Between 2008 and 2024, funding from the Union government, primarily through the National Disaster Response Fund, covered only a fraction of the total estimated losses — just 8% for droughts and 6% for floods.
This has left the State heavily dependent on limited resources, observed the Environment and Social Systems Assessment report by the World Bank, for the proposed loan for the Karnataka Water Security and Resilience Programme.
“Currently, the only pre-allocated financial support available to States is the State Disaster Risk Management Fund, which has been allocated approximately ₹4,100 crore for the 2021-2026 period under the 15th Finance Commission. However, a large portion of these funds was utilised to manage floods in 2021 and 2022, as well as the drought in 2023,” the report further said.
The assessment report further observed that over the years, the State has suffered massive financial losses owing to recurring floods and droughts, with annual damage exceeding ₹10,000 crore in the affected years. In some instances, losses have surged to nearly ₹33,000 crore.
Revenue Minister Krishna Byre Gowda talking to The Hindu said poor compensation from the Union government has been a practice and this has now rightfully been observed in the World Bank report.
“Due to climate change, natural disasters are increasing year-on-year, also increasing the losses. The frequency of these calamities has increased, affecting more number of lives and livelihood. But the State which contributes greatly in terms of taxes is met with step-motherly treatment. While the gap between losses and compensation from the Central government is increasing, in 2023-2024 the Union government denied compensation, which is the right of the State in the federal structure. The State had to fight the Union government in the Supreme Court to take compensation,” he said.
Adding to the crisis, private insurance penetration remains alarmingly low in Karnataka, mirroring national trends. Less than 10% of households have insurance coverage, and only 30% of farmers and agricultural land are insured. This leaves a vast majority of people and businesses vulnerable to financial shocks caused by extreme weather events, the report said.
It further said that Karnataka was grappling with a significant shortfall in disaster risk financing (DRF) as there is no structured mechanism to assess risks and make informed decisions on diversifying funding sources.
The report also emphasised the need for Karnataka “to adopt advanced risk assessment models and explore blended finance mechanisms — combining public and private investments — to strengthen its disaster resilience”.
Integrating such strategies could help the State secure long-term financial sustainability while also achieving its climate adaptation and mitigation goals, it said.
