ISLAMABAD, Aug 19: The federal government has decided to give a fresh and final opportunity to the provinces to reach consensus on National Finance Commission (NFC) award before President Musharraf presents his solution to the issue.

Prime Minister Shaukat Aziz told Dawn on Friday that reconstitution of the new NFC was not yet complete as nominations from some of the provinces for private NFC members was still to come.

“Once the reconstitution (of NFC) is complete, we will meet once again so that provinces resolve their differences on horizontal distribution of resources among themselves,” the prime minister said.

He said sharing of resources among the provinces was the real problem. “Naturally, we (the centre) are a party to it and we want it to be resolved,” said the prime minister, adding that sharing of resources between the centre and provinces was not a big problem.

“So we will make one more attempt. Otherwise we will give them a solution because finally every province and every member of the NFC has to agree under the constitution...I can’t amend the constitution,” he said.

The prime minister said the federal government wanted to take the provinces along and all the stakeholders were very close to an agreement.

Just before announcement of federal budget 2005-06 in June this year, the provinces had authorized the president to present a solution on the NFC award after their failure to reach a consensus themselves.

The provinces had been divided over the change in population-based formula into a multi-factor formula involving population, poverty, revenue collection and inverse population density as parameters for sharing the resources.

Also, the provinces have been demanding that the federal government increase provincial share of the divisible pool to 50 per cent from the existing 37.5 per cent, plus special grants and subvention pool.

The prime minister said the provinces had asked the president that they could not reach the conclusion themselves and hence he should give a solution which is acceptable to all the stakeholders.

President General Pervez Musharraf had reconstituted the National Finance Commission (NFC) on July 22, 2005, under article 160(1) of the constitution as the tenure of existing NFC had expired on July 21.

The new 10-member NFC, headed by Prime Minister Aziz, who also holds the portfolio of finance minister, comprised four provincial finance ministers and adviser to the prime minister on finance Dr Salman Shah. The appointment of four private NFC members from the provinces has yet to be notified.

The previous NFC, sixth after the promulgation of the 1973 constitution, was notified on July 21, 2000. Mr Aziz was the chairman of the commission as federal finance minister. It took six months to complete the formation of the NFC which held its first meeting in July 2001, a year after it had been notified.

The terms of reference for the commission include distribution among the federation and the provinces of net proceeds of the taxes on income, including corporate tax, but not including taxes on income consisting of remuneration paid out of the Federal Consolidated Fund; taxes on the sale and purchase of goods, imported, exported, produced, manufactured or consumed; sales tax on services (CE Mode); export duties on cotton; consider the inclusion of other federal taxes, including customs duties and federal excises, but not including taxes on income paid out of the Federal Consolidated Fund.

The NFC is also responsible to make grants-in-aid by the federal government to the provincial governments; the exercise by the federal government and the provincial governments of the borrowing powers conferred by the constitution; examine the question of rationalisation of payment of royalties on crude oil and of surcharge on natural gas collected by the federal government to the provincial governments and to consider review of the distribution of share of taxes between the federal government and provincial governments.

The NFC will develop and enforce a mechanism for setting parameters to achieve fiscal discipline at the federal and provincial levels for ensuring consistency in maintaining an appropriate fiscal balance at the consolidated level.