K-P's rightful share

Khyber-Pakhtunkhwa is facing severe financial crisis for the last so many years. Rather than stabilising, the crisis is deepening due to spiraling energy costs, unchecked inflation, a volatile border policy with Afghanistan and persistent threat of terrorism. These challenges have collectively eroded the province's fiscal capacity and stalled both its economic growth and social development.

The situation is further exacerbated by structural issues. The Newly Merged Districts (NMDs), with a population of 24.149 million, and Malakand Division, home to 10 million people, have rising expectations for basic services. Yet, with a limited taxable population and chronic tax evasion, the burden is disproportionately borne by the rest of the province. This fiscal imbalance hampers the government's ability to invest in education, healthcare and infrastructure development - areas that fall squarely within the provincial domain under the Constitution.

While the Constitution entrusts provinces with responsibility for social services and development, these obligations remain unfulfilled due to the federal government's delays and reluctance in releasing constitutionally mandated funds - particularly under the Net Hydel Profit (NHP) mechanism as per the AGN Qazi Methodology.

To break this deadlock and enable meaningful development, K-P, like other provinces, is fully justified in demanding the convening of the 11th National Finance Commission (NFC). Article 160 of the Constitution mandates that the NFC Award should consider multiple indicators, not just population size. These include poverty, revenue generation, security expenditure and geographic disadvantages. Moreover, following the merger of tribal districts, K-P's share in NFC Award stands at 19.46% - something that the federal government is constitutionally obligated to accept. But again, in the federal budget for the coming fiscal year, the enhanced share as per the addition of the population is missing.

K-P's case for greater weightage in the NFC Award is grounded in logic and law. The province contributes significantly to national revenue through its oil and gas resources, and bears an extraordinary burden of security-related expenses due to its proximity to Afghanistan and the impact of terrorism. Despite this, K-P continues to suffer from delayed payments and withheld arrears under the NHP mechanism.

Article 161(2) of the Constitution entitles provinces to NHP payments, and the AGN Qazi Committee's methodology - endorsed by the Council of Common Interests (CCI) and the Supreme Court - lays down the formula. Yet, the arrears continue to pile up. While the province was paid Rs6 billion in 1992 based on this methodology, inconsistencies have led to an estimated Rs75 billion in unpaid dues, with some sources placing the figure above Rs1 trillion. Under an interim arrangement approved by the CCI in 2016, a rate of Rs1.10 per kilowatt-hour with 5% annual indexation was set. Yet, even this has not been consistently honored.

According to the White Paper on Budget 2025-26, excise duty on oil is not paid to the province, as the rate has not been determined yet. K-P produces more than 50% of the national oil production which means it absorbs the highest loss from the unavailability of this duty.

The federal government collects Petroleum Development Levy on different petroleum products. This collection is not distributed among the provinces as it is excluded from the federal divisible pool of the NFC, which is a violation of the rights of the provinces. Also, despite multiple efforts, excise duty on oil is not determined despite constitutional provision.

K-P government's Adviser on Finance Muzammil Aslam is on record saying that the province had last received Rs90 billion less due to the reduction in tax collections from the federal government.

Similarly, K-P seeks a fairer and more transparent share of royalties on oil and gas produced within its borders. Article 161(1)(b) mandates that these royalties should accrue to the province where the wellhead is located. Moreover, Article 172(3), inserted into the Constitution through the 18th Amendment, clearly states that the ownership of natural resources is to be shared between the Centre and the provincial governments. This necessitates amendments to the Petroleum Act, Rules and Policy, enabling joint decision-making and equitable benefits for resource-producing provinces.

Despite this constitutional clarity, the federal government maintains centralised control, which K-P rightly views as unconstitutional post-18th Amendment. The province's repeated demands for financial autonomy, timely fund releases and greater decision-making in resource governance are not just political rhetoric - they are rooted in constitutional rights and fiscal necessity.

The Chief Minister of K-P has, through a letter, aptly highlighted the province's precarious financial position and urged the federal government to release the pending dues, especially those for the development of NMDs. This is not just about numbers on a balance sheet; it's about ensuring peace, promoting economic activity and healing the wounds of decades of marginalisation.

Justice Munir once observed that the most persistent constitutional challenge in Pakistan has been the equitable distribution of power and resources between the federation and the provinces. Today, the Constitution provides a clear framework for resolving this longstanding issue. What remains is the political will to implement it in both letter and spirit.

K-P is not asking for favours; it is demanding its rightful share under the Constitution. Fulfilling these demands will not only uphold constitutional justice but also help allay longstanding grievances and the deep-rooted sense of deprivation felt across the province.