Since it took power in 2013, the coalition government led by Chief Minister Dr Abdul Malik Baloch mentioned in its budgets that it will negotiate hard for a substantial increase in Balochistan’s share in the federal tax revenue under the National Finance Commission (NFC) when negotiations for the 8th award begin.
The chief minister considers the increase in the province’s present share from the existing award as crucial to development of the rundown social and economic infrastructure in the province and address grievances of the middle-class youth who have taken up arms against the state of Pakistan.
Dr Kaiser Bengali, an adviser to the Dr Malik government, will represent Balochistan on the commission as a private member. He is the only member of the new commission who, as a representative of Sindh, was also part of the five-month-long NFC negotiations that led to the finalisation of the historic 7th award in 2009.
Dawn spoke with him on Tuesday over the phone on how the Balochistan government plans to approach the NFC talks for vertical and horizontal sharing of the country’s tax resources during the next five years.
Following are excerpts from the conversation:
Q. When do you think negotiations for the next NFC award will begin?
A. We are only weeks away from the next budget. So I don’t see the NFC negotiations start before the next budget. Maybe we will have a token meeting before this fiscal goes out. I expect the proceedings to begin in or around August.
Q. What does Balochistan seek to gain under the new award? Have you firmed up your strategy to achieve your goals?
A. Well, we have done some preparations. Every province has. We will bring our case, proposals and demands to the table when the negotiations actually begin. I don’t think it is prudent to disclose [our strategy and demands] before the commission starts its work. You don’t show your cards beforehand when you go into negotiations of any kind. You show your hand only when you start bargaining.
We have to see what demands other provinces or the federal government make. We will formulate our strategy and make our demands accordingly to get the best possible deal for the people of Balochistan.
During the negotiations for the previous award, we knew exactly what we [provinces] wanted to achieve. For example, we knew that we wanted the provincial General Sales Tax (GST) on Services to be transferred to the federating units. We also wanted the provincial share from the tax divisible pool to be increased substantially and the formula for its distribution among the provinces changed. And we got all of that.
But this time around we don’t have any big-ticket items on the agenda.
Q. Many people expect the negotiations for the next award to be tougher than they were the last time (because of governments of opposition parties in Sindh and Khyber Pakhtunkhwa). Do you agree?
A. Well, it largely depends on how the federal government conducts itself [during the talks]. When we started negotiating for the last award we had Shaukat Tareen as finance minister. He had a very benign approach. For instance, when we asked him to first decide the formula for horizontal distribution of the share before taking up vertical division of the taxes as was the practice in the past, he immediately agreed to that.
The idea was that if Punjab took a hit because of the changes in the formula for inter-provincial sharing of the available resources, the increase in transfer of the funds from the federal government to the provinces under vertical distribution should compensate it for its losses. As a result, we see that the increase in the provincial share from the divisible tax pool more than compensated the loss suffered by Punjab owing to the new formula for horizontal sharing of the resources.
Q. The International Monetary Fund (IMF) has reservations about the vertical distribution of resources and wants the imbalances corrected in the next award and the provinces to take steps to cut their expenditure to reduce federal deficit. What’s your take on it?
A. Let me make one thing clear here: the IMF has no locus standi in this matter; it [NFC] is our internal matter. I should also explain that the NFC deals only with taxes and their distribution between the centre and the provinces and among the provinces; the issue of expenditure [cuts] can be discussed at some other forum.
Q. How was your experience of the last award?
A. Let me tell you that the then finance minister and Finance Secretary Salman Siddique were fair to the provinces and had a balanced approach towards negotiations. Every time an issue arose, they took care of it. There was not a single moment of bitterness between the provinces.
Published in Dawn, April 16th, 2015