All provinces have opposed the transfer and closure of over 350 provincial projects costing Rs1,373 billion and are not willing to take over the schemes, citing legal and contractual issues.
The federal government believes that as the seventh National Finance Commission (NFC) Award has significantly increased provincial shares in the federal divisible pool, the provinces should complete their projects through their own resources. There are a total of 1,238 ongoing projects in financial year 2023-24 having a cost of Rs12,318 billion. Of these, 357 are provincial projects valuing at Rs1,373 billion.
The expenditure on all projects is calculated at Rs3,616 billion while the spending required for provincial projects is Rs366 billion.
Sources said that the issue of transferring the ongoing projects was taken up in a meeting of the National Economic Council (NEC) attended by provincial representatives.
Khyber-Pakhtunkhwa proposed that the decision on closure and transfer of projects should be made by the newly elected government. Sindh also opposed the closure and transfer of projects, except for the Sustainable Development Goals (SDGs) programme. Punjab agreed with all the proposed modalities, with the caveat that taking over and completing the ongoing projects should be at the discretion of provincial governments.
It agreed to complete the schemes being executed by provincial agencies from their own resources. In a joint statement, all provinces said that legal and contractual issues would arise if the ongoing projects were closed or transferred, therefore they did not commit to taking over and completing the schemes.
The federal government undertakes development projects and programmes of national importance with the aim of spurring economic growth, ensuring equitable and balanced regional development and providing an enabling environment to the private sector and development partners.
NEC had approved on June 6, 2023 the Public Sector Development Programme (PSDP) 2023-24 worth Rs950 billion against the overall demand for Rs2,000 billion in development funds. Of the total projects, 30% fell within the jurisdiction of provinces and constituted 11% of the total cost. So far, 10% spending has been made on the projects.
The Ministry of Planning, Development and Special Initiatives told NEC that over the years the PSDP composition had been undergoing transformation.
One reason for that was the inclusion of projects and programmes pertaining to subjects that fell within the provincial domain subsequent to the 18th Amendment to the Constitution.
NEC was informed that allocations for such projects and programmes had risen to around 30% of the overall PSDP. As a consequence, the physical and financial progress of mega and core projects of federal subjects was being adversely affected due to the reduction in available funds for such projects and programmes.
It was emphasised that while the NFC Award significantly increased provincial share in the federal divisible pool, the federal debt servicing exceeded the entire tax revenue that remained available for the federal government after NFC share transfers to provinces.
Thus, the provinces had substantial resources to finance their respective Annual Development Plans (ADPs) whereas the federal PSDP was being financed mainly through borrowing.
NEC was informed that taking cognisance of the shrinking fiscal space of the federal government and to make resources available for critical needs, the apex committee of the Special Investment Facilitation Council (SIFC) provided policy guidelines on financing for provincial-nature schemes.
Published in The Express Tribune, March 10th, 2024.
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