The changing political ground realities are raising hopes among stakeholders that the criterion for resource distribution among the four provinces is likely to be changed by the recently constituted National Finance Commission (NFC). These indicate multiple criteria based formula for future revenue distribution.

An 11-member NFC headed by the federal finance minister Syed Naveed Qamar was notified on August 26. Its members include special assistant to prime minister on finance, Ms Hina Rabbani Khar, provincial chief ministers and one non-statutory representative from each of the four provinces. The federal finance secretary will act as member-secretary.

Earlier, there was a lingering fear that Punjab may not be ready to accept any criteria of resource distribution other than the existing one and hence prevent any consensus on NFC award.

But the results of February 18 elections and formation of coalitions at the federal level and in provinces in which Pakistan People’s Party is a common factor has given rise to a possibility of a consensus. While the coalition in the centre has received a set back, the hope for a consensus in new NFC is still there.

“Punjab’s Chief Minister Shahbaz Sharif has expressed support to give due weight to poverty, inverse population density and other factors in resource distribution’’, a senior bureaucrat in Balochistan informed Dawn on telephone from Quetta. He recalled that Punjab’s chief minister made this public announcement recently in Quetta.

Mr Kaiser Bengali, a well-known economist, who is a Sindh nominee on the NFC as a non-statutory member, was however somewhat sceptical, as according to him, the official position of Punjab government, based on documents of the last NFC proceedings, indicates no change in Lahore’s position. Nonetheless, he too appeared optimist as new emerging realities can force political parties to shift from their traditional stance.

An attempt was made to reach Mr Ishaq Dar of the PML (N) who was federal finance minister in the coalition government before he resigned in compliance of his leader’s instructions. He did not respond on Tuesday evening but promised to answer NFC- related questions on the next day (Wednesday). However, he did not respond.

The two previous NFCs headed by Shaukat Aziz, the then finance and later the prime minister, failed to give any award. In 2006, ex-President Musharraf did not alter the population-based resource distribution formula.

Politicians and bureaucrats in Karachi and Quetta draw their optimism from a meeting of finance ministers of four provincial governments held in Lahore on June 6. In that meeting, the elected politicians urged the federal government to allow provincial governments supervision of federal-funded development programmes in their respective jurisdictions. Islamabad was asked to stop five per cent deduction at source of all taxes it collects and also on gas and oil related revenue. After the PML(N)’s exit from the coalition, politicians in Karachi do not foresee any major shift in Punjab government’s attitude. “For the first time, there is a clear divide between Islamabad and Lahore’’, a Karachi activist of PML(N) explained who said that Lahore in now on the other side of fence. Second, we have entered a coalition age and Lahore-based PML(N) is looking for allies in Karachi, Quetta and Peshawar and hence a shift from traditional approach is likely.

An over-centralised and authoritarian administrative, political and financial set-up has stimulated strong anti-centre currents in all the provinces including Punjab. Never before in last 60 years, the political leadership of provinces, no matter to which party they belong, were so articulate over their provincial rights, as they are now.

One manifestation of this assertion of provincial rights is the demand that federal government should not deduct five per cent of total tax collections at source.

“We plan to collect Rs1.25 trillion taxes in the current fiscal year’’, a bureaucrat in Quetta said to point out that the total of a five per cent deduction would come to Rs70 billion when the operational cost of Federal Bureau of Revenue (FBR) is hardly Rs9 billion.

“Give the provinces Rs60 billion” he demanded arguing that it may add to his province’s share Rs3-4 billion more in a year. For a cash- strap province like Balochistan, the additional amount of Rs4 billion revenue in a year means a big fortune though it may be insignificant for provinces like Punjab and Sindh’’, he said.

Politicians in Karachi and Quetta want a vertical distribution of funds on 50:50 basis between the federation and the provinces. “We want all taxes and levies to be included in the divisible pool that should be divided straightaway on 50:50 basis between the federation and the provinces’’ the senior official in Quetta asserted. His views are endorsed by politicians and officials in Karachi.

“Now that the concurrent list is set to be taken out of the 1973 Constitution and the provinces are to be given more responsibilities’’, a local PPP leader argued that the increase in responsibilities means need for more funds. “I tell you in final count, even the 50 per cent of federal pool of taxes will be insufficient for the provinces,’’ he said. As he foresees, the provinces in due course of time will have to generate their own resources to meet rising needs.

The finance ministers from four provinces, in their June 6 meeting, wanted sales tax on services to be returned to the provinces. The Constitution authorises the federal government to collect sales tax on import, export, production and consumption of goods but explicitly excludes services, which comes under the provincial jurisdiction. There appears to be a consensus now in all the four provinces that the federal government has over-stretched itself and is doing many jobs that are not its responsibilities.

“When provinces will start getting additional responsibilities in education, health care, rural development, roads, water supply, urban infrastructure, and many other areas, the demand for funds to maintain and repair the stock of infrastructures and to take up new projects will increase manifold’’, he argued to plead for increased share in revenue and representation in administration of federal government controlled institutions by the provinces. The MQM is on record demanding representation of Sindh province in port management. How far the new NFC headed by federal finance minister Syed Naveed Qamar will go ahead in responding to growing aspirations for fiscal devolution is yet to be seen. But officials in Balochistan Secretariat are busy in setting in place some sort of cell or committee of experts to look at the issue of resources distribution and capacity development in bureaucracy to cope with increased responsibilities. “We seek experts from Balochistan but would have no hesitation to engage people from other provinces if they are ready to help us in our job,’’ the official said.

Mr Gulfaraz, a non-statutory member on the NFC from Balochistan, is the only person who does not belong to the province. He is a retired army man, a former federal petroleum and natural resources secretary and an expert in gas economy.

Balochistan wants him to push its case for getting a just share in gas revenue. The federal government has recently increased well-head prices on a number of gas fields including Sui which, the officials say, largely addresses their years’ long complaint.

In Karachi, the first and preliminary session of Sindh NFC team was held on August 24.