In the 7th National Finance Commission (NFC) award, Khyber Pakhtunkhwa found its share from the federal divisible tax pool cut by 0.25 per cent due to the change in the criteria from population to multiple factors as the basis for horizontal distribution of funds.
The loss was more than compensated as the federal government and the other provinces agreed to allocate an additional 1pc from the net proceeds of the pool (before its vertical division) to KP in recognition of its frontline role in the fight against terrorism and huge economic losses suffered by it on this account.
Additionally, the federal government conceded to KP’s long-standing demand to increase its share from the net hydel profits and reimburse arrears of previous years.
Recently, however, differences appear to have emerged between the provincial government and Islamabad regarding the implementation of the award.
In a telephonic interview, Dawn asked its finance minister Muzaffar Said about the nature of KP’s differences with the federal government as well as its expectations from the next award when the new commission starts its deliberations sometime this year.
Here are the excerpts:
Q: What demands Khyber Pakhtunkhwa will make during the negotiations for the next NFC award?
A: Everyone is well aware of the [poor] state of the [social and economic] infrastructure in the province. Years of militancy and floods have adversely damaged the provincial economy, businesses, and markets in addition to causing displacement of tens of thousands of people within the province.
We direly need to rebuild our infrastructure — schools, hospitals, roads, etc — in order to revive and grow our economy. We only want our rightful share from the federal government and the award. We wrote several letters to the federal government and held meetings [with its representatives] to convey our point of view and seek remedy. But nothing came out of this exercise. At one point we almost decided not to become a part of the next NFC deliberations because the federal government gives us the impression as if it doesn’t consider Khyber Pakhtunkhwa part of the federation.
Q: It means your government is not satisfied with the present award…
A: No, we are not satisfied with the award and have strong reservations regarding it. We feel the central government has ignored the development requirements of Khyber Pakhtunkhwa. Both its people and political leadership hold that the centre is incapable of looking beyond Punjab at the expense of the smaller provinces. For example, we are not given adequate share from the federal Public Sector Development Programme (PSDP) and whatever has been allocated is not being spent here. Similarly, our province was ignored during the recent visit of the Chinese president and we fear that the chunk of the Chinese money will be spent in Punjab. We have our arguments and numbers to prove our viewpoint and will put them on the table when the commission starts its proceedings.
Q: Do you think Khyber Pakhtunkhwa can demand further adjustments in the formula for horizontal distribution of the resources among the provinces in the next award?
A: We believe the formula should be reviewed and adjustments made in it [to accommodate the smaller provinces]. We believe the resources should be distributed according to the [development] needs of the provinces. We must get our resources so that we can invest them in the [provincial] economy and turn it around to improve the life of our people. Let me also add here that the federal government tends to hide things from the federating units. A little bit of transparency in the functioning of the federal government will go a long way towards the remedy of the grievances of smaller provinces.
Published in Dawn, April 26th, 2015