ISLAMABAD: With 7th National Finance Commis­sion (NFC) award expiring on June 30 this year, the Sindh government has demanded an interim arrangement for distribution of federal divisible pool resources for three months.

Informed sources told Dawn that an interesting situation emerged on Wednes­day when Sindh Chief Minister Qaim Ali Shah, accompanied by Syed Murad Ali Shah, the provincial finance minister, complained to the prime minister that the centre was not giving its due share out of divisible pool. He also demanded that the existing NFC award should not be extended.

At that point, the prime minister was informed by a federal representative that the reconstitution of the National Finance Commission for 8th award had been hampered for many months due to inability of the Sindh government to nominate its private member. All other provinces had complied with the constitutional requirement.

In response, Mr Shah said his government has appointed former federal finance minister Salim Mandviwala as Sindh’s private member to the commission which should be notified by the ministry of finance.

A source quoted Qaim Ali Shah as telling the prime minister that now nominations for all the private members had been completed, reconstitution of the NFC should be notified without any delay and its emergent meeting be convened later this month or in the first week of April.

He said if a consensus on fresh NFC was not possible in view of ongoing budgetary exercise, an interim NFC be announced for only three months during which time a fresh consensus be achieved on a next five-year award. “Extension of existing award would not be acceptable,” he was quoted as saying.

After failing to complete provincial nominations for months, the centre was considering moves for extending revenue sharing arrangement for another year beyond constitutionally protected five-year period.

The Sindh government had not nominated its private member for the 8th five-year NFC despite repeated reminders by the ministry of finance. The NFC Secretariat recently moved a summary to the finance minister to convene a meeting of the existing NFC soon preferably in the first week of April to consider the way out.

“The only solution now left with the five stakeholders – the centre and four federating units – is to extend existing arrangements for another year as a fait accompli,” a federal government official had told Dawn a few days back, explaining that the constitutional life of existing NFC is to automatically expire on June 30.

Private member nominations include Dr Aysha Ghous from Punjab, Prof Ibrahim of Jamaat-e-Islami from Khyber Pakhtunkhwa and Dr Kaiser Bengali from Balochistan.

The federal and provincial budgets for the next year are due in May-June. In fact, most of the budgetary arrangements, particularly development agenda, are completed latest by middle of May every year.

“We have missed the train,” said a provincial member who remarked that the new NFC even if reconstituted immediately could not do anything except to agree on extending previous arrangement to go on. The 8th NFC could not be constituted so far, hence no triggering point for the new award.

“This is a major constitutional lapse,” a former finance minister said. He agreed that legal solution was available to condone the discrepancy but this puts a question mark on the legitimacy of the will of the electorate. The previous NFC was constituted by then president Asif Ali Zardari on July 24, 2009 that enabled a consensus 7th NFC award in about five months.

The new NFC has not been constituted as yet to meet constitutional requirement regarding consideration of financial arrangements between the centre and its federating partners and among the provinces and set shares in the divisible pool proceeds for next five years.

The process involves a lot of consultations, exchange of proposals and non-papers and series of negotiations to achieve the goal of a workable financial arrangement for five years.

Finance Minister Ishaq Dar had announced in his budget speech in June last year to start consultations over the next NFC award in July and then assured the International Monetary Fund to have a fresh NFC arrangement, keeping in mind low provincial revenues and large cash surpluses, to ensure long-term fiscal sustainability.

The 7th NFC award was signed by all the parties on Dec 30, 2009 in Gwadar and it took another few months in file work and formal notification that enabled its inclusion in federal and provincial budgets for fiscal year 2010-11 in June 2010 down the road.

Published in Dawn, March 19th, 2015

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