discipline is maintained. There should not be any cause for complaints
and grievances. More focus needs to be on how disbursed money is actually utilised. The
states have to account for each and every penny spent by them. Without fiscal discipline, even
adequate f~lndii~g arrangements for disaster management cannot produce results.

The norms of assistance fixed by the Government of Inclia need to be adhe;-ed to. The states
should also decide to have a self-imposed limits on when, where and how much to assist. There
is also a need for defining calamity of rare severity or laying down broader criteria. Also
adherence to these guidelines should be insisted upon for ensuring eqnity as well as transparency.
The funds from the NCCF, as prescribed by the Eleventh Finance Commission should be
drawn upon for calamities of rare magnitude, and only in cases where the funds available under
the C W are found to be inadequate.
 110 Rehabilitation, Reconstruction and Recovery

8.5 ROLE OF INTERNATIONAL DONOR AGENCIES

As we discussed in the previous Section, apart from the National Funds and Plan Schemes,
there are many donors-individuals, groups and agencies at the national and international levels
that provide financial assistance for relief and reconstruction at the time of calamity. These are:

8.5.1 International Monetary Fund (ZMF) and World Bank

The IMF, which was created in 1945, is an international organisation enkusted with overseeing
. the global financial system by monitoring exchange rates, balance of payments, as well as
offering technical and financia1 assistance whenever asked. It provides enlergency assistatlce
to help member countries in the wake of natural disasters. Emergency financial assistance is
designed to be disbursed rapidly and is supported by policy advice, and in many cases, technical
assistance.

The IMF was established to promote international monetary cooperation, exchange stability,
economic growth and employment. Since 1962, the IMF has been providing emergency disaster
relief assistance to member countries. The assistance is aimed at 'meeting immediate foreign
exchange financial needs arising from; shortfalls in export earnings and increased imports in
order to avoid a serious depletion of country's external reserves.

Emergency assistance loans are usually disbursed quickly and do not involve adherence to
performance criteria. An IMF member requesting emergency assistance is required to describe
the general economic policies that it proposes to follow. If IMF is satisfied, the assistance is
granted. In normal cbnditions, IMF works to reduce poverty around the world by providing
financial support through its concessional lending facility. IMF resources are provided by its
member countries. The major source of funds is through payment of quotas, which broadly
reflect each country's economic size. The total amount of quotas is the most critical factor that
determines IMF's lending capacity.

The World Bank emerged in the mission of reducing poverty and providing assistance to
i prepare for and recover from natural or man-made disasters. It is a specialised agency of the .
, United Nations. In recent years, the approach of the World Bank towards disaster managernent ,
. . has revolved around a broader goal of risk management. Instead of diverting finances from
ongoing projects to fund recovery and reconstruction efforts, the Bank now provides investment
lending for emergency response, as well as disaster mitigation,. disaster prevention and
vulnerability reduction projects. h

The World Bank has been taking up disaster management funding by financing earthquake
devasted regions' reconstruction projects, streamlining risk management etc. There are different
agencies through which the World Bank or the International Bank for Reconstruction and
1
Development (IBRD) operates:

m The International Development Association (IDA)

I

r The International Finance Corporation (IFC)

I "9 The Multilateral Investment Guarantee Agency (NIGA)

iI r, The International Centre for Settlement of Investment Disputes (ICSID)

r

In addition, the World Bank along with IMF has a programme called the 'Heavily Indebted :
Poor Countries Initiative', which provides a comprehensive approach to reducing the external
debt of the world's poorest and most heavily indebted countries.
Futzding Arrangements for Reconstruction 111

8.5.2 United Nations

The United Nations (UN) was created in October 1945. Although most people associate the
UN with the issue of peace and security, a vast majority of its resources are devoted to
economic, social and sustainable development. Disaster management, in terms of provision of
relief, is one area where the UN is playing an important role. The Economic and Social Council
(ECOSOC) is the principal body coordinating the economic and social work of the UN. The
international agencies like the UN are relied upon in order to respond to nalural and man-made
disasters that are beyond the capacity of national authorities alone. Today, the UN is a major
provider of emergency relief and longer-term assistance, a catalyst for action by governments
and relief agencies, and an advocate on behalf of people struck by emergencies.

The UN has various agencies such as United Nations Development Programme (UNDP),
United Nations Children's Fund (UNICEF), United Nations Educational, Scientific and Cultural
Organisation (UNESCO), United Nations Industrial Development Organisation (UNIDO), which
are working in the area of development assistance, poverty removal, primary education, health,
child relief, women empowerment and environmental sustainability. The UN through its branches
and agencies is involved in capacity building and human development in countries stricken by
poverty, hunger and disasters.

