ISLAMABAD: Provinces will get Rs3.25 trillion under the National Finance Commission (NFC) award in the next financial year — an increase of Rs790 billion over their share of Rs2.45tr in the outgoing fiscal year.

“In accordance with the framework for distribution of resources structured by the 7th NFC award, provincial share in federal taxes and straight transfers to provinces are estimated at Rs3,254,526 million for fiscal year 2019-20, reflecting an increase of 32.2 per cent over revised estimates of 2018-19,” a budget document reads.

Punjab will get Rs1.61tr under the NFC award as against its share of Rs1.20tr during the current financial year, reflecting an increase of Rs410bn.

Sindh will have a share of Rs814.91bn as compared to the Rs616.26bn it received during the current financial year.

Khyber Pakhtunkhwa and Balochistan will receive Rs533.26bn and Rs294.98bn as against their share of Rs404.03bn and Rs237.61bn, respectively, during the current fiscal year.

Divisible poll taxes of Rs3.15tr would form the major component of transfers to the provinces under the NFC award, including Rs1.20tr general sales tax, excluding GST on services, Rs1.57tr income tax, Rs568bn customs duties and export development surcharge, Rs199bn federal excise, excluding excise duty, on natural gas and Rs2.23bn capital value tax. Straight transfers of Rs100.75bn will include Rs50.62bn royalties on natural gas, Rs24.17bn royalty on crude oil, Rs16.14bn excise duty on natural gas and Rs9.80bn gas development surcharge.

The budget document says the federal government will guarantee that Balochistan receives the projected sum of Rs83bn from the provincial share in the net proceeds of divisible poll taxes in the first year of the award and any shortfall in the amount would be made up by the federal government from its own resources.

At present the 7th National Finance Commission award is in practice. Through this award, financial autonomy of the provinces has been ensured by increasing their share in the divisible pool (taxes) from 46.5pc to 57.5pc from 2011-12 onwards. The 8th NFC was constituted on July 21, 2010, but it did not give any award as the latest award was just implemented.

The 9th NFC was constituted on April 24, 2015 and its first meeting was held on April 28, 2015. The 9th NFC, in its first meeting, constituted four working groups to undertake thematic studies to assist the commission in making its deliberation meaningful.

After the 2018 general elections, the 9th NFC was reconstituted in consultation with the provincial governments. The reconstituted NFC held two meetings on Feb 6 and March 29 this year in Islamabad and Lahore, respectively. The NFC also set up six sub-groups and it is expected the working groups will finalise their recommendations shortly.

Published in Dawn, June 12th, 2019