KARACHI, Oct 5: The Sindh cabinet in its meeting this week is expected to finalize the mandate of the provincial finance minister on the province's position on resource distribution arrangement between the federation and the provinces and among the provinces in the forthcoming deliberations of the National Finance Commission.

Prime Minister Shaukat Aziz during his recent visits to Peshawar and Quetta was urged by leaders of the NWFP and Balochistan to convene, at the earliest, NFC negotiations for a fresh formula for distribution of federal taxes.

It is believed in the NWFP, Balochistan and Sindh that a status quo on the NFC issue would add to their economic woes. Earlier, the prime minister had announced that he would convene an NFC meeting some time during the next week.

Information received at different levels in the Sindh Secretariat suggested that the provincial government would take a tougher position on the resource distribution arrangement than it had adopted in the previous two rounds of NFC talks presided over by Mr Aziz as chairman of the commission.

"We intend to raise many questions and seek firm and straight answers," a well-placed source in the Sindh government said. The first and foremost question, the source said, was whether the NFC recognized the general sales tax on services as an exclusively provincial tax, to be levied and collected by the provincial government or, on its behalf, by the federal government.

"The GST on services is neither a federal nor a concurrent subject, but a residual issue," the source explained, and recalled that in 2000, the Inter-Provincial Coordination Committee had decided to authorize Islamabad to collect the GST on services for two years on behalf of the provinces. It has been four years since then and time has come to give the authority of levying and collecting the GST on services back to the provinces.

Another contentious issue is the 2.5 per cent GST levied in lieu of octroi in 1998. The Sindh government wants 100 per cent of the 2.5 per cent GST collected in the province.

It now also wants a part of the GST collected at the port on import of machinery and raw material. Even if the imported machinery, equipment and raw material are to be used in other provinces, vehicles taking the goods from the port to the provincial borders used Sindh's infrastructure and there was little justification to demand a cess on this count.

The Sindh government will join other provinces in demanding a straight 50 per cent share in the federal pool, allowing Islamabad to keep only collection charges. Sindh will continue to demand a multiple-criteria formula for resources distribution - besides population, resources should be distributed on the basis of tax collection, inverse population density ratio, backwardness or poverty.

In the previous NFC negotiations, there was a consensus to distribute 10 per cent of federal taxes on the basis of collection, backwardness and inverse population density.

The NFC, the source said, would be asked to declare in clear terms whether it was economic backwardness or poverty that would be the criterion for resources distribution. "We are not going to accept the poverty ratio of the provinces given by the Asian Development Bank, submitted by the NWFP in last NFC."

The source further said: "We have with us reports on poverty and backwardness of six recognised institutions and reputed economists." Then there is the issue of Sindh government's burden of immigrants from Punjab and the NWFP and from other countries.

A resolution pending with the Sindh Assembly demands the counting of all immigrants from Punjab and the NWFP who for resource distribution purposes are counted in their respective home province, but live and work in Sindh and, in fact, transfer resources from here to their provinces.

"Recently, media reports revealed that 700 families from the strife-torn Wana area in the NWFP have migrated to Karachi," the source said, and wondered why these families had not settled down near their homes in the NWFP or in Punjab. "Sindh deserves a fair financial compensation," he added.

Then there is the issue of royalty and surcharge on gas and oil. Sindh is the biggest producer of oil and gas in the country. The gas that is extracted from the Marri gas field is said to be given on highly subsidised prices to fertilizer factories, mostly in Punjab.

There is also bitterness in Sindh on Punjab government's decision to ban the transportation of wheat beyond its borders. It pushed up the prices of wheat and flour in Sindh and caused economic hardships to people.

The Punjab chief minister defied orders of former prime minister Chaudhry Shujaat on two occasions to allow wheat movement out of Punjab. "Other provinces can take similar decisions on their natural resources," the source said.