March, 16 2005	Wednesday	5 Safar 1426

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PESHAWAR, March 15: A high level team of the federal government has initiated informal parleys with the federating units to evolve consensus on next national finance commission (NFC) award and proposed a plan for horizontal distribution of resources among the provinces under a new resource-distribution formula.

State Minister for Finance Umer Ayub and Adviser to Prime Minister Dr Salman Shah held a meeting with NWFP Minister for Finance, Planning and Development Siraj-ul-Haq in the committee room of the finance department on Tuesday. Dr Mohammed Zubair Khan, NWFP’s non-official member on the NFC, and senior staff of the provincial finance department also attended the meeting.

The meeting was the first of a series of informal meetings the federal government intends to hold with provincial governments to pave way for putting in place the next NFC award. The new award had become due on July 1, 2002 on completion of five-year constitutional term of the current award.

The federal government, sources said, wanted the next NFC award to be announced before the start of 2005-06 financial year. They said that the provincial government was apprised of the federal government’s intention to distribute resources between the centre and the federating units at the ratio of 50:50. The intention was in line with the recent announcement made by President Pervez Musharraf.

Similarly, the federal government’s representatives put forth a formula for horizontal distribution, among the federating units, of their 50 per cent share. “The federal government has proposed distribution of resources on the basis of population, backwardness of an area (province) and other determinants,” said an official source.

For distribution of resources among the federating units, the federal government proposed 90:10-formula. The formula envisages distribution of 90 per cent, out of the provinces’ 50 per cent share, among the federating units on the basis of population and 10 per cent on the consideration of other determinants.

The provincial government, the sources said, was asked to give its opinion on the formula in the NFC meeting scheduled to be held in Islamabad. The other three provinces would also be asked to come up with their response to the proposed formula at the Islamabad meeting which would be held after appointment of non-official member of Sindh is notified.

Official sources said that the NWFP government made a case in support of its stand on allocation of greater resources to the smaller provinces. The provincial secretary finance made a presentation wherein he explained the provincial government’s revenue and expenditure trends and requirements, its financial constraints, budgetary deficit, revenue shortfall, problems created due to over-billing by the Peshawar Electric Supply Company and NWFP’s stand on net hydel profit issue to which Wapda is a party. The secretary apprised the federal government’s team of Wapda’s refusal to raise the NWFP’s annual net hydel profit share from Rs6 billion to Rs8 billion and said that Wapda’s decision had left the provincial government with a staggering budgetary deficit. He also explained in detail problems the provincial government was facing because of financially weak district governments. The provincial finance secretary said that after allocating 60 per cent of its total annual revenue resources to the district governments the provincial government was not left with ample funds to effectively support its annual development programme.