KARACHI: The Provincial Finance Commission (PFC) of Sindh would be meeting this month to finalise a new formula proposed by the chief minister based on population, backwardness and fiscal performance, it emerged on Tuesday.
Officials said in the last meeting of the commission held in June CM Murad Ali Shah had proposed a new formula for distribution of funds under the commission and it was decided that it would be finalised in the next meeting to be held in August.
The new award aimed at correcting inter-regional disparities by means of equalisation grants from the provincial government to economically weaker local councils subject to availability of resources.
The proposed formula takes care of population at district level. It put greater emphasis on backwardness as it was not stressed in previous awards announced during the military regime led by now retired Gen Pervez Musharraf.
The first PFC award was announced in 2002 and the last one was in 2007. Later, the local government structure introduced during the Musharraf regime was scrapped and replaced with the Sindh Local Government Act, 2013.
Karachi, with a population of 20 million people, is the only metropolitan corporation of the province. Besides, the city has six district municipal corporations. Three municipal corporations are in Hyderabad, Sukkur and Larkana. Several other cities have municipal and town committees while union councils and district councils take care of the province’s rural areas.
Out of 1,744 municipal bodies, there are 545 councils in the urban parts of all 29 districts of Sindh; while the remaining 1,199 municipalities deal with the vast rural swathes of the province.
According to the previous formula, 50 per cent of the provincial allocable amount was distributed on population irrespective of the bodies located in urban or rural parts of the province.
The ratio for backwardness was just 17.5pc. The municipalities showing better tax collections would be considered for an additional 7.5pc funds, and that usually benefited the urban municipal bodies. Similarly, rather vaguely, another 15pc would be awarded to the municipalities showing ‘good performance’.
In the remaining funds, the municipal bodies would get transitional assistance.
The new award, as suggested by the Sindh government, will stress further on backwardness apart from better performance in tax collection and fiscal needs.
As the result of the new population census has not been notified, the award would be decided on the basis of the population census held in 1998.
Officials said during the last fiscal year, Rs32.26 billion had been given to the municipal bodies on the heads of salary and pension, Rs17.39bn for development, Rs50.40bn as grants-in-aid, and Rs4.66bn residual funds.
The members of the commission, sources said, would file their proposals and amendments to the fresh distribution formula, which would be discussed during the upcoming meeting when it would be finalised to the satisfaction of all, officials said.
To further distribute it in the provincial capital, suggestions are forthcoming to settle on the distribution formula for the KMC and the six DMCs. This formula would also decide the share for the Karachi Development Authority.
The officials said the PFC would be preparing benchmarks of revenues and expenditures and revenue and expenditure projections for the local governments such that they were consistent with their respective mandates as envisaged by the law and their powers to levy and collect taxes.
The PFC would also decide the criteria and formula for the vertical distribution of resources between the provincial and local government, ie determination of provincial retained and allocable amounts.
Besides, it would also decide a fiscal distribution criteria or formula and mechanisms for the horizontal distribution between the local councils of the allocable amount.
The PFC would suggest parameters for achieving fiscal discipline to maintain appropriate fiscal balance at the provincial and local levels.
All the local councils — from a union council of Sindh’s remote districts to the KMC — are facing huge shortage of funds for months, which made it hard for them to even pay salaries of their staffers.
Published in Dawn, August 9th, 2017
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