BALOCHISTAN is in deep financial crisis and apparently there is no solution in sight right now. For the second consecutive year, Balochistan has come out with a deficit budget for the year 2006-07.

In the year 2005-06, the budget declared a deficit of Rs5.24 billion with a note of caution that if federal government did not provide Rs8 billion to finance a Rs9 billion development outlay, the deficit will increase to Rs13.24 billion. The deficit did increase in the current fiscal year for which an additional amount of Rs6 billion was borrowed from the State Bank of Pakistan.

Increasing reliance on loans to meet deficit and also to finance the development outlay has pushed up the province’s debt burden to Rs52 billion this month and hence the hefty debt servicing liability in the budget.

The 2006-07 budget shows a deficit of Rs10.96 billion slightly more than Rs10.82 billion development outlay. In this development outlay, the Balochistan government’s share is Rs7.05 billion.

‘Where will the money come from’’? is the logical question. Balochistan’s finance minister Syed Ehsan Shah in his budget speech on Tuesday said “this deficit will be met from austerity measures, local resource generation and federal grants’’.

One form of such federal grant is to defer the debt servicing liability—wholly or partially—for which the provincial government is striving. Austerity measures are time-tested bureaucratic prescription. It is by way of inflating expenditure projection in the budget and then show a saving at the end of the day.

The revenue expenditure in 05-06 budget was shown at Rs34.6 billion which is now being estimated at Rs30.3 billion as the year approaches the fag end. A saving of Rs4.27 billion and Rs6 billion over draft enabled the province to take up Rs42 billion budget.

In the post-budget press conference on Wednesday, the Balochistan finance secretary Mahfooz Ali Khan elaborated on the areas he is looking for resource generation. He said: “we want to raise additional resources without putting any burden on the population’’. He is exploring to raise revenue from registration of property and as he pointed out “real estate property worth billions of rupees have changed hands in Gawadar’’.

His regret was that the provincial government did not get any revenue from this property deal. Balochistan government now plans to print security stationery that include stamps and stamp papers on which real estate will be registered. The provincial government is also carrying out a property survey in the towns that have come up in Quetta and other urban centres. The survey will work out rental values of the properties on which the government want to collect tax.

Balochistan’s revenue base is very small and an impressive 50 per cent growth—from Rs1.6 billion to Rs2.4 billion in one year—looks insignificant when compared to its demand for resources. These resources are coming from Islamabad. There has been an appreciable rise in Balochistan’s share in federal divisible pool.

This increase is attributed to improvement in Central Board of Revenue collection of Rs715 billion this year as against Rs690 billion projected. The CBR now aims at mopping up Rs835 billion in 06-07 which will improve their transfers to all provinces including Balochistan.

A fair share in gas related revenue is the province’s persisting demand which has so far proved to be a cry in the wilderness. Sui gas has been Pakistan’s household name for last 50 years. Balochistan remained the only source of energy for about 30 years before new oil and gas fields were discovered in Sindh and Punjab.

During these 30 years, it was Balochistan’s gas that kept the kitchen fire burning in a large number of homes of Sindh, Punjab and NWFP and contributed to country’s industrial development. The Sui gas did not benefit Balochistan nor the Balochs. Even now, the number of Baloch consumers of Sui gas is hardly two per cent of the country total.

As new oil and gas fields were explored and drilled, the share of Balochistan in the total gas supply has been reduced to 22 per cent. Sindh is now the biggest supplier of gas with 72 per cent share and Punjab has joined the club with five per cent share. This has affected Balochistan’s share in gas related revenue and Sindh now gets the highest share. But Balochistan’s complaint is that its gas value is suppressed by averages in which the cost is worked out on aggregate production.

A simple logic is that Sui was developed in early fifties with a very low investment. The return obviously should be high as compared to Sindh and Punjab where investments are much higher compared to Balochistan.

‘”The well head value used for calculating royalty from Sui field is much below the fair market value and due to anomaly in the valuation, the province suffers a loss of Rs3.6 billion to Rs4.5 billion a year’’ says White Paper, one of the budget documents.

Balochistan has serious reservation on the pricing system of gas that puts it at disadvantage. Ehsan Shah and Mahfooz Ali Khan claimed that Sindh’s former finance minister Syed Sardar Ahmad has conceded that his province was getting an advantage of Rs1.70 billion from Balochistan and had agreed to reimburse it to Quetta. But when Balochistan government did not offer Sindh support in the NFC on revenue collection being made one of the criteria for resource allocation, Sindh went back on its commitment.

One can feel the frustration and bitterness of Balochistan’s political workers and intellectuals on being denied the legitimate share in gas related revenue. Not the ordinary Baloch, but the provincial finance minister now wants a compensation of Rs50 billion from the economic benefits reaped by Pakistan from Sui gas. He wants creation of a special endowment fund from which Balochistan’s development should be financed.

Balochistan has another demand on Sindh. It wants Rs7 billion against Hub dam water consumed in Karachi. Hub Dam was constructed to give a boost to agriculture in Hub and Lasbela. Because of diversion of water to Karachi from Hub, the 70 per cent catchment area has gone barren.

All these complaints are genuine and need to be addressed. But more important for Balochistan is to develop the capacity to utilise the funds judiciously. Under the pressure of international donors the Balochistan government is putting a system in place, to monitor economic indicators and to construct a provincial ‘gross domestic production’ index. Preparation are being afoot to make socio- economic profiles of 29 districts of the province.

Though endowed with rich mineral, marine, agriculture including livestock resources and a population of mere seven million, Balochistan is the poorest province of the country. For this, the responsibility lies both with the federal and provincial governments.