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NFC Award
Equitable distribution of resources

  1. The NFC award
  2. The Sugar crisis
  3. Agri-tax: A challenging task
  4. Water crisis in Karachi
  5. Irrigation scenario in Pakistan

Since the NFC award was announced provinces have been complaining about unfair allocation of financial resources

From Shamim Ahmed Rizvi, Islamabad
Jun 12 - 18, 2000

The government of General Pervez Musharraf has decided in principle to review the National Finance Commission (NFC) Award in the budget 2000-2001.

A high level meeting in Islamabad also attended by the four Provincial Governors has reportedly very strongly recommended to the government to review the NFC Award over which the small provinces have been agitating for long. The Chief Executive has already hinted at removing provincial disharmony through equitable distribution of federal and provincial resources. In past Sindh and Balochistan have been agitating over the inequitable distribution of shares of provinces in divisible taxes.

The meeting was held under the chairmanship of Interior Minister Lt. General (Retd) Moinuddin Haider and attended by the Governor Punjab Lt. General (Retd) Muhammad Safdar, Sindh Governor Muhammad Mian Soomro, Governor N.W.F.P Lt. General (Retd) Muhammad Shafique, Governor Balochistan Justice (Retd) Ameer-ul-Mulk Mengal, Chief Secretaries, Finance Minister Shaukat Aziz, Communication Minister Lt. General (Retd) Iftikhar Shah and other senior officials of the concerned government departments.

The representatives of the provinces reminded the federal government its pledge of ensuring financial rights to the provinces after abolishing the octroi system.

The IPCC meeting was the first since the military takeover and various issues facing the provinces came under thorough review. It may be recalled since the NFC award was announced provinces have been complaining about unfair allocation of financial resources.

The meeting was told that the provincial governments could not complete the ongoing development projects because of financial restraint due to abolishment of the octroi system and amendments in the taxation procedure.

All the provinces submitted their recommendations seeking fresh allocation of financial resources under the NFC award. Finance Minister Shaukat Aziz assured the federating units that serious consideration would be given to the recommendations. If the recommendations found justified, measures will be taken to provide additional allocation in the next federal budget, Shaukat added.

The NFC Award announced by the previous government of Nawaz Sharif was based on census which was rejected by Sindh and Balochistan. The new NFC Award will be based on the data provided by the NADRA in light of latest census. The government will constitute NFC under Article 160 of the Constitution very soon which will make its recommendation over the provinces' shares in the federal divisible pool.

Under clause (4) of Article 160 of the Constitution the recommendation of the NFC are given effect through an order of the President specifying the share of net proceeds of the federal taxes and duties to be allocated to each province.

In pursuance of the constitutional provisions the distribution of the taxes was made on the population basis, as recommended by the NFC from time to time. The share of the provinces in the divisible pool was firstly based on the census of 1972 and ratio of each province as recommended for NFC Award for 1975 was Punjab (60.25 per cent), Sindh (22.50 per cent), NWFP (13.39 per cent) and Balochistan (3.86 per cent).

Later the ratio of provincial share was recollected from July 1,1983 through President's order on the basis of provisional population census 1981 and the population in percentage determined for each province was: Punjab (57.97) per cent, Sindh (23.34 per cent) and Balochistan (5.30 per cent).

The National Finance Commission 1990 recommended that pending the adoption of next census report, the provincial share be distributed between provinces on the basis of their respective populations according to 1981 census.

The Inter-Provincial Coordination Committee's endorsement of the provinces' demand for a new National Finance Award is welcome for more than one reason. First, because it brings into focus the harmony among the federating units of the state, as evident from the appreciation of each other's problems. Secondly it underscores the advisability of seeking solutions to problems, as much as possible, from the clear provisions of the Constitution. In this regard, it needs be noted that the strategies of the present government, as reiterated by Chief Executive General Pervez Musharraf at his recent press conference, also included the urgency of bringing about inter-provincial harmony and understanding from creation of unity of thought and action.

Resource-sharing by the centre and the provinces is the pivot on which a healthy federal structure rests. Its importance has increased after the abolition by Islamabad of local taxes, making even the local councils dependent on its handouts. With the advent of the district governments, the transfer of resources from the federation to the provinces and then to the districts is going to become even more important and sensitive. Therefore, it is appropriate that the NFC award be reviewed in the light of the experience of the provinces and the requirements of the new system of power devolution being put in place.

Notwithstanding the people's unqualified acceptance of October 12, 1999 change and its subsequent legitimisation by the Supreme Court and, again, notwithstanding the present government's determined bid to complete its agenda of salvaging the country from the dark abyss with unorthodox strategies, the federation's constitutional obligations need not necessarily remain ignored. After all, at a time when attention is being focused on devolution of authority to the grassroots level, denial of their due share to provinces in the obtaining situation will bring little credit to the government of the day. Now that IPCC, acting in deference to the wishes of all the provincial governors for a new NFC award, equal distribution of water resources, increase in financial resources of provinces and settlement of WAPDA dues, has decided soon to hold a high-level meeting for the purpose, it should mark the beginning of a return to the constitutional path to ensure inter-provincial harmony and national unity in matters of vital importance.