ISLAMABAD, May 21: The federal government has decided in principle to go ahead with the implementation of the National Finance Commission (NFC) award for another year (2004-05) owing to differences among the stakeholders on a resource-sharing formula, it is learnt.

Informed sources told Dawn on Friday that provincial finance departments had been conveyed to prepare their budgets on the basis of the previous award of 37.5 per cent share for the provinces, coupled with subvention and grants.

A member of the NFC confirmed that the provinces had been asked to base their budget projections on the previous formula. He said there was a little possibility of the federal and provincial finance ministers meeting informally on Saturday after the scheduled meeting of the Annual Plan Coordination Committee (APCC), but if they met other options could be discussed.

The member, however, said the current NFC would continue its deliberations even after the budget season so that an award was made for future in a relaxed environment and without the pressure of budget deadlines.

The sources said it had been realised by the parties that they were left with less than two weeks to finalize their budgetary projections, following which the process of budget announcement at the federal and provincial levels would have to be completed within 15 days.

They said the federal government had been insisting that it could not offer more than 47 per cent of the divisible pool to the provinces because of some additional expenditures during fiscal 2004-05.

The provinces, the sources said, also believed that instead of making a commitment of 47 per cent for five years owing to federal government's difficulties for just one year, they should take the previous award for one year and then insist on their position of 50 per cent share for the next five years.

The member said the provinces had told the federal government that they could not agree to 47 per cent share for next five years because they were given a commitment of 47.8 per cent before the 2002 elections and the elected governments had higher expectations.

"The Centre had hinted at meeting that figure (47.8 per cent share to the provinces), but we have not been able to bridge our internal differences (on horizontal distribution of resources)," a provincial NFC member said.

The sources said Punjab had recently floated the idea of distribution of resources on the basis of an equalised formula of per capita income instead of population, but this was categorically rejected by Sindh.

Balochistan and the NWFP did not oppose this, but wanted factors like inverse population density to be given some weight. The Sindh authorities believe that like population, per capita income would also favour Punjab and put Sindh in a disadvantageous position.

Sindh is not ready to accept anything less than making revenue the basis of resource-sharing. Punjab, the sources said, was not ready to give more than 20 per cent weight to factors other than population and that too with some conditions.

It demands compensation from the federal government for the loss it would suffer because of giving 20 per cent weightage to factors other than population. This was not acceptable to the federal government.