8.5.3 Asian Development Bank

The Asian Development Bank (ADB) was established in 1966. It is a multilateral development
finance institute with a mandate to reduce poverty in Asia and the Pacific. It works with the
World BSnk on labour market reform, decentralisation of social services, reduction of poverty, ,
proinotion of human development, protection of environment, and improvement of status of
disadvantaged sections.

ADB provides financial and infrastructure assistance to all Asian countries in normal times as
well as in the time of disasters. Apart from this, there are many other institutions engaged in .
funding for disaster management and vulnerability reduction such as the Inter-American
Development Bank, Caribbean Development Bank (CDB), European Union Disbursement, UK
Department of International Development (DFID), Food and Agriculture Organisation (FAO),
Canadian International Development Agency (CIDA) and other US Office of Foreign Disaster
Assistance (OFDA).

8.5.4 Bilateral and Multilateral Donor Agencies

Bilateral donors are those that are backed by respective countries' governments, for example
USAID is supported by Federal US Government. Likewise, there are Swedish International
Development Agency (SIDA), Canadian International Development Agency (CIDA), and Danish
International Development Agency (DANIDA), Swiss Agency for Development and Cooperation
(SDC), Australian Agency for ~nternationalDevelopment (AUSAID), Department for
Internarional Cooperation Agency (DICA) and Norwegian Agency for Development and
Cooperation (NORAD).

These bilateral agencies provide financial assistance to national governments and scores of
international and national NGOs for rendering humanitarian and development assistance. Funding
mechanisms of the bilateral agencies may vary. For instance, funds could be directly provided
to the Prime Minister's National Relief Fund or at times, a bilateral agency inay provide funds
to the UN agehcies in the country and ask it to further channel it, as required. Several of these
bilateral agencies have been major supporters of reconstruction and recovery initiatives following
major disasters across the world. As such, these bilateral agencies have amassed conside;able
experience, which usually dictates tenns for funding reconsti-~~ction. It, therefore, becomes
 112 Rehabilitatiorz, Reconstruction and Recovery

important to know what type of policy and strategy an agency has towards the reconstruction
process following a particular disaster in a given country.

8.6 MOBPLISATION OF COMMUNITY FOR E S O U R C E

GENERATION
In recent times, the role of the comnunity and community-based organisationslnon-governmental
organisations has been the key to effective rehabilitation work. A strong advantage that these
organisations have is the good rapport and trust they enjoy vis-8-vis the community at the grass
roots level. To some extent, this is the reason why the international donor agencies prefer to
entrust funds with Illem for rehabilitation work.

Let us take the example of earthquake-hit G~ijarat. Numerous NGOs and local voluntary
organisations have been assisting the villages in rebuilding. The village of Devgargll is one
instance. Completely destroyed, it was reduced to piles of cril~nbledgray stone and rubble in
the Bhuj Earthquake of 2003. A local NGO Sewa Bharfi adopted Devgargh. Like many other
villages, the main challenge in rebuilding is mobilisation of construction ~natkrialin remote
locations. Villages' own capacities a11d resources are harnessed by employing and training local
people, using local materials, supporting local enterprises, and working in partnership with local
NGOs.

Unfortunately, there have been few attempts from the government to give incentives to people
for participating in resource generation. Community level activities in this area need to be
encouraged, especially wher~there are so many instances of government, non-government and
cornmullity partnerships, also called the public-private-people partnerships in disaster management.
Applying a self-help philosophy, the village of Raidenpur, about 11 kilometers from the city of
Bhuj, provides another example of how people have been reaching out to those in need. Caritas
India has been actively providing assistance in rebuilding 180 odd houses. Here an owner-
driven concept has been adopted where the villagers themselves (mostly members of tribal
groups and labourers) are einployed to construct their homes. The village has also reopened
schools in makeshift tents to enable children to resume their education.

The villagers are required to rebuild improved earthquake resistant houses, using quality material.
Quality testing and monitoiing is an integral part of the process. Quality testing laboratories,
including mobile units, have been established at Morbi, Ja~nnagarand Bhuj, and one is in the
pipeline in Bhachau. These laboratories will test the quality of building material for adherence
to specified standards, While the state government should be commended for its efforts,
people's resilience and spirit to rebuild their lives have bcen clearly visible 'in the affected
areas. Death and destruction have brought out the best in the people of Gujarat, as displayed
in the strong community bonding and efforts to help one another. The Tsunami of 2004 and I
Muzzafarabad Earthquake of 2005 have also brought into light many instances of coinmunity-
based rebuilding aciivities with the help of locally, generated resources, in collaboration with the
state and central governments.
I
8.7 CONCLUSION
This Unit explained the concept of reconstr~lctiollvis-h-vis disasters. Different processes and
considerations in reconstruction, namely reconstruction requirements and resource generation
were discussed, The key role played by various funding agencies at different levels-national
and international was brought out. The Unit also threw light on the need for fiscal discipline
and cooperation at the central, state and local levels as well as between nationaland international
agencies. Insurance policies, micro-credit and saving schemes are very crucial in disaster
I

I
Funding Arrarzgernents for Reconstruction .. 113
management funding as they create a corpse of financial reserve that could be used at the time
of disasters. Equally important is the role of coininunity bonding in managing disasters and
raising awareness on fiscal discipline and emergency finance reserve etc. This Unit examined
these important issues.

