AFTER some delays, the ninth NFC commission has finally been constituted to decide the eighth NFC award, and will be holding its first meeting within days.

At the outset, it is important to underline that the process of devolving federal resources, as well as responsibilities, down to the provinces ought to be continued.

The last NFC award made history by devolving the majority of resources from the federal divisible pool to the provinces, whose share increased from 47.5pc to 57.5pc of the total divisible pool resources. In return, the provinces were required to increase their own revenue generation effort, as well as accept greater responsibilities of governance under the 18th Amendment.

This was a historic step which sought to correct an imbalance in our federation that had been there since the very beginning. But right from the outset, the new finance minister began blaming the award for the large fiscal deficit that the federal government began to run, and which grew to more than 8pc of GDP by the end of the last government’s term in 2013.

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Meanwhile, the provinces were criticised for not living up to their commitment to ramp up their own revenue effort.

None of these developments should be used as an excuse to roll back the allocations made to the provinces. A strong federation stands on strong provincial governments. Rather, the commission should revisit the weights assigned to the various criteria used to calculate provincial shares with a view to incentivising the provinces towards ramping up their revenue generation effort, while at the same time doing more to urge the federal government to cut expenses by devolving those ministries it has no business to hold on to any longer following the 18th Amendment.

Therefore, the weight assigned to the provincial revenue effort in the seventh award can be increased, which would incentivise provinces to raise more funds themselves to increase their shares from the federal divisible pool.

Likewise, the weight assigned to population should be reduced further still, especially since the population data is now woefully outdated in the absence of a new census.

The commission also has an opportunity to address other issues, such as duplication of taxes on services, and this opportunity ought to be taken advantage of.

The negotiations under the new NFC commission present the government with an excellent opportunity to address concerns that Punjab is being favoured in policymaking at the federal level, and that opportunity too should not be wasted.

Published in Dawn, April 27th, 2015

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