Reference sent to president for NFC reconstitution

Updated January 01, 2019

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President Arif Alvi will approve the reconstitution of the 9th NFC. — File photo
President Arif Alvi will approve the reconstitution of the 9th NFC. — File photo

ISLAMABAD: The government on Monday sent a reference to President Dr Arif Alvi for reconstitution of the 9th National Finance Commission (NFC) after all the provinces sent in their nominations for their non-statutory members.

A senior official at the finance ministry said the four provinces had nominated their non-statutory members to the NFC. Sindh has nominated Asad Syed for the position, while Khyber Pakhtunkhwa has named Musharraf Rasool as their private member to the commission.

Balochistan has nominated former finance secretary Mahfooz Ali Khan and also demanded an increase in its share out of the federal divisible pool taxes on the basis of the 6th population census that showed its population had increased, while those of other provinces had reduced when compared to the population count of 1997.

The Punjab government has sent several names and the finance ministry is reported to have supported Anwar Ahmad’s nomination as a non-statutory member of the most populous province.

The commission may face yet another legal challenge in the absence of formal notification of census results

Finance Minister Asad Umar has been asking the provincial governments since Sept 3 to send their nominations to complete the NFC as the Centre struggled to finalise an economic package with the International Monetary Fund (IMF) because the federal government has to indicate a clear line about financing arrangements for tribal districts being merged with KP and financing requirements of Gilgit-Baltistan and Azad Kashmir.

The reconstituted 9th NFC would be required to give 8th NFC award for five years but would have to face yet another legal challenge in the absence of formal notification of the results of the National Population Census because of concerns from various stakeholders, particularly about Karachi.

The parameters of the next NFC award are widely anticipated to change for various provinces, particularly in view of the addition of about five million population from the tribal region to KP. This required a meeting of the Council of Common Interests to endorse census results, notwithstanding objections, because a massive exercise of census could neither be repeated nor ignored.

As required under Clause (1) of Article 160 of the Constitution, the 9th NFC was constituted on April 24, 2015. Since new governments are in place both at federal and provincial levels after the 2018 general elections, reconfirmation of the non-statutory members from the provinces was necessary. The five-year constitutional term of 9th NFC is to expire in June 2020.

The provinces have been 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 7th NFC award even though no change could be effected without consensus of all the five stakeholders (the Centre and four provinces). Also, the Constitution held that provincial shares could not be reduced.

Federal and provincial finance ministers are the statutory members of the NFC. It is customary to include one non-statutory member from each province. 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 9th NFC in February 2016 when Naveed Ahsan was made non-statutory member from Punjab in place of Dr Ayesha Ghous-Pasha who became provincial minister in Shahbaz Sharif’s cabinet. The NFC, however, held only a couple of formal meetings in five years instead of compulsory 10 biannual meetings.

As a consequence, the 7th NFC award announced in 2009 continued with annual extensions and remains in place even now instead of constitutional term of five years that came to an end on June 30, 2015. There have been calls from various quarters — including the defence authorities and former finance ministers — for readjustment in 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 KP.

The provincial governments get shares from the federal government under the 7th 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, January 1st, 2019