PESHAWAR, Sept 15: The federal government and provinces decided on Sunday to continue population as the sole indicator for the purpose of distributing funds from the federal divisible pool (FDP) under the 6th NFC Award.

However, the NFC decided to accept smaller provinces’ demand that other indicators, including backwardness, size and fiscal effort, would be considered for evolving the 7th NFC Award.

The meeting, presided over by Federal Finance Minister Shaukat Aziz, who reached here on Sunday immediately after returning from the United States, decided to significantly raise the provinces’ share from the present 37.5 per cent.

Official sources said the participants of the 6th NFC meeting made progress towards finalization of the award and ‘managed to evolve’ consensus on important issues.

“A consensus has been evolved, but another meeting will be needed to finalize the report before submitting it to the president for approval,” Finance Minister Shaukat Aziz said after the meeting.

The NFC members managed to reach an agreement on the contentious issues of distribution of funds from the proposed subvention pool and other fiscal matters only after Shaukat Aziz held a closed-door meeting with the finance ministers of the four provinces.

“The next meeting would be a formality,” a senior government official said. According to him, the next meeting would only be required to examine the final draft of the 6th NFC report and suggest any last-moment changes if required.

Finance Minister Shaukat Aziz said provincial finance ministers would discuss the Peshawar meeting’s decisions with their respective governors before coming to the next meeting to be held at Islamabad, date of which would be set later.

According to sources, it was decided to retain the provinces’ present share of 37.5 per cent under the 6th NFC Award and raise it in the 7th NFC Award. In this respect a study group had been formed to determine other aspects. “The study group for the 7th NFC Award has been formed with an explicit purpose to determine other variables apart from population,” a senior government official said.

An NFC member said: “Members of the study group would formulate their report on the basis of their experiences during the first two or three years’ functioning of the new NFC Award so that they should not be debating this contentious issue any more at the time of preparing the 7th NFC Award”.

Sources said the provincial finance ministers and the federal government formed after the Oct 10 polls, would consult the report of the study group and determine the formula also considering other indicators for distributing resources among the stakeholders under the 7th NFC Award.

Federal government had made the four provinces to agree to this arrangement to ensure finalization of the new NFC Award, according the participants of the Sunday meeting.

Till lunch the meeting had not evolved consensus on any of the important  issues including the mechanism for distributing  funds from the subvention pool and the distribution of 2.5 per cent  GST allocated by federal government for provinces.

An  NFC member from a smaller province said during the lunch break that the meeting was close  to evolve consensus over the resource distribution formula inclusive of  the funds to be distributed from the subvention pool.

He said the provinces’ share would come to over  44 per cent if the funds to be released from the subvention pool are also included apart from 40 per cent share from the FDP, 2.5  per cent GST and remaining from the subvention pool.

“Certainly, there are several issues on which federal government wants the federating units to agree to its proposals,” said another member when asked that whether there was any pressure on provinces from the Centre about NFC Award’s formulation.

The meeting discussed in detail the distribution of funds among the three smaller provinces from the proposed subvention pool, distribution of funds among the four federating units out of the 2.5 per cent of General Sales Tax (GST) allocated by Islamabad for the provinces and the issue of frozen accounts of the provincial governments, sources added.

Besides, they added that Balochistan’s representatives took up the issue of less payment being made to their province under the heads of royalty on gas and gas development surcharge.

“We have demanded that we should be given Rs 20 billion annually under the gas development surcharge,” an NFC member from Balochistan said.

The federal government officials said though Balochistan’s stand had not been accepted, it was decided that monthly reports from the ministries of finance and petroleum would be provided to remove Balochistan’s apprehensions and present the factual position about gas production and revenues earned from it.

Besides, the petroleum secretary would also prepare a working paper on the subject and the same would be discussed with the stakeholders.

Later, in a brief press release issued at the end of the meeting, the federal finance ministry stated that “the meeting reached on a broad understanding on splitting the divisible pool between federal and provincial governments as well as between the provincial governments”.

“The meeting also developed consensus on the total amount to be shared by the provinces. The provincial finance ministers will now discuss final recommendations agreed upon today with the provincial governors, after which the final meeting will be held in Islamabad”. it added.