4, April 2005	Monday	24 Safar 1426

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ISLAMABAD, April 3: The federal government is to suggest a structured and step-by-step approach to provinces to increase their share in the federal divisible pool to 50 per cent in a phased manner under the sixth National Finance Commission award.

Informed sources told Dawn on Sunday that under the formula, half a per cent points could be increased in a way that the provincial share of the FDP would go up to 50 per cent by 2009-10, the last year of the sixth NFC award.

This means that the provincial share of FDP would start from 48 per cent or 48.5 per cent in the first year of new NFC. This would be increased by 0.5 per cent every year, reaching 50 per cent in 2009-10.

A senior official said it was in line with a recent statement of President Musharraf that sharing of resources should be on a 50:50 per cent basis between the centre and the provinces.

“He (the president) did not give a timeframe for this,” said the official, adding that “if we start with around 48 per cent share to the provinces and then keep on increasing every year, the ratio would automatically reach 50:50 by 2009-10”.

He said the federal government had already started discussions with the provinces on the subject so as to reach some amicable arrangement before a formal meeting of the NFC was convened.

“Prime Minister Shaukat Aziz has deputed his adviser on finance and revenue Dr Salman Shah and state minister for finance Omar Ayub Khan to hold discussions with provincial governments. The two have already had discussions with chief ministers and finance ministers of Sindh and the NWFP in recent days,” he said.

The two (Salman and Omar) would be visiting Balochistan and Punjab in the next few days to take them on board before convening a formal NFC meeting, the sources said.

A provincial source told this correspondent on Sunday that the two provinces “have disapproved the formula”.

“They say the formula simply offered an escalation cost and if the step-by-step approach is to be adopted, it should be structured in a way that it starts with 50:50 per cent in the first year and touches 52.5 per cent for the provinces by 2009-10,” the source said.

The federal government sources said the finalization of the sixth NFC award had become even more difficult for the federal government this year because of an additional Rs100 billion impact arising out of higher petroleum prices.

The sources said if the provinces did not accept the new offer, the federal government would be more than satisfied to continue with the existing 5th NFC award for another year. The current award was announced in 1996 and went into effect in July 1997.

The official said there were precedents that new NFC awards had taken around 12 years and “heavens would not fall if the current award continues for seven years” instead of constitutional requirement of five years.

He said the federal government and Punjab would clearly lose financially if the new award was finalized. Under the existing award, the provincial share of the divisible pool would range between Rs270-280 billion from Rs239 billion during the current year.

The sources said the total size of the divisible pool during 2005-06 would be around Rs620 billion, of which around Rs35-40 billion would be deducted by the federal government as service and collection charges, leaving Rs580-585 billion for distribution among centre and provinces.