ISLAMABAD, April 15: Representatives of the provinces held three rounds of discussions on Thursday and agreed to share resources on a multi-factor formula, provided the federal government enhanced their share , Dawn has learnt.

There were indications, however, that negotiations on the sharing of net proceeds of the federal divisible pool (FDP) between the federation and the federating units were virtually deadlocked despite President Gen Pervez Musharraf's intervention.

The provinces are said to have decided to insist on their demand for 50pc share in the divisible pool on Friday when they hold an informal NFC meeting to be presided over by Finance Minister Shaukat Aziz.

They were of the view they would be in a better position to finalize the percentages of the multi-factor formula, when they had a clear picture about the increase in their share.

They said that unless the centre increased their share to 49pc they would not be able to prepare their next year's budget. And in case no decision is reached and the previous award is restored, it will be difficult for present governments to function.

Sindh Finance Minister Syed Sardar Ahmad said there was a deadlock on distribution of resources among the centre and the provinces. He told Dawn that the issue of the sharing of resources among the provinces was also not clear yet. NWFP Finance Minister Sirajul Haq said the provinces were not ready to reduce their share below 50pc.

As far as the centre was concerned, Finance Minister Shaukat Aziz told the Wednesday meeting at the Punjab House that the centre would not give more than 46pc of the divisible pool to the provinces.

A finance ministry source said the federal government had now asked the provinces to let it know if the 46pc offer was acceptable to them. He said the provinces had also been asked to help increase the tax base; instead of insisting on percentages; that would automatically increase their share.

The provinces, however, reached a consensus that the rate of tax collection charges from 5pc to 2pc would get the desired cushion. Under the constitution, the federal government could charge only 1pc collection charges, a provincial finance minister said. The centre wanted to use this higher rate to upgrade port facilities for computerised screening of imported goods.

Mr Haq said he had told Mr Aziz there was no need for higher defence expenditures because of the peace process with India and also because coalition forces led by the US were deployed along the western borders. "When there is no security threat there is no need for higher defence budget," the NWFP minister said.