ISLAMABAD, June 5: The federal budget 2006-07 envisages Rs398.1 billion net transfers to provinces, including a share of Rs321.1bn in net proceeds of the federal divisible pool under the interim National Finance Commission Award.
Next fiscal year’s net transfers to provinces are 14 per cent higher than the current year’s revised estimates of Rs349bn. Similarly, net proceeds to provinces from the federal divisible pool at Rs321bn are projected to be about 31 per cent higher than the current fiscal year’s revised estimates of Rs244.6bn.
The budget 2006-06 also described details of the interim NFC award. Under the award, the provincial share in net proceeds of the divisible pool would start with 41.5 per cent in 2006-07 and gradually increase one per cent every year until 2010-11 and onwards.
The provincial share in federal pool would stand at 42.5 per cent in 2007-08, 43.5 per cent in 2007-08, 43.75 per cent in 2008-09, 45 per cent in 2009-10 and 46.25 per cent in 2010-11.
The provinces will get one-sixth of sales tax revenue, which would subsequently be transferred by provinces to district governments and cantonment boards in full. In this head, Punjab’s share would be 50 per cent, followed by Sindh at 34.85 per cent, the NWFP 9.93 per cent and Balochistan 5.22 per cent.
The remainder of the divisible pool would be distributed among provinces on the basis of their population. Under this head, Punjab will get the highest share at 57.36 per cent, followed by 23.71 per cent for Sindh, the NWFP 13.82 per cent while Balochistan would get 5.11 per cent.
Moreover, Punjab, Sindh, the NWFP and Balochistan will get 11 per cent, 21 per cent, 35 per cent and 33 per cent, respectively, out of Rs27bn collections from provinces and Rs750 million out of grants-in-aid every year.
Total transfers to provinces during the next year would amount to Rs436.9bn, up by 13.4 per cent against Rs385bn in revised estimates for the current year. However, the federal government will deduct Rs38.8bn as interest payments and debt servicing of federal loans, leaving total transfers at Rs398.1bn.
The provinces will also get Rs57bn in direct transfers against Rs56.8bn in revised estimates for the current year. During the next fiscal year, special grants to provinces by the centre have been estimated at Rs29.3bn, down by 116 per cent against the current year’s revised estimates of Rs63.5bn.
However, project aid from centre to the provinces would increase by 53.4 per cent to Rs26.6bn against the current year’s revised estimates of Rs17.5bn. The budget 2005-06 had estimated special grants to provinces at Rs24bn but were later revised downward to Rs17.5bn.
Under this head, Punjab will get Rs189.2bn in the next year against Rs148.8bn it received during the current year. Sindh will get Rs120bn in the next year against Rs95.144bn in revised estimates for the current year. The NWFP will get Rs44.6bn next year against Rs35.6bn during the current year. Similarly, Balochistan will get Rs24.5bn against Rs21.8bn during the current year.
Under 1997 NFC Award Amendment 2006, taxes on income, wealth tax, capital value tax, taxes on sales and purchase of goods, export duty on cotton, customs duty and federal excise duty excluding the excise duty on gas charged at well-head constituted the federal divisible pool.
The federal government also deducts five per cent of collection charges for the divisible pool components before paying net provincial shares.
