11th NFC's inaugural session concludes in 'cordial astmosphere'

The inaugural meeting of the 11th National Finance Commission concluded with all parties agreeing to include Khyber-Pakhtunkhwa's share in the NFC award after the merger of FATA and PATA into the province. A working group is expected to be formed to review the federal and provincial shares in the NFC award.

The 11th NFC was constituted on August 22 this year to finalise a new award for the distribution of federal divisible resources between the centre and the provinces. Its first session, scheduled for August 27, was postponed multiple times, initially to August 29, then November 17 and 18, due to unspecified reasons and requests from the Sindh government and the prime minister’s office.

In his opening remarks, the Finance Minister Muhammad Aurangzeb remarked that this meeting is an important opportunity for constitutional responsibility and cooperation. He noted that the term of the 10th NFC Award ended on July 21, this year, which increases the significance of today's meeting.

According to the finance minister, the federal government was determined that the inaugural meeting of the 11th NFC would be held without any delay. "The Prime Minister himself took a keen interest in ensuring that this meeting takes place as soon as possible".

Aurangzeb acknowledged that the provinces have also shown a strong commitment to fulfilling this constitutional responsibility on time.

The finance minister has stated they will hold discussions with an open mind and without any bias, emphasising that the federal government is to listen to the provinces' stance. He expressed the confidence that the provinces will also move forward with a spirit of constructive cooperation.

Read: Centre proposes provincial share cuts ahead of crucial NFC talks

Aurangzeb appreciated the provinces for signing the National Fiscal Pact, stating that "It is a testament to our shared resolve and our ability to work together for the national interest".

The finance minister highlighted that the NFC plays a crucial role in the fair distribution of resources, fiscal stability and sustainable economic growth in the country. "Successfully completing the matters pertaining to the 11th NFC Award is our ultimate goal".

As the meeting ended, Finance Adviser Muzammil Aslam said, "The National Finance Commission (NFC) meeting was conducted in a cordial atmosphere. Major provinces have extended support to smaller provinces, which is a welcome development".

"All parties also supported including Khyber-Pakhtunkhwa’s share in the NFC award following the merger of FATA and PATA into the province. A working group will be formed to review the federal and provincial shares in the NFC award".

Aslam stated that the working group is set to examine other legal matters related to federal and provincial shares, with opinions to be sought from the Law Division and the Attorney General.

Sindh Chief Minister Murad Ali Shah, speaking to the media after the NFC meeting, also said the session was held in a positive environment. He added that "This was an initial meeting, focused on the way forward and scheduling the next session".

It was agreed that the Ministry of Finance will prepare a joint statement on the meeting, share it with the provinces, and release it to the media.

Read more: K-P to participate in NFC session despite reservations: CM Afridi

Restructure of share

As the maiden meeting of the National Finance Commission concludes, the performance of the provinces comes centre stage, particularly Khyber-Pakhtunkhwa. Planning Minister Ahsan Iqbal has proposed multiple options to redistribute resources that would benefit the Centre and smaller federating units.

Despite giving more weight to the variables that strengthen the fiscal position of the smaller provinces, the share of K-P would increase from 1% to 3% in the range of 15.7% to 17.1%, as shown in the details of the proposals being submitted to Prime Minister Shehbaz Sharif.

The K-P government is claiming that its share should go up by 6% to nearly 20% after the merger of the erstwhile tribal districts.

The federal government sources said that during the background discussions, the provinces showed some willingness to share the federal expenses but they were not ready to take a direct hit on their revenue shares.

"While the NFC Award envisioned a shared responsibility toward revenue generation, provincial revenues have also not expanded in line with the NFC Award's objectives", according to the Planning Ministry report.

Under the current NFC Award, population dominates with 82% percent weight but poverty, revenue generation, and inverse population density carry only marginal significance. The Planning Ministry has proposed some major changes in the formula, which would reduce the share of Punjab by about 10% and Sindh's share would too so half a percentage reduction.

Also read: Kundi denies any move to impose governor's rule in K-P

However, the KP's share would increase in the range of 1% to 2.6% and Balochistan's share may go up to 3%. The Islamabad Capital Territory may get up to 5% share for the first time.

K-P's reservations

Sohail Afridi has stated that the federal government owes K-P Rs1.3 trillion under the NFC while highlighting that although the former tribal districts were merged administratively with the province in 2018, their financial integration had not yet been completed.

Afridi has urged the federal government to consider K-P’s proposals for lasting peace, warning that “decisions made behind closed doors” negatively affect the province. He added that if the centre adopts the province’s recommendations, the K-P government would take responsibility for implementing them and maintaining law and order, emphasising that all stakeholders must be included in decisions regarding peace.

Speaking outside Adiala Jail, Sohail Afridi said that I came here after attending the NFC meeting.

I presented K-P's position, noting that after the 25th Amendment, the tribal districts were merged into the province, yet they were not being given their rightful share. I stated that this was unconstitutional.

In principle, participants agreed. It was decided that a subcommittee will be formed by next Wednesday, and it will present its recommendations by January 8. The next NFC meeting will be held in January.

The people of K-P have made immense sacrifices in the fight against terrorism, and our infrastructure has suffered severe damage. Unfortunately, we have not been given our due share.

It was disappointing to see today that the people of K-P were being denied what is rightfully theirs, while three other provinces were being accommodated. We were, however, assured that our rights would be upheld.

Since our government took office in 2018, two NFC meetings have been held. After the regime change operation in 2022, these meetings could not continue. We hope the people of K-P will now receive their rightful share.

The NFC meeting, originally scheduled from 11.00 to 11.15am, continued until 12.40pm.