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1- NFC AWARD AFTER EID
2- THAR COAL POWER PROJECT
3-
RAMAZAN AND PRICES


NFC AWARD AFTER EID

 

The 5th NFC award, which was signed in February 1997 for period of 5 years, provided 37.5% of the federal divisible for the provinces

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From SHAMIM AHMED RIZVI,
 Islamabad

Oct 25 - 31, 2004
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While announcing that the National Finance Commission will meet after Eid, next month, the Prime Minister Shaukat Aziz has expressed hope that a satisfactory settlement will be made for ensuring that all parties including the federation and the four provinces get their due share from the national income in the 6th NFC award.

It sounds too good to be believed. It will be most commendable achievement of Prime Minister Shaukat Aziz if he, somehow, manages to build a consensus among all the stakeholders of the award. Shaukat Aziz could not succeed in this mission as Finance Minister despite the last minute intervention of the former Prime Minister Mir Zafarullah Khan Jamali in June last. After having failed to reach a consensus, the President was requested to extend the application of 5th award for another (2004-05) year. The President was well advised, after Jamali's failure not to intervene directly or indirectly in the matter in view of sharply divided views of the provinces.

There appears to be no fresh development justifying Shaukat Aziz optimism for a consensus except that he, besides being a Prime Minister, is also holding the portfolio of Finance Ministry. Expressing strong hope that the issue will be settled amicably, the Prime Minister has announced that the process to bring about a consensus among the federating units and the federation on the NFC award will be started next month and he would himself chair the NFC meetings.

After the failure of last NFC meeting (in May last, to resolve the thorny issue of the distribution of the divisible pool between the center and the provinces, the then Finance Minister Shaukat Aziz had declared that the federal government had agreed to increase the share of provinces to 47% from 37% in the divisible pool provinces and if the provinces did not reach settlement for division of this share among themselves by first week of June, then the federal government would seek an extension to existing NFC award for the budget 2004-05. While the provinces were demanding 50 per share in the divisible pool from the center, and they were sharply divided.

 

 

The 5th NFC award, which was signed in February 1997 for period of 5 years, provided 37.5% of the federal divisible for the provinces to be distributed among the provinces on the basis of population. The main issues relating to the 6th award are now well known. First the provinces want their share in the divisible pool to be raised from 37.5% to 50 percent. The previous five awards have been distributed on the basis of population. Punjab alone has been satisfied with this as it gets 57.88 percent of the total on the basis of its population under 1981 population census while Balochistan gets 5.3 percent, Sindh 23.25 percent and NWFP 13.54 percent. Punjab wants that basis to continue while the other 3 provinces are reluctant to follow this formula any more and have their own proposals on alternate basis. Balochistan and NWFP desire area and level of development of the province to be the basis. Sindh want revenue generation to be the basis of distribution of divisible pool.

According to the seven options proposed to the provinces by the federal government, population gets the majority share and revenue collection gets a four percent share in all the options. According to the first option, as 80 percent share will be for population, 10 percent for backwardness or poverty, six percent for inverse population density (IPD) and four percent for revenue collection. For the provinces it will translate in the following: Punjab (53.39 percent), Sindh (25.06 percent), NWFP (14.31 percent) and Balochistan (7.42 percent). The second option proposes 85 percent for population, 10 percent for backwardness, one percent for IPD and four percent for revenue collection, translating as Punjab (49.32 percent), Sindh (24.22 percent), NWFP (14.83 percent) and Balochistan (11.60 percent).

The third option proposes 90 percent for population, four percent each for backwardness and revenue and two percent to IPD, which translates into Punjab (51.97 percent), Sindh (25.04 percent) and Balochistan 7.75 percent).

The fourth option proposes 85 percent for population and five percent each for the three other factors that translates into Punjab (53.53 percent), Sindh (25.07 percent), NWFP (14.07 percent, and Balochistan (7.33 percent). The fifth option proposes 88.35 percent for population, 5.75 percent for backwardness, 4.15 percent for revenue and 1.75 percent under IPD, which translates into Punjab (51.25 percent), Sindh (24.99 percent), NWFP (13.95 percent), and Balochistan (9.81 percent).

The sixth option proposes 87.8 percent under the head of population while poverty, IPD and revenue will get six percent, two percent and 4.2 percent respectively. This translates for the provinces as Punjab (53 percent), Sindh (25.76 percent), NWFP (14.40 percent) and Balochistan (7.48 percent). The seventh option proposes 90 percent for population, two percent for backwardness and IPD and revenue will get four percent each, which translates for the provinces as Punjab (52.76 percent), Sindh (22.09 percent), NWFP (14.42 percent) and Balochistan (7.72 percent).

For the Prime Minister's optimism to bear fruit this time round, it needs to be understood by all and sundry that a consensus will only be possible and sustainable if all the stakeholders, especially the provinces, feel a sense of ownership will only emerge if the provinces receive through the proves of negotiations to a greater or lesser extent at least one of their demands for a fairer deal. If the relatively backward provinces of NWFP and Baloshistan are to be compensated for the looming loss of subventions, the new formula should seek to correct their poverty. If Sindh negotiates some weightage for its contribution to revenue generation, heavens will not fall, and the province would feel vindicated. In other words distribution under the award shall have to be based on multiple factors and not on population alone. It is the Centre and Punjab that have to show some flexibility and magnanimity if the new NFC award is to see the light of day. While the Prime Minister's optimism may be infectious, much hard bargaining lies ahead. It would be a test of the Prime Minister's sagacity and persuasive powers to get all the stakeholders on board for satisfactory sharing.