ISLAMABAD, June 11: The government promised on Wednesday to reconstitute the National Finance Commission and convene its meeting soon, and announced a 24pc increase in transfer to provinces from the federal divisible pool in the next financial year.

In his budget speech, Finance Minister Naveed Qamar projected provincial transfers, including grants at Rs606billion in the financial year 2008-09 against the revised estimates of Rs490billion of the outgoing year.

The NFC meeting will be held as soon as nominations of members were received, Mr Qamar said.

With the increase in transfers, provinces are likely to have an improvement of Rs79billion in their cash balance after catering to the local component of their public sector development programmes (PSDP).

In the next financial year, the provinces will get Rs505.706 billion, compared to this year’s revised estimates of Rs391.311billion.

Under the head of “straight transfers”, provinces will get Rs62.62 billion in comparison to Rs65.89billion they had received in the outgoing year.

Next year, Rs90 million will be transferred to provinces under the Japanese government’s grant programme.

He said that about Rs38.1 billion would be provided to provinces under special grants and subventions, showing an increase of more than Rs5 billion compared to this year’s revised target of Rs33.39 billion.

The transfer to provinces on net basis registered a decline of Rs26.16 billion in the outgoing year mainly because of pre-payment of federal loans by provinces. However, in the next financial year, the amount of pre-repayment of debt by provinces would witness a 28.6pc increase and reach Rs59.89 billion.

Under the 1997 NFC Award, income tax, wealth tax, capital value tax, taxes on sale and purchase of goods, export duty on cotton, customs duty and federal excise duty, excluding the excise duty on gas charged at well-head, constituted the federal divisible pool.

The federal government deducts five per cent of collection charges from the divisible pool components before paying shares to the provinces.