PESHAWAR, Sept 13: The establishment of the proposed subvention pool and the issue of distribution of 2.5 per cent funds of the General Sales Tax (GST) would be looked into by members of the National Finance Commission (NFC) here on Saturday, according to sources.

In line with a decision of the last NFC meeting, held at Karachi on Aug 30 and 31, representatives of the four federating units and federal government’s senior officers would discuss the recommendations put forth by provinces on the above mentioned two subjects and other minor issues on Saturday.

Whereas, formal meeting of the NFC, to be chaired by Finance Minister Shaukat Aziz, would be held on Sunday.

“The Saturday’s meeting - scheduled after dinner - is meant to reach on some sort of understanding on the contentious issues before going to the formal session of the NFC,” said the sources close to provincial government’s official circles involved in preparing NWFP’s case for the NFC.

In the last held meeting of NFC, stakeholders had been asked to prepare and submit their proposals vis-a-vis some important fiscal issues to be covered under the new NFC award.

The proposed subvention pool (SP) — being established to provide extra funds to Sindh, Balochistan and NWFP in recognition of their demand to consider backwardness, size and fiscal effort as other variables for distributing federal resources among the federating units — would be deliberated upon thoroughly at the Saturday’s meeting to enable the Sunday’s NFC moot to finalize its details.

Whereas, Sindh has reportedly positively consented to the federal government’s recommendation vis-a-vis the establishment of subvention pool, the NWFP is asking for greater share under the proposed pool to offset the impact of backwardness hampering its economic growth and persistently causing financial crisis to the successive provincial governments.

Citing lower literacy rate, ruined infrastructure due to housing over two million Afghan refugees for well over two decades, industrial backwardness and weaker communication network as some of the reasons for NWFP’s backwardness, the provincial government is pressing for greater share under the subvention pool to help the province come out of economic recession.

Besides, the provincial government is also asking for the settlement of its long pending net hydel profit issue to help the future governments of the province to overcome the financial crisis and magnitude of resource crunch hampering the successive governments in the recent past.

“For the NWFP, the current NFC has appeared to be a total disaster plunging the government in deep financial crisis and leaving the future governments of the province to inherit well over Rs73 billion debt burden,” said the sources.

The current NFC had set aside around Rs8 billion for the purpose of distributing extra grant among the NWFP and Balochistan to compensate their backwardness and large area, respectively.

The subvention fund specified, under the 1996 NFC, for distribution among NWFP and Balochistan made 2.5 per cent of the total size of the resources distributed among the four federating units (on population basis).

However, the 2.5 per cent subvention funds lost weightage getting shrunken to 1.6 per cent in the 2002-03 due to increase, though marginal, in the population of bigger provinces.

“The NWFP government has also brought under question the inclusion of Sindh in the proposed subvention pool on the pretext that it would lead to lower the NWFP and Balochistan’s share under the subvention making them to get even less than the 2.8 per cent benchmark the 1996 NFC had set for the purpose of distributing funds to compensate their backwardness and size, respectively,” the sources said.

The provincial government is also demanding the federal government to resolve the contentious net hydel profit issue before finalizing the 6th NFC.