President Zardari constitutes 8th NFC

ISLAMABAD: President Asif Ali Zardari on Wednesday constituted the 8^th National Finance Commission to ensure just distribution of resources between the Centre and the four federating units.

Under the constitution, the president has to announce a new NFC after every five years. The 8^th NFC will comprise the federal finance minister as its chairman and four provincial finance ministers as members.

The president directed the four provinces to nominate their non-official members at the earliest. Each province is allowed to have a private member to assist its finance minister in the commission’s meetings. Provincial governments will notify their non-official members in consultation with governors.

Article 160(1) of the 1973 Constitution prescribes the constitution of NFC at intervals not exceeding five years. As such NFCs have been constituted after every five years. The 7th NFC was established on July 21, 2005. And it expired July 20, 2010.  In keeping with the constitutional obligation, the 8th NFC has been notified with effect from July 21, 2010.

The PPP-led coalition government reconstituted the 7th NFC on July 24, 2009 to finalise a new award for the next five years. The 7th NFC submitted its recommendations for a new award on December 30, 2009 and the recommendations were given legal cover through a Presidential Order, which became effective on July 1, 2010 for the next five years.

The 8th NFC will not have any impact on the latest financial award, which gives more financial autonomy to provinces. Under the award, the Centre for the first time transferred 56 per cent resources to provinces and the distribution of resources among provinces was agreed on the basis of multiple criteria, still dominated by population 82 per cent of the total resources. The remaining resources would be distributed on the basis of revenue generation, poverty and disparity.  From the second year of the award implementation 2011-2012 provinces’ share will be further increased to 57.5 per cent.

The 8th HFC will ensure distribution between the federation and provinces of the net proceeds of taxes mentioned in Clause (3) of Article 160 of the Constitution. It will also decide about grants-in-aid by the Centre to provincial governments.

The commission for the first time will carry out the exercise about provincial borrowing powers. Under the 18th amendment, the commission is required to meet after every quarter to monitor the implementation of the award in letter and spirit. The commission is also desired to submit a biannual report on the implementation status of the award to parliament.

Published in The Express Tribune, July 22^nd, 2010.