Eighteenth Amendment: question of natural resources

With the govt announcing its inadequacy in provisioning of funds, the wheels of development will come to a standstill

Syed Akhtar Ali Shah October 17, 2019
The writer is a former Secretary Home & Tribal Affairs and a retired IG. He currently heads a think tank ‘Good Governance Forum’ and can be reached at [email protected]

The 18th Amendment, passed in April 2010, was heralded as a most comprehensive constitutional reform package after the 1973 Constitution by a broad spectrum of society. Considered as a pre-requisite for strengthening the Federation through empowering federating units, the Amendment faces a number of challenges as to its implementation. Expressing apprehension, the authors of the Amendment at the very outset stated that forces inimical to the concept of provincial autonomy would resort to all sorts of tactics to thwart its implementation. Ever since its promulgation, the provinces have been facing problems in getting their due shares in the distribution of funds.

Although the Amendment has settled one of the most contested issues of fiscal federalism in the history of Pakistan, the federal government is dragging its feet in releasing resources. In this context, the declaration of the 7th NFC Award is regarded as a landmark achievement for attaining the goal of fiscal federalism. The Award has enhanced the shares of the provinces in the federal divisible pool from 47.5% to 57.5% — a significant rise of 10%. In addition to that, the formula for resource distribution in the Award is not solely based on population but also poverty, revenue generation and inverse population density. More importantly, outstanding issues such as the arrears owed to Khyber-Pakhtunkhwa (K-P) on the net hydel profits and to Balochistan on gas development surcharge by the federal government had also been agreed upon with an intention to assuage the feeling of deprivation of these provinces. In accordance with Article 160 of the Constitution of Pakistan, the President is under an obligation to constitute the National Finance Commission for a period of five years to work out resources between the Centre and the federating units in accordance with the formula already agreed. But ever since the 7th NFC Award, there has been a stalemate between the Centre and the provinces over its successor awards — the 8th and the 9th.

The 18th Amendment certainly generated new hopes and aspirations among the people of the smaller provinces for the opening of new vistas of economic and human development by exercising equal power on their natural resources. No doubt the government of the Awami National Party (ANP) and the Pakistan Peoples Party (PPP) had to their credit the release of a chunk of capped net hydel profit arrears of Rs110 billion enabling the government to develop hydel projects, road networks, hospitals, schools, colleges, universities, and projects in other sectors.

Prime Minister Imran Khan had assured the K-P government in the first week of January 2019 that the federal government would resolve the issue of the net hydel profit and pay the dues of the provinces according to the AGN Qazi formula. Article 161 (2) of the 1973 Constitution of Pakistan clearly stipulates a mechanism for the determination and payment of the net hydel profit. In accordance with this Article, “The net profits earned by the Federal Government, or any undertaking established or administered by the Federal Government from the bulk generation of power at a hydroelectric station shall be paid to the Province in which the hydro-electric station is situated.” The White Paper of the K-P government on Budget 2019-20 also states that the K-P and the Centre have signed a Memorandum of Understanding (MoU) to resolve the issues of the net hydel profit arrears and uncapping of net hydel profit. The key outcomes included the fact that the uncapped net hydel profit as determined and transmitted from NEPRA got notified on March 7, 2016, provisioning the payment of the net hydel profit to the K-P government at the revised rate of Rs1.15 per KWh (of the electricity production in K-P). In addition, out of the total share of Rs70 billion on account of uncapped net hydel profit arrears, actual disbursement of Rs58.1 billion has been made to the K-P government leaving a balanced amount of Rs11.9 billion. On the other hand, Sardar Hussain Babak, ANP’s parliamentary leader, in his speech in the Provincial Assembly asserted that the province’s NHP arrears since 2015 amounted to Rs500 billion but the Centre had not only denied those payments but also waived off Rs300 billion on account of the Gas Infrastructure Development Cess outstanding against different entities.

The prime stance of the K-P government is to adhere to and implement the AGN Kazi Committee Methodology duly approved by the Council of Common Interest (CCI). Unfortunately, so far this could not be implemented by WAPDA nor was it honoured by the federal government. Knowing full well the arrangement being temporary, the K-P government despite having its own government at the Centre has been unable to implement the Kazi formula and the related issues. The recent remarks of the Prime Minister expressing the constraint of the federal government to release the funds not only dampened hopes but was also met with anguish and despondency.

In such a case, if the due funds are not forthcoming as is incumbent upon the federal government to transfer as a result of its commitments after the 18th Amendment and commitments made on natural resources of the province, the development process in the province is expected to be stalled and expectations generated by promises of the Prime Minister and government will be shattered. The economy overall is already stuttering and with this pronouncement of the Prime Minister, with the federal government announcing its inadequacies in provisioning of due funds, the wheels of development not only in the province but also in the newly-merged tribal areas will come to a standstill. There are apprehensions that feelings of alienation among the people will grow. The federal government is, therefore, advised to get its finances so as to give the province their due rights and funds post-18th Amendment.

Published in The Express Tribune, October 17th, 2019.

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