Hard pressed for time to evolve a consensus amidst sharp, diverse views, the federal government has not ruled out the possibility of the 7th National Finance Commission Award being extended for one year.

Apparently, the new NFC was set up too late for completion of serious deliberations specially after the impact of the landmark.7th NFC award that expires on June 30. The existing award coincided with the transfer of the concurrent list to the provinces under the 18th Amendment. Pieced together, the two led to significant transfer of rights and obligations to the federating units.

The provinces (administrative units) were able to secure increased fiscal, legislative and administrative powers but were not fully equipped to exercise their reinforced authority and responsibility, given the historical background of ‘strong centre’ and ‘unity of command’ dispensation, which deprived the provinces of their legitimate autonomy to which a sub-federation is normally entitled.

The core issue in the eighth award is to incorporate measures that would make devolution more meaningful in raising the living standards of the common citzen, something which can be achieved only by empowering people at the grass-root level

But for the much improved sales tax collection by Sindh and Punjab compared to that of the Federal Board of Revenue, the provinces have yet to demonstrate they have vigorously upgraded or engaged in any worthwhile capacity building exercise to fully carry out their new responsibilities.

So one has to study the ground realities emerging from implementation of both the NFC Award and the 18th amendment. The apparent outcome has lead some to conclude that too much was conceded by the federation for which the beneficiaries were also not well prepared to manage. And that has left the centre with scarce resources to take care of the fiscal deficit.

Others may say that the sub-federations must be helped to take on their responsibility through rapid capacity building for the exercise of their much sought rights achieved after decades of constant struggle.

The key issue is: the devolution journey should continue uninterrupted. There is a lot of distance to be covered to reach the final destination. Any reversal would prove ultimately counter productive as has been in the case of centralisation pursued at the cost of democracy in a larger part of Pakistan’s history. The rights of the sub-federations can only be suppressed to provide fuel to the existing multiple crises. There is no escape from democratic federalism in this era of ‘self-determination between and within nations’.

However, there may be some space that has been created by reinforced provincial autonomy for the federation to coordinate or assume responsibility in areas of common pursuits of all the provinces, which cannot be dealt with individually. It can be in the realm of common policymaking or coordinating bodies, , standardisation and pricing of products or foreign trade.

For different reasons both the federation and the provinces have not stuck to their original commitments made in the 7th award. The provincial governments have been induced by Islamabad to produce huge budget surpluses to help the ‘centre’ achieve the consolidated fiscal deficit as agreed with the IMF.

While there is always a gap between estimated and actual disbursement of funds earmarked for development spending, the targeted budget surpluses of the provinces impact adversely on public spending for socioeconomic uplift of the teeming millions.

On the other hand the provincial governments have failed to effectively tax farm incomes for which there is a huge potential.

On the socioeconomic front, the situation has been made worse by the mainstream political parties denying the common citizens representative district /local governments and their legitimate right to levy local taxes. This anomaly should go. And that should include property tax now being collected by the provincial governments.

The core issue in the 8th award is to incorporate measures that would make devolution more meaningful in raising the living standards of the common citzen, something which can be achieved only by empowering people at the grass-root level to enable them to fend for themselves. This requires representative local governments and empowered communities.

The Cantonment Board and Balochistan district government polls have been held which will be followed by elections in Punjab, Sindh and KP later this year. It is time that the third tier of the federation is also entrusted with more authority and responsibility to managing more effectively socioeconomic development at the grassroots. And if this this is to be done, the delay in 8th NFC award would be justified to some extent.

Published in Dawn, Economic & Business, May 4th, 2015

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