Days before maiden session of the 11th National Finance Commission (NFC), Khyber-Pakhtunkhwa (K-P) has demanded change in the formula for distribution of resources among the four federating units by drastically reducing the share of population and including the benchmarks of forestation and prosperity.
As much as 82% of resources are distributed among the provinces on the basis of population and 10.6% on the basis of backwardness, which need to be changed, K-P Finance Minister Muzzammil Aslam said at the weekend.
He was speaking at a seminar organised by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) from the platform of Prosper Pakistan. He added that the provincial government would demand changes in the formula of horizontal resources distribution among the federating units at the NFC forum.
"The provincial government will seek reducing the share of population and inclusion of forestation as important benchmark," said Aslam. His statement came two days after the president constituted the 11th NFC and few days ahead of the first scheduled session of the constitutional convention.
Federal Finance Minister Muhammad Aurangzeb would chair the meeting.
Aslam's views on reducing the share of population are similar to those expressed by Planning Minister Ahsan Iqbal. The planning minister has proposed to freeze the number of people at 241.5 million for the purpose of the NFC award and also reduce the share to 60%.
Iqbal has also proposed to include forestation and climate changes as criteria for the distribution of resources among the provinces. The climate changes are also causing flash flooding and there is a demand to set aside a portion of Undistributed Federal Divisible Pool for building large dams.
Mian Anjum Nisar, former president of the FPCCI, said that large dams were also needed for agriculture water storage facilities and since agriculture is a provincial subject the four provinces should contribute funds under the new NFC award.
The NFC has been constituted for evolving consensus on the vertical and horizontal distribution of financial resources. Under the vertical formula, the provinces get 57.5% shares and the remaining goes to the federal government.
After paying provincial shares under the NFC, the remaining revenues are not even sufficient to meet two largest expenses, debt servicing and defence.
The two-day FPCCI conference had been organised by K-P Regional Office Peshawar in collaboration with the K-P Board of Investment and Trade along with other stakeholders. The Prosper Pakistan team, led by Hiba Fawad and Aun Ali Syed organised this conference whereby representatives of chambers from across the country participated.
Aslam said that it was not yet known whether the NFC Award would be a continuation of the 7th NFC Award or a new debate would start on the resource distribution under the 11th NFC Award.
He said that there were 12 ongoing hydropower projects in the province in order to generate cheaper electricity at 8 cents per unit. However, the government has increased wheeling charges up to Rs27 per unit in a bid to block cheaper electricity from the province, he claimed.
He said that the Indus River System Authority (Irsa) distributed 110 MAF of water among the provinces, and it was agreed that four canals would be constructed, but the Left Bank Canal could not be constructed.
In 2009 at the time of 7th NFC award finalisation, the federal government had promised to finance the Left Bank Canal project but the promise remains unfulfilled
The K-P finance minister quoted Ahsan Iqbal as saying that the federal government was heading towards economic collapse in five-year period because the national kitty was empty and the federal development budget was less than Punjab and Sindh.
However, one of the reasons for low income and high budget deficits was that the FBR failed to increase its tax-to-GDP ratio to 15% by 2015. The FBR tax-to-GDP ratio is still 10.2%.
The government has been making bizarre decisions. It has given three charges to one FBR member, Hamid Atiq Sarwar. Hamid is member Strategic Transformation, Member Inland Revenue Operations and surprisingly acting Chief Executive Officer of Pakistan Revenue Automation Limited, which is purely a technical job.
Muzammal Aslam said that the National Highway Authority (NHA) was used to undertake road development projects in the larger provinces of Punjab and Sindh and ignored the federal government K-P and Balochistan.
The imbalance in the development approach has aggravated the situation in the smaller provinces, he added. He criticised the federal government for claiming deforestation in the province and stated that the K-P government increased its budget as 45% forests of Pakistan exist in K-P.
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