January 24, 2006	Tuesday	Zilhaj 23, 1426

KARACHI, Jan 23: No official response has been given by the Sindh government after almost a week of the announcement of the resource distribution formula by President General Pervez Musharraf last Tuesday, but politicians and officials in their informal comments termed it “worse than the 1997 NFC award” while pointing out that the 1997 award was also “unjust and unfair to Sindh for a number of reasons”.

Ministers and advisers of the Muttahida Qaumi Movement (MQM) complained that Sindh Chief Minister Dr Arbab Rahim was not available to them since Wednesday. Chief minister’s adviser on finance M.A. Jalil is said to have sent a written note to Dr Arbab, explaining him the negative impact of what is being called “an amendment to the 1997 NFC award”. Dr Arbab did not respond to his adviser’s note till Monday evening.

The Sindh cabinet is expected to meet this week or next week and is likely to give an official assessment of the impact of the amended formula of resources distribution. The MQM ministers and advisers are expected to declare their position in the cabinet meeting.

Ministers, advisers and officials in the Sindh government now do not mince words to declare that the amended resource distribution formula of President Musharraf has hit hard the Sindh province on a number of counts. Initial calculations show a net reduction of Rs1.47 billion in the share of 2.5 per cent general sales tax in the very first year of 2006-07 and total negative impact in the next five years comes close to Rs10 billion.

President Musharraf’s formula has deviated from the 1997 NFC award on distribution of 2.5 per cent GST and that benefits Punjab and hits Sindh. The consistent demand of Sindh is to give a 46 per cent share in the 2.5 per cent GST. On this basis, the share of Sindh in 2006-07 comes to Rs21 billion.

Punjab has emerged as the biggest gainer in the new formula as it disregards completely the demands of the three provinces — Sindh, Balochistan and NWFP — for a multiple criteria for resources distribution. Punjab has been given subvention for the first time and an enhanced share in the 2.5 per cent GST.

Now that President Musharraf’s order on distribution of resources for 2006 has been announced, it has been made clear that the announcement on Tuesday was an amendment to the 1997 NFC award and not a new dispensation. This explains to retaining the population as the only basis of the resources distribution and ignoring the demands of Sindh, Balochistan and NWFP to give some share to inverse population density ratio, poverty and tax collection.

The total increase in overall shares of the provinces works out to be Rs14.33 billion in 2006-07 and “not Rs51 billion as has been announced by the president in his speech on Tuesday evening”, is a starling disclosure of the initial calculations made by the officials on the basis of information and data obtained from Islamabad.

Well-placed sources say that in the first year, the overall share of the four provinces works out to be 45.3 per cent, while the existing share under the original 1997 NFC award is 43.7 per cent. “It is only a 1.8pc increase in the total provincial transfers and in terms of money amounts to Rs14.33bn and not Rs51bn as was announced.

The new formula is quite on the demands of al the four provinces for relief servicing of federal government debts. The provincial governments are paying an interest of 16 and 18 per cent on the federal loans which is claiming a substantial part of their budgets. Provinces want the federal government to write off the debts because the provinces had paid a substantially big amount than the original principal amount.

Syed Sardar Ahmad, the former finance minister of Sindh, in his 2005 budget speech complained that his province was paying for the loans that were never taken, implying that the principal amounts had been overpaid.

The new formula is bound to slow down the pace of development in all the four provinces, particularly in Sindh. With oil prices and inflation on the rise, Sindh will find it difficult to take up infrastructure projects.