KARACHI, Jan 19: Sindh will benefit the least from the new formula of national resources distribution announced by President Pervez Musharraf on Tuesday and financial analysts estimate a gain of only 3.4 per cent in Sindh’s share of the federal tax pool.
With the tax pool projected to be about Rs725 billion by next June, the share of the provinces is being put at Rs329 billion. Sindh expects to get a little over Rs83 billion under the new formula as against over Rs81.5 billion estimated under the 1997 NFC award. The federal government is expected to collect more than Rs525 billion taxes from Sindh in the current fiscal year.
While waiting anxiously for the presidential order on distribution of resources, ministers and advisers and officials of the Sindh government remained in touch with their ‘contacts’ in Islamabad on Wednesday and Thursday to get a feel of the scheme of things under new dispensation to draw up emerging financial scenarios.
Based on hints dropped by bureaucrats in the federal finance ministry, officials in Sindh fear an actual cut in its share of the 2.5 per cent of the GST collection.
According to sources, Islamabad has indicated a change in the distribution ratio of 2.5 per cent of collected GST among the provinces. Hitherto, the federal government has been giving 62.5 per cent of the collected GST on the basis of historical octroi and zila tax collection and 37.5 per cent on the basis of population. This ratio is now being changed to 50 per cent on the basis of historical collection and 50 per cent on the basis of population.
Analysts estimate a collection of about Rs53 billion of the 2.5 per cent GST at the end of the current fiscal year. Under the 1997 NFC formula, Sindh’s share comes to more than Rs15 billion which will now drop to Rs12 billion.
Sindh has been consistently demanding its share from the GST collection entirely on the basis of historical collection of octroi and zila tax as declared by the federal government. A federal government audit has determined Sindh’s share at 46 per cent. In that case, Sindh’s actual share in the Rs53 billion will be about Rs23 billion.
The NWFP will be the biggest beneficiary of President Musharraf’s resources distribution formula followed by Punjab and Balochistan.
The president also announced the actual figures to be given to the provinces from the Rs28 billion subvention pool. Under this arrangement, the NWFP will get 35 per cent, Balochistan 33 per cent, Sindh 21 per cent and Punjab 11 per cent.
Under the 2002 resources distribution formula which was accepted by Sindh but was discarded by the Centre and Punjab, an annual subvention fund of Rs20 billion was to be instituted. This fund was to be given only to Sindh, NWFP and Balochistan. In the current formula, the size of the subvention pool has been increased to Rs28 billion but now Punjab will also be a recipient.
However, it is not clear how the subvention pool of Rs28 billion will be instituted. Will it be from the federal government’s share in the tax pool or will it be part of what is being claimed as increased share of the provinces?
Influential circles in Sindh maintain that the president’s formula is not based on consensus of elected politicians of the federal and provincial governments. According to them, it is a case of the centre imposing its will on the provinces and it is bound to create heart burnings and leave deep financial scars on Sindh economy.
Way back during late General Zia’s rule, the first NFC was formed in 1983. It did not work and was dissolved in 1985 since the population ratios of Sindh and NWFP had been slightly increased. The second NFC was constituted in 1985. In 1988, the then federal finance minister Dr Mahbubul Haq wanted to obtain signatures of the provincial finance ministers on dotted lines. It was fiercely opposed by the then caretaker chief minister Akhtar Kazi and finance minister Javed Sultan Japanwala.
With the submission of the caretaker government of Mumtaz Ali Bhutto, the 1997 NFC award carried signatures of then finance minister Kunwar Idrees, and Mr Bhurgari, the private statutory member of Sindh on the NFC. The 1997 award dealt a crippling blow to the finances of Sindh from which it is yet to recover.
Only two NFC awards have enjoyed support of the entire political leadership of the country, the 1974 NFC award during late Zulfikar Ali Bhutto’s government and the 1991 award when Mian Nawaz Sharif was the prime minister. The 1991 award recognised for the first time the right of the provinces on their natural resources. That the provinces are yet to be given this right is another story.
