ISLAMABAD, April 23: Provinces have formally protested with the federal government after developing serious differences over the non-financing of projects from the federal development funds.

Sources said that disputes over resource distribution between the centre and federating units — and among the provinces themselves — are re-emerging as the next year’s budget preparations enter a crucial stage.

Balochistan formally requested for arbitration in its dispute with Sindh over gas development surcharge and oil and gas royalties, the sources said.

Similarly, the NWFP also asked the federal government to increase its share in hydel profit as an interim arrangement till the arbitration tribunal, led by Justice Ajmal Mian, finalised an award.

The sources said that during a meeting of the Executive Committee of the National Economic Council (Ecnec) held on Saturday, the two larger provinces — Punjab and Sindh — protested over the centre’s decision not to finance or co-finance provincial development schemes and urged the centre to reverse its decision.

They said that representatives of Punjab were more vocal and aggressive than their counterparts from Sindh after the increase in provincial share in the revised National Finance Commission award.

Prime Minister Shaukat Aziz, who presided over the meeting, reminded the provincial planning and development ministers that their chief ministers had agreed to abide by the decision in writing and, therefore, they had no right to raise fresh objections. The issue was resolved with a consensus, a source quoted the prime minister as telling the provinces.

“The provinces are victims of selective memory,” said the source, adding that provinces were satisfied with the increase in share in the NFC but forgot that they had agreed to stop seeking funds from the Public Sector Development Programme (PSDP) if their share in the federal divisible pool was increased.

The sources said the provinces’ share in the NFC had been increased by Rs52 billion while the federal government was to finance the provincial projects worth Rs68 billion during the current year, which meant the provinces were net losers.

Meanwhile, Balochistan urged the federal government to appoint an arbitration commission over its dispute with Sindh over gas development surcharge and royalties through arbitration and said bilateral efforts to resolve the dispute had failed.

The sources said that Balochistan had told the centre that provincial government would not be able to present its budget owing to higher expenditure on law and order, interest payments and drought.

Balochistan’s overdraft increased to Rs16.5 billion during the current fiscal year, escalating its interest payments. The sources said that the Asian Development Bank would not release its second tranche of the Provincial Resource Management Programme, worsening Balochistan’s financial situation.

Under the provincial government directives, Balochistan had reduced its current expenditure from Rs34 billion to Rs29 billion, which would again rise to Rs31 billion, rendering the Annual Development Programme unmanageable, creating problems for the provincial government in the election year.

The sources said the federal government had been reminded that an inter-provincial committee under Senator Dilawar Abbas had recommended a formula for an increase in Balochistan’s share of the gas development surcharge and royalty but that had not been implemented. “If the Dilawar Abbas formula could not be implemented for some reason, the only option left (open) is to resolve the dispute through arbitration,” a provincial government source said.

The centre had recently informed the provinces that in view of an increase in the share of the provinces from the federal divisible pool in the new NFC award, none of their projects would be financed or co-financed from the federal PSDP from next financial year (2006-07).