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Provinces’ delay in sending nominations for NFC irks Centre

Updated November 14, 2018

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Three provinces delaying completion due to calls from finance ministry, IMF to reduce share in divisible resources. — File
Three provinces delaying completion due to calls from finance ministry, IMF to reduce share in divisible resources. — File

ISLAMABAD: The federal government is getting annoyed by lukewarm response from the provinces in sending their nominations to complete the National Finance Commission (NFC) despite repeated requests, according to informed sources in the finance ministry.

Among other things, according to the sources, the Centre’s impatience to complete the NFC also stems from ongoing discussions with the International Monetary Fund (IMF) for a proposed bailout package, as the federal government has to indicate a clear line about financing arrangements for tribal districts being merged with Khyber Pakhtunkhwa (KP).

Sindh, Punjab and Balochistan have not yet sent their nominations for non-statutory (technical expert) members to the NFC. The only nomination has come from KP so far.

Sindh, KP, Balochistan are delaying NFC completion due to calls from finance ministry, military and IMF to reduce their share in divisible resources

The sources said the ministry of finance had renewed contacts with the provincial finance secretaries asking them to immediately send their nominations for non-statutory members of the NFC after federal Finance Minister Asad Umar expressed disappointment over the failure of the three provinces to send the nominations despite his personal requests to them at the meeting of the Fiscal Coordination Committee on Oct 31. The meeting was attended by all provincial finance ministers, including Sindh Chief Minister Sindh Murad Ali Shah who also holds the position of finance minister, as well as finance secretaries.

Another challenge in this matter is the absence of formal notification of the results of the national population census because of concerns expressed by various stakeholders, particularly about Karachi. The parameters of the next NFC award are widely anticipated to change for the provinces, particularly the addition of about five million souls from the tribal region into KP. This required a meeting of the Council of Common Interests to endorse the census results, notwithstanding objections, because a massive exercise of census could neither be repeated nor ignored.

Finance Minister Umar had initially written to the provinces on Sept 3 to confirm their existing members or make fresh nominations for non-statutory members so that the NFC could be reconstituted and deliberations for future resource distribution commenced.

Having received no response for over a month, the federal government reminded the provinces through follow-up letters on Oct 5 about their constitutional responsibility to complete the NFC to set the future course of sharing common financial resources.

The provinces have been reminded again on Monday and Tuesday that in terms of Clause (1) of Article 160 of the Constitution, the ninth National Finance Commission (NFC) was constituted on April 24, 2015. Since new governments are in place now both at the federal and provincial levels after Elections-2018, re-confirmation of the non-statutory members from the provinces is necessary. The five-year constitutional term of the ninth NFC is to expire in June 2020.

An official said the provinces perhaps were delaying the NFC completion owing to calls from various quarters — including the ministry of finance, the armed forces and the IMF — to “rebalance the transfer of larger chunk of divisible pool resources to the provinces” under the seventh NFC award, even though no change could be affected without consensus of the five stakeholders (the Centre and four provinces). Also, the Constitution promises that provincial shares cannot be reduced.

Finance ministers of the federal and provincial governments are the statutory members of the NFC. It is customary to include one non-statutory member from each province in NFC.

Practically, it would be a totally new NFC because all the finance ministers, except from Sindh, would be new faces on the constitutional body.

The PML-N government had last reconstituted the ninth NFC in Feb 2016 when Naveed Ahsan was made non-statutory member from Punjab in place of Dr Aysha Ghous-Pasha, who became provincial minister in the Shahbaz Sharif cabinet. The NFC, however, held only a couple of formal meetings in five years, instead of compulsory 10 biannual meetings.

As a consequence, the seventh NFC award announced in 2009 continued annual extensions and remains in place even now, instead of its constitutional term of five years. There have been calls from various quarters – including the defence authorities and former finance ministers – for re-adjustment in the Centre-provincial sharing of resources to create fiscal space for the Centre to meet additional requirement of security expenses, besides special allocations for special areas like Azad Jammu and Kashmir, Gilgit-Baltistan and tribal areas now merged with the Khyber Pakhtunkhwa.

The previous NFC award had expired on June 30, 2015 but it had seen annual extensions since then. The provincial governments get shares from the federal government under the seventh NFC award as per the following formula: Punjab 51.74 per cent, Sindh 24.55pc, KP 14.62pc and Balochistan 9.09pc.

Published in Dawn, November 14th, 2018

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