10 NFC: Don’t upset the apple cart

The composition of the 10^th National Finance Commission (NFC) has set off alarm bells within the provinces and supporters of provincial autonomy. Almost all political parties, barring the PTI, have openly opposed the composition of the body terming it to be against the vires and spirit of the Constitution. Moreover, the leaders from Khyber-Pakhtunkhwa (K-P) and Balochistan have also objected to the appointment of Dr Musharraf Rasul and Javed Jabbar as representatives of the provinces in the NFC, as being non-residents of the respective provinces.

Article 160 of the Constitution makes it obligatory for the President of Pakistan to notify the NFC for five years with an objective to work out the debts between the federal government and the provinces in accordance with Article 2(3). A plain reading of this clause clearly limits NFC to the distribution between the federation and the provinces of the net proceeds of the following taxes as mentioned in sub-clause 3 of the aforementioned article. It allows grants in aid by the federal government and the provincial governments to borrowing powers, and any other matter relating to finance referred to the Commission.

Although the article mentions the President as the authority to constitute the commission and frame terms of reference, he does not enjoy unfettered powers. Those powers are to be exercised with due diligence and in accordance with the law as enshrined in Article 4 of the Constitution and judgments of the courts. Moreover, the overall spirit of the Constitution and Sustainable Development Goals (SDGs) also has to be adhered to.

Sub-clause 3A of Article 162 of the Constitution has restrained the powers not only of the President but all others with the insertion of the words: “The share of the Provinces, in each Award of NFC shall not be less than the share given to the Provinces in the previous Award.” Therefore, it made it imperative to have drafted the terms of references keeping in view the spirit of this clause.

The Supreme Court held in Mir Ahmad Nawaz Khan Bughti v Superintendent, District Jail, Lyallpur (1966) that “Article 4 is intended to negative any claim by the Government that any category of its acts in relation to citizens and other persons in Pakistan are not subject to law at all”. On the same analogy, the acts of the President are to be tested.

The adviser to the prime minister on finance and revenue is alien to Article 160(1) which mentions the minister of finance of the federal government, but the notification authorises the adviser to the prime minister to chair the Commission. This is one of the basic legal moot points. In this context the Rules of Business of 1973 have explicitly defined that “Cabinet” means and consists of the prime minister and the federal ministers, meaning thereby that the adviser to the prime minister is not even a part of the cabinet. Similarly, the same rules lay that “Minister” means federal minister in charge of the ministry, making it clear that the adviser has got no legal authority under the Rules of Business of 1973 framed under Articles 90 and 99 of the Constitution of Pakistan.

The TORs also include the assessment and allocation of resources to meet expenditures related to the Azad Government of the State of Jammu and Kashmir, Government of Gilgit-Baltistan and newly-merged districts of K-P i.e. erstwhile FATA. This also brings us to other constitutional and legal issues. Under Article 1 of the Constitution, the territories of Pakistan comprise only the provinces of Balochistan, K-P, Punjab and Sindh, Islamabad Capital Territory and such states and territories as are or may be included in Pakistan by accession or otherwise. As such, Kashmir and Gilgit-Baltistan are not part of Pakistan and have not formally been merged into Pakistan. They only enjoy a special status under the international law. FATA already formed part of the federation and now stands merged with the province of K-P with a commitment to provide 3% of the NFC.

Any plan to meet expenditures made on security, natural disasters and public debt by reducing the share of provinces appears to be a subversion of Article 160 sub-clause 3A. The Constitution clearly demarcates the responsibilities of the federation and provinces. Therefore, shifting the burden of failures of the federal government to provinces is not appropriate. As far as rationalisation of subsidies given by the federal and provincial governments in their budgets and agreeing on a mechanism to finance them, the burden can be shared to the extent of benefit accrued to the respective provinces. In the context of exploring ways to reduce losses of state-owned enterprises and agreeing on mechanism, conversely the provinces may ask for sharing the burden of their owned entities. It seems strange that how the burden of losses of state-owned entities such as the Steel Mills, PIA or Railways can be shifted to the provinces.

With regard to non-statutory nominations, Javed Jabbar showed grace by publicly stepping down to avoid controversy. It is expected that Musharraf Rasul will also demonstrate the same spirit and the Government of K-P may appoint any other well-versed retired civil servant who has stakes in the province such as Shakil Durrani, Riaz Noor and Amjad Ali Khan to avoid further embarrassment.

The better course is not to upset the apple cart. The above-mentioned issues were settled after a lot of debate with consensus. The best option available is to get rid of the sick state units persistently causing loss in billions, improve tax collection, and enhance international trade by improving the quality of cotton seeds for quality cotton yield making it compatible with the international market.

Published in The Express Tribune, June 10^th, 2020.

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