KARACHI, July 21: The five-year term of the National Finance Commission (NFC) expires on Friday July 22, 2005. But it will not die an “unwept and unsung death” as the tears are being shed and noises raised in Karachi, Quetta and Peshawar. Lahore is the main beneficiary of the NFC stalemate and it remains a silent spectator. Islamabad is totally unruffled, unconcerned and unmoved.
“We have no information about the expiry of the NFC term,” an official in the Islamabad based NFC Directorate replied when asked about the status of the Commission on Friday and after. “If necessary, the government will issue a notification” Mr Malik replied and banged the phone. Dr Salman Shah Advisor to the Prime Minister on Finance was in a meeting. Dr Ashfaq, the government advisor in the finance ministry is in Japan.
In Karachi, the Sindh Finance Minister Syed Sardar Ahmad was as usual “busy in a meeting.” The finance secretary Israr Malik and additional secretary Naheed Durrani were also busy. Balochistan’s finance minister Syed Ehsan Shah was in his hometown Turbat but not available on phone.
Syed Sardar Ahmad is reported to have tried to contact the Sindh Chief Minister Dr Arbab on Wednesday to discuss the situation arising out of the expiry of the NFC. “The Chief Minister did not respond to his senior minister’s call,” a well placed source in Sindh government said.
Senator Sanaullah Baloch who has been voicing loudly the demands of his province for a just and fair resource distribution formula is convinced that any new NFC structured on the same lines will never be able to deliver a just and fair award. “Status quo and stalemate on resource distribution arrangement suits Islamabad and Lahore,” he remarked.
The current NFC, sixth after the promulgation of the 1973 constitution was notified on July 21, 2000. Shaukat Aziz was the Chairman and still holds the same position even now after he has been elevated to the office of Prime Minister. It took six months to complete the formation of the NFC and it held its first meeting in July 2001, a year after it was notified. It held its second meeting in September followed by meetings in Lahore and Karachi.
From the outset, the NFC was beset with differences. Provinces demanded 50 per cent instead of 37.5 per cent share of the tax divisible pool. The process of devolution has been set in motion and provinces were expected to share their revenues with more than 100 district governments. The federal government represented by finance minister refused to yield. From October 2001 to April 2002 there was no meeting of the NFC. A meeting of NFC Working group was held in April 2002.
The constitutional terms of the 1997 NFC award expired in 2002 and the government extended its term to one year and framed the 2002-03 budget on the basis of the existing revenue distribution arrangement. Shaukat Aziz in his post-budget press conference in June 2002 said that the NFC would announce award only after reaching consensus. He said the NFC worked had slowed down because of the 9/11.
President Pervez Musharraf intervened in August 2002 when he called a meeting of the governors and the chief and finance ministers of the provinces to discuss the resource distribution arrangement in context of administrative and fiscal devolution.
A two-day meeting of the NFC was subsequently held in Karachi on August 30 and 31 which decided to retain population as the only basis for revenue distribution among the provinces. But the NFC pledged to consider other factors for revenue distribution after five years in the next NFC.
The NFC decided to set up an annual Rs20 billion pool which was to be shared between the three provinces, Sindh, Balochistan and the NWFP. The Sindh government agreed to accept this arrangement on the condition that NFC gives a clear pledge that the next NFC would not consider population as the only factor for resource distribution and that revenue collection would be given a weightage.
There was almost a consensus but those who were pulling strings ensured that differences crop up on other issues and this did happen. Syed Sardar Ahmad in his article in Dawn in September wrote “Indications are that the NFC having had a long gestation period of 21 months and against all expectations of the constituent politics, is not likely to deliver a healthy baby when it goes to the operation theatre.”
The fifth meeting of the NFC was due in Lahore on October 25, 2002 as the then government wanted to leave this matter to the next elected governments. Elections were held and governments were formed. Since there were no apparent signs of re-constitution of the NFC, the Sindh Assembly passed a unanimous resolution by all the members which sought a radical change. The Sindh assembly proposed that every constituent province of the country should contribute to federal exchequer on the basis of the population.
In May 2003, the Sindh government proposed a formula according to which 94 per cent of the tax pool would be shared on the basis of population. The three factors, inverse population density, backwardness and revenue collection, were to be given two per cent each weightage. It was rejected by the Punjab which insisted on population as the only basis.
In May this year, President Musharraf convened an informal meeting and heard the positions of all four provinces. He managed to obtain a pledge from all the four provinces that he would give a formula that would be acceptable. But indications are that he would not be in a position to make such an announcement before the local body elections. It means that the matter has conveniently been put off till November at least.
