ISLAMABAD, April 13: The federal government has told the provinces that their share in the federal divisible pool could not be increased beyond 47 per cent at any cost owing to additional expenses of about Rs75 billion at the federal level during the next year.
This additional burden would be other than the normal expenditure on running of the civil administration, debt repayments and the proposed increase in the defence budget, a member of the NFC told Dawn in a background briefing.
The provinces have, however, been informed that their share in the divisible pool would increase by 145 per cent by the year 2010-11 when the new NFC would become due if the share of the provinces and the centre is taken at 46:54 per cent, respectively.
Sources close to the finance minister said the provinces "have been asked not to insist on percentages" because a higher NFC base would give them the desired comfort with the inclusion of 2.5 per cent of GST in the divisible pool as well.
The centre has provided all the projections to the provinces assuming their share at 46 per cent and hinted at increasing to 47 per cent. Senior sources at the finance ministry, however, said that final settlement would come "from authorities higher than the finance ministry".
The NFC member said that the likely size of the provincial share during fiscal year 2004-05 would be around Rs250 billion, or about 13.5 per cent higher than Rs215 billion share during the current year.
This would increase to Rs550 billion by the year 2010-11, he said, quoting official documents provided to the provinces. The total size of the provincial share in the 1997-98, including subventions, octroi and zila tax, was Rs110 billion.
President Musharraf would discuss the NFC award with provincial chief ministers on Wednesday and Thursday for forging a political consensus to be followed by an informal meeting of the NFC on Friday.
Giving a breakdown of the additional expenses projected for fiscal year 2004-05, the member said about Rs14 billion would be incurred on restructuring of PTCL and OGDCL to prepare them for privatization.
The SBP is estimated to face an impact of Rs25-30 billion as a result of interest rates. The policy of low interest rates was adopted by the SBP on the advice of the government to contain inflation, otherwise increase in the cost of borrowing would have pushed prices high.
The government is expected to compensate SBP by providing over Rs3 billion as compared to Rs6 billion during the current year.
