Sindh govt examining legal options: Resources distribution
By Sabihuddin Ghausi
KARACHI, May 17: Sindh is examining legal and constitutional options in case the National Finance Commission fails to reach any consensus on resources distribution and the federal government decides
to retain the 1997 NFC formula that provides a 37.5 per cent share in divisible pool for the provinces and the horizontal distribution of funds between the provinces is based only on population.
"We are in touch with a number of lawyers and eminent jurists," Sindh Finance Minister Syed Sardar Ahmad informed Dawn on Monday. "There is absolutely no provision of enforcing any resource distribution arrangement through ordinance in the constitution."
The finance minister concedes that article 254 of the constitution does provide some room to extend the period of the previous NFC award. "We are studying the implications of this particular provision," he added.
Mr Ahmed dispelled any impression of compromising the principles on which his government had taken a position on resources distribution arrangement. He clarified that he did agree with the federal government's proposal of 47 per cent share of the pool but on one condition.
"This 47 per cent share should not include 2.5 per cent collection of sales tax," he clarified and explained that the 2.5 per cent collection of sales tax, which is now being estimated at around Rs21 billion, should be taken out from the federal government's 53 per cent share and should be distributed among the provinces on the basis of audited accounts of octroi and zila tax collection.
He said the Punjab government had some reservations on the audit report of octroi and zila tax collection. An officer of the Sindh government has been sent to Lahore to reconcile Punjab's objections on the audit report. "It is a minor issue and we have no hesitation to settle it to Punjab's satisfaction," he said.
By deducting 2.5 per cent in the 53 per cent of the Federal government's share in divisible pool, the provinces get by and large a 50 per cent of the pool, and it meets the demand of all the provinces.
Sindh's position on the NFC formula remains unchanged. It is 50 per cent share for all the provinces in the divisible pool after adjusting the actual tax collection cost, which in any case is less than two per cent.
The 2.5 per cent collection of sales tax should not be part of the provincial share of the divisible pool. It has to be deducted from the federal government's share of pool.
The fund distribution between the provinces should be on multiple factors that include population, backwardness, inverse population density ratio and size of the province.
A stalemate in the NFC has affected budget-making process in the Sindh government where planners are sitting with crossed fingers. For the last three years, Sindh budget-makers have faced uncertain position in respect of funds allocation.
The development budget carries a note for the last three consecutive years: the implementation of this "ambitious and over-sized development budget" is subject to the availability of funds. The development budget is financed as a last resort when current expenditures are squeezed to generate funds.
The history of resources distribution arrangement also carries bitter memories for Sindh and Balochistan. In the first NFC award, the Bhutto government was literally pressurized by Ghulam Mustafa Khar and Hanif Ramay to retain sales tax in federal government's jurisdiction and keep Punjab's population ratio on the higher side.
In the two subsequent NFCs in 1979 and 1985 headed by Ghulam Ishaq Khan, there was Martial Law in the country and Sindh and Balochistan's case went unheard. Ghulam Ishaq Khan did not hold meeting of the NFC. When a few meetings were held there were no discussions.
In 1991 when the elected governments were installed in the federation and provinces, the award gave some benefits in terms of straight transfers to the provinces.
The 1997 NFC award was announced before the elected governments were installed. Farooq Leghari, the then President of Pakistan, inflicted a heavy blow on the provinces by signing the 1997 NFC award.
There was a provision in the 1997 award of a monitoring committee headed by the finance minister to meet every quarter to monitor financial positions of the provinces.
There was only one meeting of the committee in which former Punjab Chief Minister Shahbaz Sharif criticized the then Finance Minister Sartaj Aziz for failing to collect the targeted taxes and making the provinces to suffer. Since then no federal finance minister held any meeting of the monitoring committee.
