ISLAMABAD: The provinces are set to receive 17 per cent more share from the federal divisible pool in the next financial year as the government has estimated to transfer Rs4.099 trillion to the four federating units as compared to Rs3.511tr last year.

As usual, Punjab will get over 50pc of the share from the divisible pool, leaving behind the same amount to be distributed among the three other provinces, shows a document of the federal budget for the financial year 2022-23.

According to the budget document, out of the total Rs4.099 trillion estimated federal divisible pool for the next fiscal year starting from July 1, Punjab will get Rs2.029tr, followed by Sindh which will receive Rs1.029tr.

The two other smaller provinces Khyber Pakhtunkhwa (KP) and Balochistan will get Rs670.46 billion and Rs370.23 billion, respectively.

In the outgoing financial year, the provinces have received Rs3.511tr from the federal divisible pool whereas the Pakistan Tehreek-i-Insaf (PTI) government, while presenting the federal budget, had estimated the provincial share at Rs3.411tr.

In the outgoing financial year, Punjab had got the lion’s share from the federal divisible pool amounting to Rs1.74tr. Sindh’s share from the divisible pool was Rs873 billion, followed by Rs575bn for Khyber Pakhtunkhwa and Rs322bn for Balochistan.

The procedure for distribution of resources among the provinces has been spelt out in Article 160 of the Constitution, which provides for setting up of the National Finance Commission (NFC) with intervals not exceeding five years.

The mandate of the NFC is to make recommendations to the president for distribution of resources between the federal and provincial governments.

The province-wise allocations are based on multiple weights as agreed upon, where population matters the most as it amounts to 82pc, followed by other yardsticks, including backwardness and share in revenue generation.

The taxes in the divisible pool consist of income tax, capital value tax, sales tax (excluding general sales tax on services), federal excise duties (excluding excise duty on natural gas) and customs duty (excluding development surcharge). In the next financial year, the government has estimated to collect Rs3.974tr as divisible pool taxes.

Besides this, the provinces will receive Rs125bn through “straight transfers” under the heads of gas development surcharge, royalty on natural gas, royalty on crude oil and excise duty on natural gas.

Published in Dawn, June 11th, 2022