ISLAMABAD, June 7: The federal budget 2005-06 envisages Rs315.5 billion net transfers to provinces, including a share of Rs239.9 billion out of net proceeds of the federal divisible pool under the existing NFC award. Net transfers to the provinces are 23 per cent higher than budget estimates of current year while provincial share in the divisible pool is 19.4 per cent higher.

The budget 2004-05 had estimated Rs200.9 billion share to the provinces out of the divisible pool, which has now been revised to Rs204.8 billion. In the new budget, the provincial share in the pool has been projected at Rs239.9 billion, 17 per cent higher than the revised estimates and 19.4 per cent above the budget estimates of current year.

State Minister for Finance Omar Ayub Khan said in his budget speech that President Pervez Musharraf would announce the new award soon that would ensure fair distribution of resources among the provinces.

He said Prime Minister Shaukat Aziz had taken extreme caution in finalizing the NFC details and continued discussions with provincial chief ministers. Due to this strategy, agreement on most clauses of NFC had been reached, he said.

Of the Rs239.94 billion provincial share in the divisible pool, Punjab would get Rs137.6 billion (57.36 per cent), Sindh Rs56.9 billion (23.71 per cent), the NWFP Rs33.2 billion (13.82 per cent) and Balochistan Rs12.3 billion (5.11 per cent). The share of the NWFP and Balochistan would increase further with special grants and subventions.

The net transfers to the provinces at Rs315.5 billion for the next year are about 23 per cent higher than last year’s budget estimates of Rs256.7 billion and 29 per cent higher than revised estimates of Rs244.6 billion, a result of enhanced share in taxes and project aid.

Straight transfers to the provinces next year would stand at Rs44.4 billion compared with current year’s revised estimates of Rs40.5 billion. Originally, straight transfers to the provinces were estimated at Rs38.3 billion in the budget 2004-05.

Special grants and subventions to the provinces have been estimated at Rs41.3 billion as against current year’s revised estimates of Rs35.3 billion and original estimates of Rs35.86 billion.

Similarly, project aid for the provinces has been estimated at Rs24.1 billion compared with the revised estimates of Rs15.5 billion during the current year and budget estimates of Rs20.8 billion. As such, total transfers to the provinces have been projected at Rs352.6 billion compared with current year’s revised estimates of Rs297.6bn and budget estimates of Rs296 billion.

However, the federal government would deduct Rs37 billion out of total transfers to the provinces in the shape of interest payments and loan repayments. Hence, net transfers to the provinces would stand at Rs315.5 billion next year. For the current year, the government had estimated net transfers of Rs256.7 billion but the amount has been revised to Rs244.6 billion.

The federal government had estimated Rs39.2 billion deductions under interest and loan repayments but these have been revised to Rs53 billion.

The province-wise share in the divisible pool has been worked out on the basis of their respective population in the percentages fixed in the distribution of revenues and grants-in-aid (amendment) order 2002. As such, Punjab gets a share of 57.36 per cent, Sindh 23.71 per cent, the NWFP 13.82 per cent and Balochistan 5.11 per cent.

The net proceeds of the divisible pool are arrived at by deducting five per cent collection charges by the federal government. The federal share in the net proceeds of the divisible pool is 62.5pc, with the remainder of 37.5pc going to the provinces.

Under the 1996 NFC Award, taxes on income, wealth tax, capital value tax, taxes on sales and purchase of goods, export duty on cotton, customs duty and federal excise duty excluding the excise duty on gas charged at well-head constituted the federal divisible pool.

The royalty on crude oil and development surcharge on natural gas, after deducting two per cent collection charges, is transferred to the provinces on the basis of well-head production. The royalty and excise duty on natural gas after deducting two per cent collection charges is also transferred to the provinces in accordance with Article 161(1) of the constitution. The GST on services (provincial) is also transferred to the provinces after deducting two per cent collection charges.