ISLAMABAD: The government is likely to continue with the 7th National Finance Commission (NFC) award of 2009 for another year because of tough positions on resource sharing among the stakeholders and limited time available until the presentation of next year’s budget.

The 7th NFC expired on June 30, 2015, and it has since been on repeated extensions through presidential extensions.

An official told Dawn that it appeared almost impossible to work out a fresh revenue-sharing formula among the Centre and provinces before federal and provincial budgets for 2017-18, expected to be announced in less than three months.

The federal government has already scheduled to hold meetings of the priorities committee on next year’s budget in the first week of April to finalise expenditure details, including development projects. That leaves little room for a mammoth exercise of NFC consultations, he said.

In its last meeting in December 2016, the NFC led by Finance Minister Ishaq Dar agreed to convene the next meeting of the commission in the first week of January to have structural discussions and share recommendations for the next award. The meeting was not called since then.

A federal government official said the government did not even need to issue a fresh presidential order to extend the previous award because the existing order would remain in force till further orders.

Sindh’s NFC member Senator Saleem Mandviwalla on Tuesday protested over the delay in the next NFC: “The federal government is responsible for the delay of NFC award. It is not interested in the issuance of new NFC award and is depriving the smaller provinces of their constitutional rights.”

He said that it was the obligation of the federal government to issue a new NFC award after every five years, but it was not doing so.

Referring to a recent unanimous resolution passed by the Senate, Mr Mandviwalla said he was taking up the matter of delay in NFC award with the Senate chairman, who had already announced to play his role in this regard.

The resolution, also supported by the PML-N, required that the Senate should have the powers to extend the award for a year with one per cent increase in provincial share if the federal government failed to announce NFC award in the stipulated time.

A government official, however, said the resolution of the Senate was at best recommendatory in nature and was not binding. “The Constitution is very clear on NFC and there was a parliamentary process to make any amendment,” he said.

The official said the finance minister had already triggered budgetary process for the next year and would also be holding pre-budget meetings with lending agencies in the coming days with consultations with the International Monetary Fund due later this month.

An official in the government of Khyber Pakhtunkhwa said the federal government had little incentive to announce fresh award when the provinces were offering cash surpluses.

He said the Centre’s demand for setting aside about 7pc of divisible pool taxes for security, mainstreaming of tribal region and Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan was an attempt to keep the provinces at bay for higher share in resources.

While the provinces have eyes on increased revenue share, the Centre has already made a pitch for jointly sharing the responsibility of war against terrorism, natural disasters and the needs of special areas like AJK, Gilgit-Baltistan and the Federally Administered Tribal Areas by setting aside 7pc resources of the consolidated fund before calculating net proceeds of the divisible pool for sharing with and among the provinces.

In initial meetings, the provinces indicated to seek increase in their share from existing 57.5pc in national taxes to finance additional responsibilities arising out of the devolution under the 18th constitutional amendment and security expenditure. At present, the Centre retains 42.5pc of the divisible pool and transfers 57.5pc to the provinces after deducting collection charges.

Of the provincial share, 82pc is distributed on the basis of population, 10.3pc on poverty or backwardness, 5pc on the revenue collection and 2.7pc on the inverse population density (area).

Published in Dawn, March 15th, 2017