Sep 07 - 13, 2009

Mineral-rich Balochistan is the area-wise largest, but most backward province of the country. In the 1991 NFC award, the province was forced to rely entirely on the data and information on oil and gas production and revenue given by the centre. The Baloch nationalist parties have strongly been demanding the ownership and effective administrative control over natural resources of the province. A need is also felt for restructuring of those federal agencies that control production, transmission, distribution, and revenue generation of natural resources in provinces.

The analysts say that the next NFC award should be responsive to the pressing fiscal needs of Balochistan and it must address the genuine grievances of the province, which is currently facing an insurgency-like situation. The next NFC award can help pacifying the situation in the province and it can also add fuel to the fire if it takes population as sole criterion for distribution of national resources and ignores other factors like area and backwardness. The new NFC award must address the issues related to the province's royalty on gas and other minerals.

While Punjab has been insisting on retaining the population-based formula for inter-provincial distribution of resources from the federal divisible pool of taxes under the NFC award, the other provinces have been stressing the need for a formula based on multiple indicators. Punjab being the biggest province with respect to population has been the biggest beneficiary of all the NFC awards. On the other hand, Balochistan has suffered most for being the least populous province.

In political theory a nation-state is constituted by four essential elements including population, area, government and sovereignty. In other words, every constituent is important in defining a true sovereign state. In the state of Pakistan, the constituent of population rules supreme in allocating share to the provinces from divisible pool. This population-based formula enhanced the importance of most populated regions at the expense of least populated and least developed areas in the country. This was due to the inequitable and illogical distribution of revenue that a disagreement was ever found among provinces vis--vis distribution of resources.

This resulted in inter-provincial disharmony posing serious threat to national integration and solidarity. Balochistan has been most voiceless and hence most neglected province.

Pakistan is the most centralized federation in revenue collection where approximately 90 percent expenditures of the provinces are met through federal transfers in the form of straight transfers, share of divisible pool taxes, and grants and subventions. Vertical imbalance arises from centralization of revenue collection with the federal government and excessive dependence of provincial governments on federal transfers.

The interim award, announced by the former president Pervez Musharraf in 2006, did not address the basic issues of IPD and HDI for horizontal fiscal equalization and retained population as the sole basis for horizontal distribution. It also retained the practice of federal subventions for running of provincial governments marginalizing the fiscal autonomy.

Local experts argue the existing population criterion does nothing for reducing poverty, illiteracy and population growth in the country where population growth rate at 2.7 percent, according to one estimate, is one of the highest in the world and where 33 percent of the population lives below national poverty line. How will the most populous province discourage population growth when population provides it with the basis to secure additional funds? It would be better if greater incentive would have been provided to the provinces decelerating the population growth and sponsoring population welfare programs.

It is worth mentioning that Australia and in many other federations of the world, the IPD is one of the factors, which are considered for the distribution of resources among federating units.

Federal government poverty reduction statistics show 32 percent backwardness for NWFP and 24.9 for Balochistan. The parametric ratios indicate Balochistan's share in population as 5.11 percent, IPD 82.9 percent, and revenue collection 2.4 percent.

Provincial finance secretary told this scribe that provincial government has challenged the federal government's poverty reduction statistics showing NWFP as the country's most backward and poorest province.

The province's own revenue generation has been estimated at Rs3.47 billion, of which Rs2.50 billion is non-tax income and only Rs972.16 million is expected to be collected as taxes. The province is in dire need of resources to combat backwardness and drawing out of the underdevelopment trap. The UNDP's Pakistan National Human Development Report 2003 has found that out of Pakistan's top 20 most backward districts, 50 per cent are located in Balochistan. The report also indicated 0.499 HDI for the province with HDI distance of 45 percent. Will almost half of Pakistan area be left backward and not provided sufficient funds only for the reason of being smallest province with respect to population? Balochistan is paying the price for being least populous federating unit.

Baloch nationalists believe the existing sole population criterion for distribution of national resources is based on political indicators. Stronger the province politically would be, greater it would be the receiver of resources; and more deplorably at the expense of politically weaker federating units. What an irony?

Political power indicators expose the dominance of one province in all the power circles - bureaucracy, both civil and military, National Assembly and the Cabinet. This dominance finds its manifestation in economic planning, policy-making decision-making processes in Islamabad. Balochistan has been most voiceless and hence most neglected province.

The province needs to find new and dependable sources of income to reduce dependence on federal divisible pool. It has no effective administrative control over its natural resources. It is the federal agencies that control production, transmission, distribution and revenue generation of natural resources in province. The province has repeatedly expressed its serious reservations about the federal government's method of calculating wellhead cost of gas.

Though Balochistan has a rich mineral endowment yet this sector contributes nominally to the provincial GDP. It has actually been the federal government that remains responsible for mineral sector development. The undeveloped or under-developed status of this sector shows that it has suffered years of neglect.

The constitution provides the flexibility of dynamically varying the distribution formulas in line with the changing needs of time. Unfortunately, the country has a checkered history of NFC.

Fiscal federalism is yet to gain roots in the federation which is one of the major causes of lack of harmony and stability in the country.