For the first time in the country’s history, there may be an allocation of 3pc — around Rs90bn — for the Federally Administered Tribal Areas, giving them a share in the federal divisible pool.

This will be in addition to the existing annual development allocation of Rs21bn under the public-sector development programme for the area.

The recommendation for the allocation of this hefty amount came from the committee on Fata reforms.

Finance Secretary, Dr Waqar Masood said the proposal of giving a 3pc share in the NFC award to Fata would be calculated on the pattern of the 1pc share given to KP as compensation against the war on terror. The NFC calculates this 1pc from the sum total divisible pool of taxes.

An exhaustive study on revenue sharing was conducted by the Fata secretariat. It puts the cost of war to the tribal belt at Rs21bn per annum.

The findings of the study state the budget allocation to Fata under the discretionary and non-equalisation scheme is less than half of what it could have gotten had it been part of the NFC.

Since Fata bears the tax burden of GST, customs duties and federal excise duties like the rest of the country, it should receive its due share in revenue as well.

Since Fata bears the tax burden of GST, customs duties and federal excise duties like the rest of the country, it should receive its due share in revenue as well

Fata also retains a claim on historical shares of royalty from the Warsak Dam and Gomal Zam Dam since their inception.

This claim is based on the fair application of the principle of symmetric fiscal equalisation.

After the 18th amendment, revenue generated through oil and gas is to be shared by the federal and provincial governments at the rate of 50:50. However, Fata is not included in this resource sharing formula.

The Fata secretariat report recommended that Fata’s share be computed using the NFC formula through an implicit application on the basis of the NFC policy of providing equal access to public services for all citizens.

It was also suggested that Fata be co-opted a non-voting membership in the 8th NFC, either through a constitutional amendment or through an application of the NFC formula for revenue assignment through an executive order.

In the last NFC-related meeting, Finance Minister Ishaq Dar submitted a formal proposal seeking a 3pc share for security and 4pc for development activities in Fata, Gilgit-Baltistan and Azad Jammu and Kashmir.

In case of approval of this proposal, the remaining 92pc share of the divisible pool will be left for distribution on the formula of 57.5pc share to provinces and 42.5pc to the federal government.

The provinces will have to give their consent to the proposal but at least one thing is clear: there has been no proposal so far from the federal finance ministry to seek a 3pc share for tribal areas.

The NFC — created under article 160 of the constitution — provides membership to the provinces and the federation.

As Fata enjoys special status, its interests are being represented by the federal government.

The only option with policymakers is to amend the constitution to give a share on the principle of equity.

An exhaustive report by the Fata reforms committee in 2016 attributed the main cause of under-development of the area and its people to paltry resource allocation.

Official data relating to per capita budget allocation shows that Fata, on average, is allocated 155pc less in comparison with Gilgit-Baltistan and 204pc less in comparison with KP. Similar variations have been witnessed in terms of allocations for development.

The committee’s plan to integrate the tribal areas into the province of Khyber Pakhtunkhwa envisages a transition period of five years. A 10-year timeline has been set for development activities and financial mainstreaming

Former Federal Textile Minister, Abbas Khan Afridi, who belongs to the Khyber Agency, suggested that the government should include the proposed 3pc share for Fata in the 8th NFC Award.

“The disbursed share under the next award will help in uplifting under-developed tribal areas in the transition period”, he said.

Published in Dawn, Business & Finance weekly, January 23rd, 2017