The federal government’s move to transfer 35 of the 47 subjects in the Concurrent List to the provinces has come three decades after it was due in 1973. Unless overtaken by events, authorities do not shed power.

Normally, the reforms are triggered by crises and as, in this case, changes are being precipitated by the failure of an over-centralised system to deliver public goods. By design or by default, responsibilities of the three tiers of the government overlap, remain unclear and are a constant source of tension in their mutual relationship.

Earlier, the financial sector reforms were pushed through vigorously only when the country came under the threat of debt default and the balance-sheet of the banks became unmanageable because a crippling portfolio of non-performing loans.

On the eve of the general elections next year, a serious move towards devolution, may help soften ethnic self-assertion, without giving too much.

As a part of the second generation of reforms, the federal legislative powers are intended to be restricted in most of the areas where, under the 1973 Constitution, the centre’s writ takes precedence over provincial jurisdiction. It is a part of a continuing process of devolution starting from the district governments.

“ The country (federal government) needs to surrender many of its functions which can be better performed by the provinces” the Minister for Parliamentary Affairs Dr Sher Afghan Niazi said while announcing the official agenda.

Included in the devolution plan is the empowerment of the Provincial Finance Commission that apportions tax revenues between the provincial and local governments but is biased in favour of the the provincial government at least in Sindh.

As the reports go, the provincial government would take full charge of the health, education, agriculture and industry in 2007. The Concurrent List includes such subjects as zakat, unemployment and health insurance, old age pensions, labour welfare, tourism, centres of education excellence. The federal policy and institutions dominate in some of these areas.

Apparently, the official move would end duplication of many functions between the federation and the provinces and may help economise on public expenditures at a time when federal government’s fiscal deficits are once again on the rise.

The new arrangement may save the federation some money but it may transfer financial burden to the provinces. The increased autonomy will also need to be accompanied by capacity building- both in terms of human and financial resources.

The legal, constitutional and administrative aspects of the transfer of subjects from the federation to the provinces is reported to have been analysed by the National Reconstruction Bureau. But it is not known whether the fiscal implications for fully managing 35 subjects/assignments are also being examined.

Under the interim NFC Award, the share of the provinces at 45.83 per cent of the Divisible Pool, increasing at one per cent per annum towards a maximum ceiling of 50 per cent. It is a marked improvement over 1997 NFC Award which fixed the share of the federating units at 37.5 per cent( plus subventions).

But the announcement of the Interim Award was followed by federal decision that no project of a provincial nature will be financed or co-financed by the Public Sector Development Programme from fiscal 2006-2007, sparking protests from the provinces. An estimated 20-25 per cent normally came from the Centre.

“On the fiscal front, the inter-governmental relationship in Pakistan is marked by large vertical imbalance,” says World Bank report on “Securing Sindh’s Future.”

Despite devolution, the centre keeps a tight control on the country’s purse strings. The fiscal autonomy of the provinces suffers from the absence of any single major source of provincial revenue. All taxes with rich yields are collected and distributed by the federation in an arbitrary manner.

Sales tax, a provincial subject in most countries, remains part of the Divisible Pool when it could easily revert back to the federating units with the condition that its rates would remain uniform in all four provinces.

The situation in the prosperous city of Karachi, endowed with a sea port and a big financial market, has been no different. Whether it is an issue, for example, of city roads or irrigation system in rural Sindh, the remedy lies in a highly centralised regime with questionable consequences.

Often the perceptions at the federal level do not coincide with realities at the grassroots - not before issues become problems or assume the proportion of a crisis. And then solutions are found outside the policy and institutional framework like the KPT building city roads, bridges or underpass because goods from and to seaport pass through its thoroughfares.

On the other hand, the local self-government is restrained by the federation from imposing any service charges. And where does the KPT get a mandate for these kinds of jobs? It comes from the writ of a powerful individual.

With reference to Sindh, the World Bank report says the local government officials have limited financial powers and this hampers budget execution. Ironically, the devolution has resulted in centralisation of powers within provincial finance department. The Chief Minister of Sindh has also lately been authorised to overturn local government decisions and suspend Nazims. In the absence of the spirit of give and take, Sindh suffers from problems of multi-ethnicity.

The mode of integrating the four provincial economies into a single market often tends to exclude the people of the federating units from the fruits of economic development. For all practical purposes, the provinces are treated as administrative units in a quasi-unitary system anchored on a military uniform.

On the other hand, politics is getting more divisive than ever before and the growth of domestic market is breeding pluralism. The ideological foundations of the unitary system have been eroded. It is time to give the provinces the status of the federating units, more so, because of ethnic self-assertion that threatens social stability. The move to transfer bulk of the subjects in the current list to the provinces is the right one, but it needs supporting facilities to make whatever autonomy is given, work.

But good policies and legislations are not enough. Not only the economies of the federating units suffer from archaic controls, even the provinces usurp the legally granted rights of the district governments.

Now the Parliamentary Committee headed by Senator Waseem Sajjad is finalising proposals to devolve power from the federal to the provinces and from the provinces to the local institutions.

The government wants to further empower the Provincial Finance Commission that apportions resources between the provinces and the district governments, perhaps realising that good governance is deeply linked with federalism and autonomy of the federating units.

A permanent body, the National Commission for Governmental Reforms” was also set up recently to look at the three tiers of the government- federal, provincial and district levels. To quote the World Bank report” The federal government has considerable influence over development outcomes” (reference to Sindh)……… The province has performed below its potential because of the Centre’s “misguided policies and institutional frailty.”

The NCGR will come out with recommendations that are easier to implement and that do not upset the apple cart. How the recommendations of NCGR and NRB will be dovetailed at the highest official level will be unfolded when decisions are taken.

It is time to look at the larger picture. The issues of transfer of subjects in Concurrent List, fiscal autonomy including collection and sharing of tax revenues are inter-connected and should be treated as such.

Otherwise, the outcome would be no different from the one initially experienced in devolution at the district levels. Finally, good policies become meaningless, if these are not implemented effectively.