PESHAWAR, April 21: The Provincial Finance Commission (PFC) of the NWFP has turned down the demand of district governments for doing away with the condition of allocating 40 per cent of their development funds for big projects.

The PFC, which determines resource distribution between provincial and district governments, rejected the demand in a meeting here on Saturday, sources said.

The PFC had bound district governments to earmark 40 per cent of their development funds for uplift schemes of water supply and road sectors which may cost up to Rs500,000.

The condition was put in place in the current financial year 2006-07, when the PFC announced award for the next three years, with a view to improve service delivery in water supply and road sectors that had been badly affected after the devolution of power plan, the sources said.

They said that district governments were more interested in small projects than investing in vital areas and had been demanding the abolishment of such conditions.

District governments were of the view that funds allocated under the PFC award were inadequate and restricted them to reserve 40 per cent for big projects.

Under the PFC award the provincial government had been allocating Rs963 million for district development programmes, which was distributed among districts and tehsil municipal administrations (TMAs) under a multi-factor criterion. The share was stagnant for the last four years.

Finance Minister Shah Raz Khan, being the chairman of the PFC, had also been approached by the district governments of Malakand region for abolishment of the condition.

Apart from the districts, sources said, the National Reconstruction Bureau (NRB) and other international donor and lending agencies, which were sponsoring decentralisation in Pakistan, had also objected over such conditions and termed it a step to hinder fiscal devolution to the districts.

Most of the PFC members, however, were of the view that existing development programmes of the districts were heavily dominated by small schemes like pavement of streets and drains and gave little priority to water supply and roads.

According to the sources, the PFC unanimously rejected the districts’ plea and decided that its earlier condition would stay intact for another year.

The meeting, the sources said, also deferred the rules of business recently formulated for the PFC overall operations in line with section 120-L of the Local Government Ordinance (LGO-2001).