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| May 27, 2005 | Friday | Rabi-us-Sani 18, 1426 |
Three provinces agree on new NFC formula
ISLAMABAD, May 26: Three provinces — Punjab, Balochistan and the NWFP — agreed on Thursday to give up population or multi-factor formula for horizontal distribution of net proceeds of the federal divisible pool and set a new principle of percentages based on shares they were already getting, including grants. Under this mechanism, Balochistan should get 8.73 per cent, the NWFP 15 per cent, Sindh 24 per cent and the remaining will go Punjab. Describing the new formula as a major breakthrough, they said it would end stalemate on the NFC award.
This would mean that the provinces would no more fight with each other over percentages of population, backwardness, inverse population density and Sindh’s demand for revenue collection or personal income tax which was considered to be the main cause of failure of the NFC for the last two years.
Sindh Finance Minister Syed Sardar Ahmad did not attend the meeting held at the Balochistan House although he had been invited to it, finance ministers of the NWFP and Balochistan told reporters.
The meeting was unofficially informed by the federal government that the size of next year’s divisible pool would be around Rs570-580 billion. One of the participants told Dawn that the provincial share of the divisible pool would be around Rs235-240 billion.
Informed sources said the three provinces also agreed to jointly present this formula to the prime minister on Friday so that they were able to finalize their provincial budgets. They also agreed that based on this consensus, the federal government would be compelled to give 50 per cent share to the provinces and the share of any province would not come down but increase.
The sources said that Balochistan’s share under the existing NFC award, which is based on population, was 5.11 per cent but it was getting 8.73 per cent after including its share from subvention pool and other grants.
So it should get 8.73 per cent share under the new award as a principle instead of grants and aids and automatically its share would go up with the higher size of the divisible pool.
Similarly, the NWFP was getting 13.82 per cent in the existing award and after including grants, its total share amounted to about 15 per cent. Sindh was currently getting 23.71 per cent share. Its share in the next award has been proposed at 24 per cent.
Punjab’s share in the existing award is 57.36 per cent but it was originally getting about 53 per cent because it is required to contribute a sizable amount to the subvention pool. Punjab thus showed willingness to accept a little less in the next award.
It was, however, clear indication that Sindh and Balochistan had not been able to settle their differences over the gas development surcharge. The levy is not part of the National Finance Commission.
Meanwhile, President General Pervez Musharraf on Thursday directed expeditious work for the formulation of the NFC award with the consensus of all stakeholders. NWFP finance minister Siraj-ul-Haq told reporters that the three provinces would ask the federal government, including the president and the prime minister, to settle the issue by playing a direct role.
He said the federal government should act as an umbrella. “The umbrella has become a baton and that is creating problems,” he remarked. He said every stakeholder should be given an amount with which it could formulate its budget. He said the size of the divisible pool was around Rs575 billion.
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