Sindh govt opposes move to deduct bills from tax pool

The four provinces and federal government agreed on a formula to share the cost of holding local government elections.

ISLAMABAD: The Sindh government on Monday shot down a move by the Centre to withhold the provinces’ share in federal taxes equal to 50% of monthly electricity bills. Instead the provincial government linked the deduction with prior resolution of more pressing issues of overbilling and illegal connections.

Sindh Chief Minister’s Adviser on Finance Syed Murad Ali Shah put his foot down in a meeting of the National Finance Commission (NFC)’s monitoring committee. The committee is headed by the federal finance minister with all four provincial finance ministers/advisers as its members.

The four provinces and the federal government, however, agreed on a formula to share the cost of holding local government elections.

Shah argued that Sindh’s rightful share would go into the pockets of corrupt elements of Hyderabad and Sukkur power distribution companies if the issues of overbilling and unauthorised connections were not resolved first, according to the officials who attended the meeting.

Sindh’s stance led to the constitution of a subcommittee, which will be headed by Water and Power Minister Khawaja Asif. “Khawaja Asif (subcommittee) would present its recommendations well before the next meeting of the Council of Common Interests,” according to a statement issued by the finance ministry after the NFC monitoring committee meeting.



Under the 7th NFC Award, the federal government transfers 57.5% of the federal tax revenues to the provinces as their share in the divisible pool. The federal government, through the office of federal adjuster, wanted to retain a portion of this money to improve electricity recoveries.

The federal government has addressed only one out of three main causes of circular debt. It has increased power tariffs but has done nothing to improve recovery of bills and to check power theft and line losses.

An amount of Rs215 billion was outstanding against power consumers including over Rs100 billion against the provinces and the federal government, finance ministry officials said.

Shah claimed that the power distribution companies were overbilling as much as 50% of the actual bills while there were approximately 10,000 illegal connections which have not been disconnected despite the provincial government requests.

LB elections cost

The federal government agreed to bear half of the estimated Rs6.6 billion cost of holding LG elections in the provinces.  The K-P finance minister, Sirajul Haq, stressed that his province did not have the fiscal space to bear the expenditures on LG elections, according to an official of the finance ministry.

The federal government also urged the provinces to save Rs117 billion out of their budgets in the current fiscal year in order to meet the IMF’s condition to restrict the national budget deficit to 5.8% of GDP.

Government would pay Rs175.4 million and Rs296.9 million to Balochistan and K-P governments respectively, as a reward for showing surplus in the first quarter, said a finance ministry statement.

NFC implementation

The meeting also reviewed progress on the implementation of the 7th NFC Award. During the period Jan-June 2013 the FBR reported tax collection of Rs1.1 trillion. For six month period, Rs592.6 billion was given to the federating units. Punjab got Rs299 billion, Sindh Rs141.9 billion, K-P Rs94.6 billion and Balochistan Rs57.1 billion.

Published in The Express Tribune, December 17^th, 2013.