8th NFC Award: Punjab, K-P seek larger slices of revenue pie

At working group meeting, provinces seek funds to fight terror

Shahbaz Rana January 25, 2016
Students stage a demonstration outside the Bacha Khan University. PHOTO: AFP

ISLAMABAD: Amid the centre’s reluctance to finalise the new National Finance Commission Award (NFC), Punjab and Khyber-Pakhtunkhwa have demanded an increase in their shares in the federal financial resources to create room for spending on counterterrorism.

While Punjab has sought making expenses on the National Action Plan (NAP) part of the formula for distribution of resources, the K-P government has asked for increasing its compensation share to 5% of the divisible pool on account of losses suffered in the war on terrorism.

Currently, K-P gets 1% of the total divisible pool to cover financial losses of the war. The province has also sought Rs66 billion from the centre for its expenses under NAP without calling for inclusion of such expenses in the federal divisible pool.

The federating units raised these issues during a meeting of the working group of the National Finance Commission (NFC) on Monday. The group had met to discuss a report on analysis of allocation and efficiency of expenditures by the federal and provincial governments that will become the basis for determination of expenditures for the next five years.

The K-P government presented the draft report of the working group. The findings showed the quality of expenditures had been affected owing to less than the allocated transfers by the federal government.

The provinces got less than the indicated revenue receipts due to Federal Board of Revenue’s inability to meet its tax targets, the report stated.

Punjab’s Finance Minister Dr Ayesha Ghaus Pasha also sought inclusion of expenses on activities related to China-Pakistan Economic Corridor (CPEC) among the criteria for distribution of resources from the centre to provinces.

The financing needs of the provinces have significantly increased after the 18th Amendment and requirements for meeting the Sustainable Development Goals (SDGs), she said. The financing needs to implement NAP should also be made part of the formula of distribution of resources to the provinces, she added.

The demand for increase in resources has come at a time when the federal finance ministry is reluctant to finalise a new NFC Award. The 7th award expired in June last year but the president has extended it further as an interim arrangement.

Punjab’s demand would complicate the matters for the centre that is already trying to rebalance the allocation of resources tilted in favour of the provinces under the 7th NFC Award. In the last award, the provinces’ share in federal taxes was increased from 47.5% to 57.5%.

The K-P finance minister demanded his province’s share on account of losses against war on terrorism be increased by four times to 5% of the divisible pool.

But Punjab opposed the demand. “Terrorism is no more limited to K-P as it is now affecting the national economy,” said Punjab’s Dr Ayesha.

The K-P government also demanded the federal government should clear its Rs144 billion arrears on account of net hydel profit.

Meanwhile, Punjab also asked the International Monetary Fund (IMF) to stay out of the discussions.

“The NFC is a constitutional body and its deliberations are sacred,” Dr Ayesha said while responding to the IMF’s recommendations on rebalancing resources between the centre and the provinces.

Published in The Express Tribune, January 26th,  2016.


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