The deadline of March 31, 2004 given to the National
Finance Commission to achieve a consensus on the 6th Award has already
passed but the desired agreement is still not in sight. The Finance
Minister, Shaukat Aziz after 2 days of unsuccessful deliberations at
Quetta (March 30-31) has reportedly requested the Prime Minister to
intervene and help in evolving a consensus.
The main issues relating to 6th NFC Award are now
well-known. First the provinces want their share in the devisable pool
to be raised from 37.5 to 50 percent but the center which was previously
insisting on 45 percent has reportedly agreed in Quetta meeting to raise
provinces share to 46 percent. The other and the major disagreement is
on the formula for inter-provincial distribution of resources in the
The federal-provincial equation may be solved by
center showing a little bit more generosity by increasing provinces
share to 47.5, but the inter-provincial distribution remains
contentious. The previous five awards have been distributed on the basis
of population. Punjab alone has been satisfied with this as it got 57.88
percent of the total on the basis of its population under 1981
population census while Balochistan received 5.3 percent, Sindh 23.28
percent and NWFP 13.54 percent. Punjab wants that basis to continue
while the other 3 provinces have their own proposals to on alternate
basis. Sindh wants revenue generation to be the basis; Balochistan and
NWFP desire area and level of development of the Province to be the
basis. Apart from this demand of NWFP and Balochistan demand their share
in profits of hydle power and gas respectively. It is yet another point
on which there is a difference of opinion amongst the NFC members.
Prime Minister Mir Zafarullah Khan Jamali, who had a
long session with the Finance Minister after Quetta meeting emphasized
the need of finalizing the Award within the next 2/3 weeks so that the
budget proposals for the coming financial year could be prepared in its
light. While assuring full personal help, the Prime Minister has
directed the Finance Minister that adequate resources be made available
to the center and the provinces as it was essential for improving the
effectiveness of the governance, infrastructure financing their
development needs and improving the standard of common man.
The NFC is a constitutionally mandated forum to
distribute federally collected financial resources between the
federation and federating units: Balochistan, the NWFP, Punjab and Sindh.
The federal finance minister heads the NFC and the provinces are
represented by their respective ministers of finance. The other four
members of the commission represent the interest of their respective
The NFC award process predates the 1973 Constitution.
However, under the 1973 Constitution, the federation and the provinces
have, in addition to their exclusive sources of revenue, a divisible
pool comprising a certain proportion of the net of specific taxes to be
shared by all constituents and the federation. The constitution spell
out the taxes that constitute the divisible pool but the president has
the authority to make changes. Under the last NFC Award signed in
February 1997, the federal government transferred Rs. 96.15 billion to
Pubjab, Rs. 67.3 billion to Sindh, Rs. 22.3 billion to the NWFP and Rs.
17 billion to Balochistan — a total of Rs. 193 billion to all the four
The NFC Chairman, Finance Minister Shaukat Aziz, with
full backing of the Prime Minister has started a round of negotiations
to resolve the issue before the next meeting, now scheduled for
Islamabad in a week or so. He met Ch. Pervez Elahi in this connection.
So far, Senator Aziz had been handling matters with confidence, but now
its seems he has felt the need for a senior politician to play a
mediating role. It is also significant that he has not gone to the
President. This is because, as Senator Aziz may have realized by now,
that the NFC, like other federal coordination exercises, is more about
politics, where he is a neophyte, than about finance, where he is an
undoubted expert. Mr. Jamali built a pro-province consensus for the 1991
award, while merely Balochistan's unofficial member. As Prime Minister,
given a free hand, he is probably the best person to break the current
deadlock, not because of his economic wizardry, but political experience
and a commonsense understanding of the issues.