The main issues relating to 6th NFC Award are now well-known


Apr 12 - 18, 2004





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 divisible pool.

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 provinces.



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 provinces.

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.