ISLAMABAD, April 25: Sindh has asked the federal government to make public the multi-factor formula for horizontal distribution of net proceeds of the federal divisible pool under the sixth National Finance Commission (NFC), Dawn has learnt.
Sources said the provincial government believed it could respond to the seven options on the multi-factor resource-sharing formula only when the federal government officially moved from 'population-alone to a multi-factor criterion' for horizontal resource distribution.
The sources said none of the seven options could be considered by Sindh unless an assurance was given that the federal government would give 50 per cent from the net proceeds of the divisible pool to the provinces in addition to 2.5 per cent GST.
"This suggests a difficult situation because the federal government is not even ready to offer over 47 per cent share to the provinces, and that includes 2.5 per cent GST," said an official. The sources said financial managers of Sindh were in contact with other smaller provinces to evolve a joint strategy on the issue.
The federal government gave seven options to the provinces on horizontal distribution of resources during an 'informal NFC meeting' in Islamabad a week ago. The federal government has told the provinces that their share in the divisible pool could not be increased beyond 47 per cent owing to additional expenses of about Rs75 billion at the federal level during the next year.
These expenses would be in addition to normal expenditures needed for the running of civil administration, debt repayments and proposed increase in the defence budget.
The additional expenses projected for fiscal 2004-05 would include Rs14 billion on the restructuring of the Pakistan Telecommunication Company Limited (PTCL) and the Oil and Gas Development Company Limited (OGDCL), a Rs3 billion subsidy to the SBP on account of monetary policy, a Rs7-9 billion subsidy to oil refineries, Rs35 billion to Wapda and the KESC and a Rs15 billion subsidy on account of the GST.
The gross size of the federal divisible pool is estimated at around Rs570-575 billion. After deducting about Rs25-30 billion collection charges, its net proceeds are estimated at Rs545-550 billion.
A one per cent increase in resources is equal to Rs5.4 billion for 2004-05. This means that the provincial share calculated at Rs250 billion on the basis of 46 per cent in 2004-05 would increase to about Rs255 billion on the basis of 47 per cent. At 50 per cent, it would go up to Rs272 billion.