8.8 KEY CONCEPTS

Disaster Insurance

Insuring against disasters is the best way to guard one's life and property in case of catastropl~es.
Crop Insurance against droughts and floods, house insurance against earthquakes and landslides,
and livestock insurance against cyclones, floods etc., need to be encouraged by the governmental
and non-governmental agencies. Insurance can also be a means of finance in case of a
disaster, Disaster insurance in most countries is still at a nascent stage and needs to be
promoted through education and awareness.

Micro-finance

Micro-finance is often considered one of the most effective and flexible strategies in the fight
against global poverty. It is sustainable and can be implemented on a massive scale in order
to respond to the urgent needs of those living below the poverty line. Micro-finance consists
of making small loans available to individuals, usually the women and the weaker sections to
establish or expand a small business. Grameen or rural banks are instrumental in providing
micro-finance, recycling funds, and benefiting community in normal and disaster times.

8.9 REFERENCES AND FURTHER READING

Brown, Lester R. et al., 1997, Vital Signs: The Eizvironmental Trends that are Shaping our
Future, Worldwatch Institute, U S A ,
Cuny, Fredrick, 1983, Disasters and Development, Oxford University Press, England.
Commonwealth of Learning Executive Masters Programme in Public Administration, IGNOU,
New Delhi,
Fernando, W.B.J, 2003, "Disaster Mitigation" in Pardeep Sahni and Madhavi Malalgoda
Ariyabandu (Eds.), Disaster Risk Reduction in South Asia, Prentice-Hall of India, New Delhi,
Mohanty, Siba Sankar, 2004, "Rhetoric and Reality of MPLADS" (A Compilation), The Centre
for Budget and Accountability, New Delhi,
Parsai, Gargi, 2005, "When Nature Strikes Back" in The Hirtdu, December 25.
Sahni, Pardeep, 2003, "Drought Profile, Management and Risk Reduction in India" in Pardeep
Sahni and Madhavi Malalgoda Ariyabandu (Eds.), op.cit.
Sinha, U.P, 1985, Planned Development of Resources in a Developing Region: An
Economical and Geogi.aphical Analysis, Inter-India Publications, New Delhi.
Smolka, Anselm, 2003, "The Principle of Risk Partnership and the Role of Insurance in Risk
Mitigation" in Pardeep Sahni and Madhavi Malalgoda Ariyabandu (Eds.), op.cit.
Drnfi Report, 2004, Natural Disasters and Relief Provision in India: Commitnlents and Ground
Realities (Compiled by Subrata Das and Nandan Kumar Jha), Centre for Budget and Governance '
Accountability, op.cit.
114 Relzc~bilitation,Reconstruction arzd Recovely

Rodrik, D, 1998, Where did all the Growth go?: Extenzal Shucks, Social Conflict and
Ecunornic Gmwtlt, Haivard University, Cambridge.

Uvin, Peter, 1996, Development, Aid and Conflict, United Nations University, Tokyo.

6Gn-lcl Develupme~itReport, 1999, "Development and the Environtnent", Oxford University

Press, New York.

Hutnu11 Devekopnzetlt Report, 1999, Oxford University Press, New York.

Websites:

www.un.org
www.u~ld~.org
e~~.wikipedia.org/wiki.imf
www,imf.ou

- roodspeeches-urese~ltations
ww~cci.con~/ficci/rnedia
youthink.wcrrldbank.org/~lossa~.Qhr,
grameenfoundalion.or~/~nicr~~fi~~ance
y!ww,shantiommosg/hom-files/fund.l~~m
www.ndmindia.nic.in/committee/fund/comin.html

1) Make a list of the different agencies that provide financial aid in the case a natural disaster.

2) Do you feel that comrntlnity awareness is important to strengthen fiscal discipline? List the
different ways of creating community awareness on mobilisation of resources.

3) With reference to any recent tnajos disaster ill India, try to collect information through government
or NGO official documetlrs and complete the following Table :

Table: Fillancing of Reconshetion &r a 'disaster WOUmay take up the case of any disaster)
r"- 1
Fund Source I Funds Provided for Reconstruction (Rs.)
Food Aid Medical House Repair of Livelihood
Service C~nstmction Public Building Support

Central Goveinment
NCiOs (Specify)
1 I
International Agency
(Specify)
I
I 1

Grand Total I I