October 13, 2002	Sunday	Sha'aban 6, 1423

KARACHI, Oct 12: The National Finance Commission (NFC) is holding its final session before the end of this month, tentatively on October 25 at Lahore, to decide resources distribution formula between the federation and the provinces and among the provinces.

The final session of the NFC, according to well placed sources, is being convened on insistence of Sindh government, which perceives that the consensus reached so far on distribution of revenue favours this province and should be implemented before the elected government is installed next month.

The Sindh government wants enforcement of new NFC formula before the next elected government is installed with a firm pledge that next revenue distribution formula to be operative from 2008-09 will not be based only on population.

Once the new governments are installed in Islamabad and in four provincial capitals, the proceedings of the NFC will become infructuous and a new NFC would have to be constituted by the federal and provincial governments. This NFC would then begin a fresh exercise.

“Except for two issues, which are distribution of Rs32 billion of 2.5 per cent GST among the four provinces and sharing of hydel profits between Wapda and NWFP all other issues on revenue distribution have been finalized,” a source close to NFC disclosed.

The previous NFC proceedings in Karachi and Peshawar held during last days of August and in September agreed to make population as the only basis for resources allocation to the provinces. The population ratio of the provinces will, however, be decided on the basis of last census, which gives Sindh an insignificant increase of 0.4 per cent.

However, the distribution ratio of the federal tax pool has been changed from 62.5 per cent for Islamabad and 37.5 per cent for all four provinces to 58 per cent for the federal government and 42 per cent for provinces.

The NFC has already decided to set up a subvention pool of Rs20 billion every year from which Sindh is expected to get an annual grant of about Rs6 billion for next years. Besides this, Sindh and other provinces will get share from the development surcharge on oil and gas production in their respective jurisdictions.

Provinces, however, have sharp conflicting views on the distribution arrangement of Rs32 billion representing 2.5 per cent of the GST collection since 1999. Sindh is insisting to allocate a chunk of this amount for distribution on basis of collection. The rest of the amount to be distributed on the ratio of octroi collection in July 1999 when Nawaz Sharif government abolished this tax and increased rate of GST from 12.5 per cent to 15 per cent to compensate provinces from this loss. All three provinces, however, do not endorse Sindh’s proposal and there is very little hope of reaching any consensus on this issue in Lahore meeting.

Sources doubt if NWFP and Wapda would be able to work out any acceptable arrangement of distribution of hydel electricity profits. The NWFP government demands accumulated profit of the previous years which Wapda finds impossible to share.

Almost all the big political parties thrown into corridors of power by October 10 elections are not ready to accept many decisions of the military government. The NFC formula is one such arrangement, which has been publicly opposed by Pakistan People’s Party, Muttahida Qaumi Movement (MQM) and other political parties.

Emergence of a powerful group of federal and provincial legislators from religious parties has already caused considerable panic in the government circles. A fresh dispute on NFC formula would perhaps be a too difficult proposition for the military rulers.