Old wine in a new bottle

04 Aug 2020

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THE 10th National Finance Commission (NFC) has been reconstituted and its terms of reference redrafted with the basic objective remaining unchanged.

This demonstrates a renewed effort by the PTI government to persuade the provinces, enjoying fiscal autonomy for more than a decade thanks to 7th NFC award, to share federal expenses.

However, the position taken by Sindh and Balochistan, the latter ruled by PTI allies, indicates that the possibility of evolving a consensus needed for the new award appears to be very remote, if not impossible.

Balochistan’s Finance Minister Mir Zahoor Ahmed Buledi recently said: (a) Balochistan was enjoying constitutional cover for its share in federal resources, (b) his government had prepared a strong case to get its due share from the NFC and (c) economist Kaisar Bengali (whose views are well-known) will present Balochistan’s case in the NFC.

While the PTI government is trying to shift a part of the federal expenses to the provinces, the 7th NFC award provides additional funds from the provincial divisible pool to meet Balochistan’s special needs which is the least developed, most sparsely populated, and area-wise the largest province of Pakistan.

The 10th NFC with the new terms of reference on its agenda is on a course which leads nowhere

A sum of Rs83bn (9.09pc of the provincial pool) was earmarked for the first year for Balochistan while extending this arrangement for the remaining 4-year constitutional tenure of the 7th award which is still operative in the absence of a new award.

For the first time, multiple criteria for horizontal distribution of resources was evolved and incorporated in the 7th award, replacing a single criterion of population plus grants-in-aid. To be exact, 18pc of the NFC provincial divisible pool is shared based on needs, inverse population density, economic backwardness and revenue collection.

Dr Kaiser Bengali, author of the book A Cry for Justice – Empirical Insights from Balochistan and a non-official member of the reconstituted NFC says: “the province has for 70 years, suffered a situation where the country has taken much and given little to it.”

Bengali also represented the province in the 9th NFC and was a nominee of former Chief Minister Dr Abdul Malik Baloch.

As empirical evidence shows, he says, Balochistan has suffered and continues to suffer from the structural and systematic economic exploitation, discrimination and neglect – minus the fiction of imagined wrongs.

Now Prime Minister Imran Khan says he will bring the people of Balochistan out of the ‘sense of deprivation’ through a series of development projects and promises to undo past neglect. Earlier special packages for uplift for Balochistan announced by two preceding governments did not bear fruits.

Presiding over the second meeting of the National Development Council on July 24, he decided to set up a committee to suggest priority areas for development projects focused on communication, agriculture, energy and unidentified ‘other important sectors.’

It is not clear at this point of time where the resources would come to finance development projects whenever the committee comes up with specific proposals. Under the terms of reference (TOR) of the reconstituted NFC, the centre is banking on the provinces to share the cost of the federal projects.

Sindh that does not enjoy cordial relations as Balochistan does with the central PTI leadership has its own reservations on three new TOR items. “It is very clear from the (NFC) notification that the three items are not in conformity with the explicit provisions of the constitution,” wrote Sindh Chief Minister Syed Murad Ali Shah in a letter sent to the Prime Minister.

He was referring to the items with regards to sharing of expenses incurred or to be incurred: (i) by the federation in respect of subjects and matters of the provinces and vice-versa (ii) by the federation and for the provinces in respect of trans-provincial matters and (iii) for national projects to be shared by the federation and the provinces.

The NFC is not mandated under the constitution to deal with expenses and its agenda is restricted to the distribution of resources between the federation and the provinces,Mr Shah said in his letter.

Copies of the letter have also been sent to chief ministers of three other provinces.

It was the prerogative of the national and provincial assemblies, he elaborated, to approve federal and provincial expenditures respectively. And Mr Shah made it clear that the NFC cannot take over the role which the constitution explicitly gives to the legislature.

Earlier the replaced TORs required the provinces to share federal expenditure made on security and natural disasters/calamities, repayment of public debt and subsidies.

Critics are of the view that the possibility of TOR expense-related items coming into judicial scrutiny cannot be ruled out.

The provinces have, from time to time, demanded full implementation of the 18th Amendment and the 7th NFC award both of which have empowered them to withstand federal efforts so far to tinker with their fiscal autonomy. Also, the PTI government has lost much of its political vigour it gained in the initial period after assuming power nearly two years ago.

The Sindh chief minister appears to be satisfied with the removal of non-elected prime minister’s advisor on finance and federal finance secretary from NFC membership. The notification with regards to the (NFC) members, he says, appears to be in consonance of Article 160(i) of the Constitution. The NFC members have been reduced from eleven to nine.

There are speculations that Dr Abdul Hafeez Shaikh or someone else may be appointed as federal finance minister. Dr Shaikh will have to be elected as a senator to become eligible to become finance minister and qualify for NFC membership. Currently, the prime minister is holding the portfolio of finance.

The situation is in a state of flux. The political pressure on PTI leadership that the government be run by elected representatives as provided under the constitution, continues to mount both from within the party ranks as well as from political rivals.

And when two main aspects of representative democracy – autonomy and majority rule – are delinked we are left with an unworkable lame duck democracy and poor governance.

Apparently, the 10th NFC with new TOR items on its agenda is on a course which leads nowhere.

Published in Dawn, The Business and Finance Weekly, August 4th, 2020