ISLAMABAD, June 9: The federal budget for 2007-08 envisages Rs491.7 billion net transfers to provinces, including Rs403 billion in net proceeds from the federal divisible pool under the interim National Finance Commission Award.

The next year’s provincial share out of net proceeds from the divisible pool and straight transfers has been estimated to total Rs465.9 billion, up by 19.5 per cent against current year’s Rs390 billion. This does not include project aid and subventions.

As such, Punjab would get a total of Rs236.3 billion next year on account of net proceeds, up by 25 per cent when compared to current year’s Rs188.9 billion. Sindh’s share would increase by 11.57 per cent to touch Rs144.15 billion next year compared to Rs129.2 billion this year. NWFP’s share in net proceeds of the divisible pool and straight transfers has been estimated to increase by 24.77 per cent to Rs55.9 billion next year, against Rs44.8 billion revised estimates for this year. Balochistan would get a total of Rs29.6 billion next year, up by 5.8 per cent, compared to Rs28 billion this year.

Next fiscal year’s net transfers to the provinces are 29 per cent higher than current year’s revised estimates of Rs381.45 billion. Similarly, net proceeds to provinces from the federal divisible pool at Rs403 billion are estimated to be 25.7 per cent higher than current year’s revised estimates of Rs320.6 billion.

The budget for 2007-08 also describes details of the interim NFC award. Under the award, the provincial share in net proceeds of the divisible pool would be 42.5 per cent in 2007-08 and gradually increase one per cent every year until 2010-11 and onwards. The straight transfers to provinces for the next year have been projected at Rs62.8 billion, compared with Rs70.3 billion during the current fiscal year, showing a decline of almost 11 per cent or Rs7.5 billion.

On the other hand, special grants and subventions to the provinces have been projected at Rs31.27 billion, against Rs29.25 billion during 2006-07, thus showing an increase of 6.9 per cent. However, project aid to the provinces has been increased by 55 per cent to Rs26 billion from Rs16.8 billion revised estimates for the current year.

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. Under this head, Punjab’s share would be 50

per cent, followed by Sindh at 34.85 per cent, the NWFP at 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 Sindh 23.71 per cent, the NWFP 13.82 per cent and Balochistan 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 Rs31 billion in collections from provinces.

Total transfers to provinces during the next year would be Rs524.5 billion in 2007-08 against Rs439.6 billion of the current year, up by 19.3 per cent. However, the federal government will deduct Rs32.8 billion as interest payments and debt-servicing of federal loans, leaving total transfers at Rs491.75 billion.

Under the 1997 NFC Award (Amendment) 2006, income tax, 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 deducts five per cent of collection charges for the divisible pool components before paying net provincial shares.