June 29, 2002	Saturday	Rabi-us-Sani 17, 1423

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PESHAWAR, June 28: The NWFP’s first Provincial Finance Commission award, unveiled here on Friday, envisages distributing the total provincial revenue resources between the provincial and district governments on a 40:60 basis, once the provincial government’s obligatory expenditure requirements are met.

“The provincial divisible pool will be the balance amount determined after subtracting the obligatory expenditure from the provincial pool,” the document outlining the PFC award states.

The award has been announced for an interim period of one year, at the completion of which its performance would be assessed by the commission for the purpose of introducing rectifications, if so required.

The divisible pool would consist of the entire provincial revenue receipts, including revenue assignment from the federal divisible pool, royalty on crude oil and gas, net hydel profits, subvention, provincial own receipts and the general sales tax on services, excluding the 2.5 per cent GST which the federal government would transfer to provinces out of the total 15 per cent GST.

However, provincial revenue receipts would be pooled for onward distribution among the provincial and district governments only after meeting the obligatory expenditure requirements of the provincial government.

The obligatory expenditure requirements to be taken care of before putting the resources in the provincial divisible pool contain debt-servicing, including payment of the principal amount of loans (apart from the interest), pension paid to the retired staff of the provincial government, subsidy on wheat, contribution to G.P. fund and pension fund in addition to the charged expenditure of the Governor House, Provincial Assembly and High Court — ignoring the expenses of the Chief Minister’s house.

The total volume of the provincial government’s obligatory expenditure, according to sources, comes to around 37 per cent which leaves 63 per cent of the total revenue receipts of the province to be put in the divisible pool.

Total revenue receipts of the provincial government for the 2001-02 financial year stood at just over Rs34bn — as per the revised budgetary estimates.

Of the 63 per cent divisible pool amount, 40 per cent would go to the provincial government and the remaining 60 per cent would be distributed among the district governments.

The 40 per cent share of the provincial government would be called ‘Provincial retained amount’ whereas the 60 per cent of the district governments’ share would be labelled ‘provincial allocable amount’.

The inter-district distribution of Provincial Allocable Amount and part of the 2.5 per cent GST will be transferred on the basis of a resource distribution formula that would cater for every district’s recurring and development expenditure.

The formula devised for the resource distribution gives 50 per cent preference to population, 25 per cent to backwardness and 25 per cent to the state of infrastructure.

Nine per cent of the Provincial Allocable Amount would be transferred on the basis of the aforementioned formula whereas the remaining 10 per cent would be transferred as fiscal qualization grant (among the deserving districts) for the purpose of resource distribution.

Every district government would be entitled to retain 60 per cent of the funds transferred to it from provincial divisible pool, 30 per cent would go to the tehsil/town administration and 10 per cent to the union councils falling in a district.

Similarly, 33 per cent of the development funds set aside for the tehsil administration shall be shared on the basis of number of union councils in a tehsil — if there are more than one tehsil in a district.

The ten per cent of development funds allocated for union administration shall be shared equally by the number of union councils in a district.

The district governments will allocate 70 per cent of their development funds for social sector (education, health and drinking water supply) and the remaining 30 per cent to other sectors.

WAPDA ARREARS:

The PFC award asks the district governments to develop a mechanism to avoid excessive billing by Wapda in addition to ensuring that the Authority does not take recourse to deducting at source the amount of unpaid electricity bills from the provincial government’s share.

“The district governments shall develop a mechanism at district and tehsil level for monthly reconciliation of bills with Wapda and ensure the payment of the same,” reads the provincial government’s order notifying the PFC award.

In case of at-source deduction from the revenue assignments of the province by the federal government on account of arrears of Wapda — owed by a district government or tehsil/town administration — a proportionate amount will be deducted at source from the share of the respective district government, tehsil or town administration.