Almost half the budget, or Rs1.45 trillion, has been allocated to the provinces for their expenditures in 2012-13 – an amount which is Rs251 billion, or 20.8%, higher than the ongoing fiscal’s allocation.
The share has been worked out under the 7th National Finance Commission (NFC) award which stipulates that 57.5% of total taxes are distributed among provinces on the basis of multiple criteria.
According to the province-wise breakdown, Punjab will get Rs710 billion, an increase of 21%, or Rs124 billion, compared to the outgoing fiscal’s Rs585.9 billion. Sindh will get Rs373.7 billion, an increase of 19%, or Rs62 billion, as its share in federal taxes. Khyber-Pakhtunkhwa will get Rs241.7 billion, an increase of 22%, or Rs44.3 billion, while Balochistan will get Rs133.3 billion, an increase of 19.2%, or Rs21.5 billion, compared to the outgoing fiscal.
The provinces rely on the federal government for meeting their expenditure requirements since about 94% of the country’s income is generated at the federal level, while only 6% of the income is generated at the provincial level.
In order to maintain inter-governmental fiscal relationship, article 160 of the Constitution provides for setting up of a National Finance Commission (NFC) at intervals not exceeding five years. The mandate of the NFC is to recommend to the president the distribution of resources between the federal and provincial governments.
The 7th NFC award was constituted in July 2005, while the award as announced in 2010, after a gap of 14 years. Through this award, provinces’ share in the federal divisible pool was increased from 50% to 56% in 2010-11, and 57.5% from 2011-12 onwards.
Meanwhile, multiple indicators were adopted, for the first time, for distribution of provincial share in the divisible pool. The indicators include population (82%), poverty or backwardness (10.3%), revenue collection and generation (5%) and inverse population density (2.7%).
In all the previous awards, population was the sole criterion, with special grants to smaller provinces.
Based on the criteria, Punjab’s share in the divisible pool comes to 51.74%, Sindh’s to 24.55%, Khyber-Pakhtunkhwa’s to 14.62% and Balochistan’s to 9.09%.
Published in The Express Tribune, June 2nd, 2012.