August 18, 2002	Sunday	Jamadi-us-Saani 8, 1423

KARACHI, Aug 17: The National Finance Commission is expected to announce its award on resources distribution between the federal and the provincial governments and among the provinces on the last day of August.

Well-placed and authoritative sources said that the NFC was holding a two-day session in Karachi on August 30 and 31 (Friday and Saturday) in the State Bank’s committee room. Finance Minister Shaukat Aziz will chair the meeting and all members of the NFC — finance ministers of the four provinces, top bureaucrats of finance in Islamabad and four provincial capitals and the four statutory members of four provinces — are expected to attend.

Seventh in the sequence, since the promulgation of 1973 Constitution, the current NFC has taken the longest time — more than two years — in finalizing the resource distribution award. Sources close to the NFC say that the four working groups constituted in the first meeting have finalized their reports.

“But a consensus on all the contentious issues remains a question mark,” a well-placed source confided, adding the federal government has many reservations on the demands of provinces to distribute the federal pool of taxes on fifty-fifty basis.

Islamabad is also reluctant to write off all the development loans amounting to well over Rs200 billion given to the provinces. The least provinces want from the federal government is write-off of the loans given till 1988 and a cut on interest rates. They want the interest rates of federal loans to be linked to Federal Investment Bonds interest rate.

Provinces are poles apart in matter of deciding on the criteria of resources distribution among them. Punjab insist on retaining population as the single criterion for resource distribution as it has reaped all the benefits since 1973. Sindh and Balochistan wants size of the province, resource generation capacity and economic backwardness be given due weightages in matter of allocation of resources.

But then the NFC functioning “is less by consensus than by federal government’s power to prevail over the provinces,” wrote Dr. Arshad Zaman, a former chief economist of Pakistan government, in one of his research work “Fiscal Resources - Sindh”, sponsored by the World Bank.

The last NFC award given in 1997 by Farooq Leghari-Malik Meraj Khalid and Javed Burki combine is a glaring example of how federal government literally dictated terms on imposing a resources distribution formula. This award is still in operation even after lapse of the constitutional five years period. It has left Sindh and Balochistan much bitter and pauper.

Realising the growing bitterness that is now gradually leading towards alienation in Sindh and Balochistan, the military set-up has opted to avoid imposing a resource distribution formula designed on the lines of previous six NFC awards.

Ministers in Sindh cabinet and officials complain of typical “Islamabad arrogance” in dealing with Sindh and Balochistan. But they have been able to find a few receptive ears at the top level. “At least they console us if they are not able to heal our wounds,” a frequent Islamabad visitor in Sindh government once remarked.

While there is both scepticism and hope on the NFC formula expected on last day of this month, the Sindh government is convening the Provincial Finance Commission (PFC) meeting on August 26 (Monday) in Karachi. It is chaired by Sindh Finance Minister Dr. Hafeez Sheikh and has nine members. Three more members representing a district, a taluka and a union council are expected to be added.

This meeting will review the implementation of the interim award given by the PFC just before the budget. It will also consider the distribution arrangement of Rs10.4 billion expected from the 2.5 per cent GST share. This 2.5 per cent GST is a substitute of the octroi and zila tax and hence the collection of these taxes before their abolition in 1997 will be one of the main criterion.

Earlier, on August 7, the governors and finance ministers attended a meeting in Islamabad chaired by President General Pervez Musharraf. The National Reconstruction Bureau chief General Naqvi is reported to have spoken on fiscal and administrative devolution.