LAHORE: The Pakistan Tehreek-i-Insaf (PTI) has objected to the Punjab government’s disclosure of 17.5pc Provincial Finance Commission (PFC) share for the local governments’ budget instead of 37.5 per cent allocable amount (PFC Award component) — in the post-budget discussion for the second quarter — FY 2025-26.

As the Punjab Assembly is scheduled to begin post-budget discussion on Monday (today), opposition PTI MPA Ahmer Bhatti has written a letter to the Punjab finance minister, seeking clarification in computation and disclosure of the PFC share for local governments in the document presented in the Punjab Assembly.

In a letter written to the finance minister, Mr Bhatti stated the budget document reflected total provincial budget outlay Rs5,335bn; and the PFC share/transfer to local governments is shown as approximately Rs934.2bn – approximately 17.5 per cent.

“This percentage is materially inconsistent with the governing statutory framework and the last notified Finance Commission Award as well as raises a serious issue of legality and statutory compliance (sic),” he objected.

Seeks clarification from finance minister vis-a-vis post-budget discussion for second quarter of 2025-26

Mr Bhatti has forwarded copies of the letter to the Punjab Assembly speaker and the chief minister.

Explaining the governing legal framework and relevant provisions, the opposition MPA stated that the Interim Punjab Finance Commission Award, 2017 (Notification (11 of 2017) specifies the split between the Provincial Retained Amount and Provincial Allocable Amount. The award’s Clause 3 (Provincial Retained Amount) says, “The Provincial Retained Amount shall be equal to 62.5 per cent of the net proceeds of the Provincial Consolidated Fund.”

While, the Clause 4(1) (Provincial Allocable Amount) states: “The Provincial Allocable Amount shall be equal to 37.5 per cent of the net proceeds of the Provincial Consolidated Fund”.

Accordingly, Mr Bhatti asserts that the Provincial Allocable Amount (PFC Award component) should be 37.5 per cent of the relevant base (net proceeds of the Provincial Consolidated Fund), and not 17.5 per cent.

Citing provisions of the amended Punjab Local Government Acts 2013, 2022 and 2025, Mr Bhatti stated, if recommendations were not finalised before expiry, “the award in force shall continue to serve as the determinant of the Provincial Allocable Amount and the shares of the local governments till such time that a new award is approved.”

If the required finance commission and the new formulae/award have not been constituted/approved, Mr Bhatti stated the Punjab Finance Department could not lawfully apply a materially reduced percentage through an ad hoc approach, particularly where prior law contains express continuation clauses.

Citing Supreme Court judgements, Mr Bhatti wrote that the landmark Judgement MQM vs Government of Pakistan (PLD 2022 SC 439) on Local Governments constitutional rights the Supreme Court of Pakistan in Para 46 (v) stated, “The Government of Sindh shall ensure that all local governments in the province of Sindh do get their share in the divisible pool of funds by implementing the Provincial Financial Commission Award and also to ensure that no arrears in this regard are accumulated and if, there are arrears, the same are released.”

Referring another landmark case of Imrana Tiwana vs Province of Punjab (CLD 2015 983) where similar issue was decided by the Supreme Court, the MPA quoted, “Hence, prima facie the amount which constitutes to 17.5pc looks to be constitutionally void, illegal and in clear violation of the orders of the Honorable Supreme Court as it directs the provincial government to allocate the funds to the local government according to the Finance Commission Award”.

Mr Bhatti stated that no ad-hoc or arbitrary decision could be made while transferring the funds to local authorities. Any such act would be a clear violation of the Supreme Court orders and Article 140-A and Article 156 (3) of the Constitution of Pakistan.

Explaining his case of the PFC share for local governments, the opposition MPA asked finance minister Mian Mujtaba Shujaur Rehman to disclose the complete basis of calculation used to arrive at Rs934.2bn, including the denominator/base used (net proceeds / general revenue receipts / any other base); the precise “formula” applied, and the legal instrument authorising that formula (award/order/approval).

“If the published figures are a result of a drafting error, a corrigendum may kindly be issued. Otherwise, if the figure reflects a deliberate departure from the governing framework, it appears prima facie ultra vires and liable to be challenged,” he stated.

When contacted to seek the finance department’s opinion, a senior officer told Dawn that the current resource allocation to local bodies was being disbursed under the Interim-PFC 2017 – which remained same as was when the now opposition was in power.

The senior officer said the governing framework for local bodies allocation was this Interim-PFC until the time a New Provincial Finance Commission was constituted.

The officer said the new commission would devise the vertical and horizontal resource distribution formula. Until then, the Interim PFC would continue.

“Besides it’s not as simple as 37.5pc because 37.5pc of “what” is the main factor,” the officer explained.

Further explaining the calculation formula, the finance department officer said provincial retained amounts were subtracted from the Gross Revenue Retention (GRR), then common expenditures were subtracted, then expenditure on those local functions which were being performed by the provincial govt were subtracted and other subtractions were made. After that, we get the Net-GRR and on that the vertical distribution formula is applied, the officer stated and added that this needed to be done by the new commission, once it would be formed.

Stating that the finance department only provides secretarial support to the commission once constituted, the officer suggested that the administrative department for administering the PLGA was the Local Government and Community Development (LG&CD) department.

When posed the same question to LG&CD department secretary Mian Shakeel, he did not respond.

Published in Dawn, February 2nd, 2026