ISLAMABAD, Feb 1: The federal government has turned down a demand of the four provinces to include petroleum development levy (PDL) in the federal divisible pool under the sixth National Finance Commission (NFC) , Dawn has learnt through authoritative sources.

The federal government and the provinces have, however, agreed to collect motor tax, which is a provincial subject, through petroleum products as a consumption tax.

The NFC has called for rectification to a complaint of Balochistan which said its rounding up of share in two decimal on the basis of population census was causing it huge losses and provided undue benefit to Punjab.

Balochistan's share under the existing NFC award is 5.114784 per cent. It has been rounded of at 5.11 per cent. On the other hand, Punjab's share is 57.350534 per cent but has been rounded up at 57.36 per cent. The NFC has agreed that Balochistan's share should be 5.12 and that of Punjab at 57.35 per cent.

The provinces have been demanding since the reconstitution of the NFC on Nov 12 last year that the petroleum development levy, formerly known as petroleum surcharge, be included in the net proceeds of the divisible pool and then transfer 50 per cent of its proceeds to the provinces every year.

The government collects around Rs45-50 billion every year through the PDL. Its inclusion would have increased the size of the divisible pool by around 25 per cent. Total size of the NFC is around Rs500 billion, of which current year's divisible pool was estimated at around Rs177 billion.

A member of the NFC told Dawn that the issue was discussed at length at the Jan 18 meeting of the commission but the federal government informed the provinces that the PDL was a federal subject under the fourth schedule (federal legislative list) Article 70(4) of the Constitution.

The federal government has, thus, no intention in the foreseeable future to surrender its authority over such a vital item that yields around Rs45-50 billion to the national exchequer.

Secretary Petroleum M. Abdullah Yousaf, who had attended the NFC meeting on special invitation, presented the federal government's position on the PDL. The provinces were told that the federal government utilised proceeds of the PDL on the development of oil and gas sector, guarantees, security of key oil and gas installations, setting up of infrastructure facilities and at times for providing subsidy.

The sources said Dr Gulfraz Ahmad (non-official member from Balochistan), who is a retired petroleum secretary, was critical ofsix per cent increase in the annual PDL in view of its high potential and this was accepted by the incumbent secretary petroleum.

Some members had also raised reservations over the PDL collection in the deregulated regime. They were informed that the government had reached an understanding with the Oil Companies Advisory Committee (OCAC) to collect the PDL on behalf of the government and then transfer directly to the federal government when deregulation process is completed.

The sources, however, said it had not yet been settled with the OCAC whether it would charge the government for collecting the PDL.

The sources said the motor tax would now be made part of the retail price of the petroleum products and the OCAC would maintain separate record of this collection and then transfer to the provincial governments on the basis of petroleum sales. The provinces were told that they may have to pay service charges to the OCAC for this collection.