ISLAMABAD, Jan 1: Provinces have expressed reservations about the new resource distribution formula presented by the centre for the finalization of next National Finance Commission (NFC) award and have sought clarifications. Informed sources told Dawn on Sunday that Sindh, Balochistan and the NWFP had expressed reservations about the new formula.
The federal government has proposed to the provinces that it will give 90 per cent weight to population and 10 per cent to revenue generation, backwardness and inverse population density in the horizontal distribution of resources (among the provinces) from the federal divisible pool.
The centre has also offered to increase provincial share to 50 per cent in a gradual manner under vertical distribution of FDP resources — between the centre and provinces, the sources said.
The sources said the Sindh government “has raised three major questions and sought clarifications”. The federal government has not yet responded to these points, the sources added.
Sindh wants to know at what ratio each of the three factors would claim resources out of the 10 per cent proposed by the centre. Its second concern is that it wants 2.5 per cent general sales tax to be kept out of the FDP like before and that its distribution among stakeholders should continue to be made on the basis of actual collection.
Third, Sindh has demanded that the provincial share of the net proceeds of the federal divisible pool should start from 48 per cent in the first year, reaching 50 per cent in the subsequent years of NFC, without accounting for the 2.5 per cent GST as its part.
That means that if 2.5 per cent GST is also included, the provincial share of FDP should start from 50.5 per cent in the first year and reach 52.5 per cent in subsequent years.
Similarly, Balochistan has also submitted its comments to the new formula. It has conveyed some reservations about the 90:10 formula but has not taken any strong position on that because it is not going to get much out of the FDP.
However, it has taken a strong a position on gas development surcharge (GDS) issue and asked the centre to ensure its rightful share because this would provide it a big financial cushion.
The NWFP has similarly sought clarifications about ratio to be given to factors other than population and called for giving maximum weight to poverty factor.
President Gen Pervez Musharraf is expected to convene a fresh round of discussions with four chief ministers and provincial members of the reconstituted NFC to finalize the award for announcement ahead of the construction of new reservoirs, the sources said.
Implementation of the new NFC award would start from the beginning of the next fiscal year because half of the current year has already gone and it is practically not possible to apply such a massive restructuring to this year’s budget allocations, the sources said.
The seventh NFC, a mechanism to distribute resources among the provinces, has been pending since 2001 due to lack of consensus among the provinces and the centre over the formula. The sixth NFC award was announced in 1997.
