Govt to hold NFC moot ‘with open mind’, PM assures Sindh CM

Prime Minister Imran Khan has assured Sindh Chief Minister Murad Ali Shah that the federal government will participate in the National Finance Commission (NFC) meeting with a "completely open mind" and in the spirit of mutual respect and accommodation.

PM Imran has written a letter to CM Murad in response to the latter's letter dated July 23, noting that the NFC is the only forum to deliberate "as to how the costs/expense incurred or to be incurred in discharge of such new obligations and national projects based in the provinces are to be shared between the federation and the provinces".

"This necessarily entails adjustment in the distribution of taxes between the federation and the provinces that is to be made under Article 160," reads the PM's letter.

The NFC is meant to distribute financial resources among the federal government and the provinces and includes distribution of taxes collected by the federal government under federal divisible pool.

According to Article 160, the president constitutes the NFC after every five years for a period of five years. Once there is a consensus among all stakeholders on a particular formula to distribute the finances, the award is implemented for the next five years.

The PTI led federal government on May 12 formed the 10th NFC to announce the new award. The Ministry of Finance notified constitution of the 11-member commission after approval by federal and provincial members and its terms of reference (ToRs) by President Arif Alvi.

Referring to Articles 78-83 and Articles 118-123, the letter said these provisions have no relevance in the context of sharing of taxes as these refer to expenditure once the tax share stood determined in term of Article 160 of Constitution.

"It is also stated that the purpose of 10th NFC is to evolve and agree upon revised criteria keeping in view of the development since the last award, which would form the basis of equitable distribution of taxes between the federation and the provinces.

"We shall have ample opportunity to deliberate upon all relevant considerations during the meetings of the NFC but let me briefly address clauses No 2 (d) to (f) of the notification which you have described as unconstitutional in your letter," said the PM.

The letter said prior to the abolition of the concurrent list in 4th schedule to the Constitution, the federation as well as the provinces shared a number of subjects. 

He said with its abolition, all such subjects devolved to the provinces. 

"However, it emerged that in spite of the devolution it was not possible for many such subjects to be dealt with the provinces alone. This is particularly so when the issue transcended the territorial limits of the respective provinces." 

The letter said in order to deal such issues, the PPP led federal government introduced the concept of 'trans-provincial' matters and introduced a federal law - Industrial Relations Act 2012 - on the subject of labour welfare which had otherwise devolved to the provinces. 

The letter said this law was challenged on the ground of usurpation of provincial legislative power by the federation in different high courts. 

"Ultimately, the Supreme Court decided the case in the Sui Southern Gas Limited in 2018 and the legislative competence and the obligation of federation in such matters was upheld." 

The PM also referred to another SC judgment wherein three hospitals situated in Karachi were transferred to federal government.  "It is also stated that though health fully devolved in the provinces but there are obligations on federation in view of SC judgment."

The letter also referred to the SC suo motu case related to coronavirus wherein certain directions were passed to federal government related to health issue. Even otherwise this is provincial subject.

"The federal government does not have any option to ignore of opt out of the obligations on the ground that the subject stood devolved to the provinces as all these matters directly relate to and effect the fundamental rights of the citizens as well as obligations under Article 151 of the Constitution," said the letter.

Source said the Council of Common Interest (CCI) will meet today (Thursday). The meeting will be chaired by the prime minister and attended by all provincial chief ministers.