FATA reforms: Untangling the Agency Development Fund

It fills the gap of paltry sum provided by federal govt to meet expenses of FATA agencies

PESHAWAR: As the government nears end of term, the ruling party attempts to make good on its commitment to mainstream Federally Administered Tribal Areas (Fata).

In an address to the National Assembly on May 2, Prime Minister Shahid Khaqan Abbasi reaffirmed his government's pledge to implement recommendations outlined in Fata Reforms Committee 2016 report. A day later, Khyber-Pakhtunkhwa Chief Minister Pervez Khattak announced that Fata will be merged with K-P on May 30, 2019.

The disenchantment of the tribesmen, spanned over 70 years of tribal system with no legal, administrative and development mechanism coupled with over 15 years of military operations resulting in displacement of over five million people, rests atop a tainted system under political agents (PA).

Taxation system

At the core of this lies the taxation system in Fata - translating into the only income-generating source for the PAs. The duty fixed on commodities and transport permits by political agents peg around the Agency Development Fund (ADF) or Agency Welfare Fund: Which basically pertains to filling the gaps of paltry sum of monies provided by the Federal Government through a taxation system  by the political agent to meet expenses of the agency.

Cash inflow, outflow

The deep-rooted manipulation is an open secret that the system does not attempt to hide as data obtained from Fata secretariat reveals gaping discrepancies in balance sheet with expenditure outperforming income.

According to the documents, the average revenue of Khyber Agency rests at Rs83 million while average monthly expenditure is clocked at Rs78 million, In Kurram Agency income is averaged at Rs9 million while expenditure costs Rs9.8 million - since the amount is not audited through auditor-general (AG), the receipts are not deposited in the government treasury but in assignment accounts of respective agencies.



Similarly, data from the secretariat’s law and order department reveals the total revenue computed for all seven agencies for the fiscal year 2016-17 was Rs1.6 billion against expenditure of Rs1.4 billion, however the federal government allocated a mere Rs20 million to cover side expenses. This by the end of the day is a zero sum game.

The revenue exceeds in agencies with an international border active for trade.  Yet if the border closes, the expenditure will not decrease. The daily economy of the agency will exist.

Speaking to The Express Tribune, an official said the Fata Secretariat asked the federal government for Rs1.4 billion to be included in the current expenditure but the demand was turned down.

A parallel system

Where legal mechanisms fail to provide relief, a parallel system evolves to make up for the anomaly in cash outflow. The dynamics of generating income in the agency fall under three categories: legal, illegal and under the table.

The Rahdaar [route permit], fines and taxes are clubbed under legal sources of revenue but are corrupted to make up for the allocation. In Khyber Agency, the documented profit from rahdaari, fines and local levies in December 2017 reached between Rs80 and Rs90 million meeting operational expenses of around Rs70 million. While the rahdaari for a ten tyre truck is officially sold for Rs4,500, unofficially it is worth Rs45,000 - the excess amount of Rs40,500 is shared. The supply of goods is directly proportional to its demand - providing a chance for the rates to be manipulated.

The third source of income through illegal means include cross-border smuggling of goods, vehicles and narcotics through popular routes.

However, officials caution against singling out the political agent as smuggled goods are facilitated even in K-P. "Controlling smuggling will be difficult if the ADF is abolished," he added.

Another official recommends making an additional amount collected through taxation system available to the political agents in the budget to ensure a smooth transition. Stating that the ADF contributed to amenities paid to tribal Maliks in the agency, he highlighted concerns shown by tribal elders over dissolving ADF.



Combating depravity: The Mohmand model


Despite the lack of resources to build capacity independent of proposed Fata reforms, the political agent of Mohmand Agency initiated a process to counter the parallel system on April 13, 2018. He began with abolishing cess on Water and Power Development Authority (Wapda) and 38 other miscellaneous items. The locals were charged at least Rs220 per person despite not having access to electricity.

The average income in lieu of this tax ranged between Rs500,000 and Rs800,000. Apart from Wapda, tax on 38 out of 104 items was also lifted bringing the total financial impact to Rs1 million when averaged per month as per data of the last 21 months. The items, including food and daily utilities, were found to be expensive in the agency compared to most areas of K-P due to transportation overheads.

With 55% reduction in check posts in Mohmand Agency and the rest being handed over to the political administration when the cellular network was made functional cellular companies were asked to contribute to the agencies development under the Corporate Social Responsibility (CSR). The same funds would be utilised to better the security mechanism of the agency and provide for the latest equipment.