In search of an equitable formula

THE first meeting of the reconstituted National Finance Commission (NFC) has brought out once again the fundamental differences between the provinces and the centre over how much should be retained by the latter from the total divisible pool and what should be the criteria for the distribution of the balance among them. The centre has already agreed to enhance the share of the provinces from 37.5 per cent to 40 per cent while asserting that it cannot make do with less than 60 per cent because of its debt obligations and defence and administrative expenditure. However, since the now defunct NFC had agreed in September, 2002, to increase the share of the provinces to 42.5 per cent by providing a subvention of Rs 20 billion and another Rs 32 billion from the 2.5 per cent of GST, there is a possibility that the federal government will eventually make its position a bit more flexible on this matter.

More so because over the last couple of years, the federal government has succeeded in reducing its domestic debt liability significantly and also kept the defence budget capped at a certain level for some years. Also, it has been gradually divesting itself of some overlapping responsibilities. In the years to come this process is likely to be accelerated. Also, in the last two years, the centre’s income from tax and non-revenue sources has gone up steeply. This trend is likely to continue in the coming years. All this should make it possible in the next couple of years for the centre to enhance the share of the provinces to about 50 per cent if not more. However, since the award is to be finalized before June, 2004, to be incorporated in the next budget, one hopes that the centre will agree to raise the share of the provinces to at about 43-44 per cent.

Developing a consensus on the criteria for distribution of resources among the provinces, however, presents a more difficult problem. All the previous NFCs have used population as the sole criterion for allocations. Punjab, which benefits the most from this criteria, has circumvented all attempts in the past to find a more equitable formula. Sindh, which has the only port of the country at Karachi and therefore, collects the most revenues, wants revenue collection and the level of poverty to be given weightage in the distribution of divisible resources. The NWFP wants backwardness to be given due consideration as it argues that the per capita daily income in the province is as low as Rs 27 in the urban areas and Rs 17 in the rural areas. And it does not want the NFC to change, as proposed by the defunct NFC, the AGN Kazi formula for sharing the profits from the generation of hydro-electricity. It also demands that the arrears of Rs 342 billion under this head should be paid to it immediately.

Balochistan, the largest but sparsely populated province of Pakistan, wants both area and backwardness to be given proper weightage. It has argued that using the single criterion of population for distribution of resources has already deprived it of Rs. 400 million annually over the last six years because of a 0.2 per cent reduction in its population according to the 1997 census. This is a telling argument against using population as the sole criterion. This argument alone should win the case for the three smaller provinces against the current distribution formula. Sindh’s demand for weightage for revenue collection may not be very convincing but its expectations of consideration for rural poverty and the strain on its resources on account of a continuous flow of migrants from other parts of the country are valid. One more thing: a major chunk of provincial resources go into meeting their debts which they owe to the centre. This burden could be brought down considerably if the interest rates charged by the federal government are rationalized. This will release a good amount of resources, thereby reducing their dependence on subventions.

Deaths in custody

THE death of two people in Karachi on Monday in police custody and the murder of a third by a police constable are incidents that belie the claim that the police have somehow become a better force. According to newspaper reports, a maid working at a bungalow in Defence Housing Authority had been accused by her employer of theft and brought to the police station for questioning. She died in police custody in mysterious circumstances a couple of days later. The manner in which the maid was tortured and her family members rounded up for a crime that had yet to be established needs to be properly investigated. The ASP of Civil Lines area under whose jurisdiction this case fell, claimed that the 25-year-old woman, a mother of three, committed suicide in the lock-up. In a separate incident on the same day, a 55-year-old man was picked up and tortured at the Gulshan-e-Iqbal police station because he had lodged a complaint against a shop owner whose brother was an under-training police officer. The torture was so severe that he suffered a heart attack and died. The police have registered a case and are investigating.

The third incident involves a police constable who is understood to have murdered a woman, a mother of three from Lyari. The man has, however, been arrested by the police. The practice of torture is common in Pakistan as the police have never been known for their investigative skills. Such cases are good examples of how the police work: harass the victims instead of going after the criminals, spoil the cases and do whatever it takes to protect themselves. There must be a judicial inquiry into these deaths and those responsible punished. It is only then that the end of justice can be met.

Fertilizer shortage

THERE are reports of shortage and an increase in the price of fertilizer in various parts of Punjab. Farmers fear that the wheat crop may be affected if they do not get DAP (Di-Ammonium Phosphate) in time. There is also concern that the target set for wheat output would be difficult to achieve if the current situation persists. The price of DAP is now hovering around Rs 920 for a 50 kg bag in the blackmarket compared to the official rate of Rs 832 for a bag. Farmers facing a cash crunch owing to delay in cane-crushing are particularly worried.

Landlords have alleged that fertilizer dealers have created an artificial shortage to make undue profits. Dealers, on the other hand, attribute the shortage to the stoppage of bulk supply of fertilizer by the companies concerned and delay in the import of DAP. The reported increase in the world price of DAP, coupled with an increase in transport cost from Karachi to upcountry destinations, are also a factor. However, a major reason, as pointed out by agriculture officials, is the speculative pressure on the import of DAP. Some price relief was earlier thought of as part of a measure to reduce farm input prices. But delay in the issuance of the required SRO is believed to have activated the speculative forces in the market and contributed to the price rise and scarcity. Apparently, dependence on imports has placed considerable market clout in the hands of importers. Steps are needed to streamline the supply of fertilizer and stabilize its price. In the present case, the government can import fertilizer through its own agencies to ensure its uninterrupted supply at reasonable rates.