ISLAMABAD, Nov 13: President Gen Pervez Musharraf on Thursday reconstituted the National Finance Commission (NFC) to distribute net proceeds of the divisible pool among the federation and the provinces.

The NFC will also have the mandate to resolve the thorny issues of GST and hydel profit.

Official sources said the first meeting of the reconstituted 10-member NFC would be held in Islamabad on Tuesday next (Nov 18). This would be followed by meetings at the provincial headquarters on a rotation basis on the invitation of respective provincial governments.

Under a gazette notification, Dr Gulfaraz Ahmad has been appointed as non-statutory NFC member to represent Balochistan in place of Fateh Khan Khajjak. The existing non-statutory members of other three provinces would continue as before.

The name of former secretary general finance Moin Afzal as official expert of the federal government has also been deleted under the notification. He has been replaced by secretary finance Naveed Ahson.

Under article 160 of the 1973 Constitution, federal finance minister is the chairman while all the four provincial ministers are permanent members of the NFC.

The notification said that Saeed Ahmad Qureshi, Abdul Karim Lodhi and Dr Mohammad Zubair Khan would represent Punjab, Sindh and the NWFP, respectively, as non-statutory members.

Official sources said the NFC’s first meeting would decide whether to start deliberations afresh for the distribution of resources or own up to decisions already made during the military government.

The provincial governments are most likely to insist on opening up the entire gamut of decisions taken by the Commission during the military government in view of changed political scenario. If this position is accepted then the NFC is likely to take at least a year to finalize its award.

Earlier, the NFC had settled 90 per cent issues but could not reach agreement on sharing of hydel profit, distribution of subvention pool and general sales tax among the provinces.

However, with the October 2002 elections certain issues resurfaced, as the new provincial governments were not ready to accept decisions concerning these issues. The federal government had to advise the finance ministry to defer the announcement of new NFC award at the eleventh hour.

The NFC had agreed to set up a Rs20 billion subvention pool to assist the provinces under the principle that the share of provinces would progressively increase and that smaller provinces would not suffer in case of any change in the size of resources. For this, six separate formulae remained under consideration but no decision was made.

Similarly, the NFC had de-capped the Rs6 billion annual hydel profit for the NWFP and had set up a committee to calculate a new amount. This issue, however, also remained unresolved. Chiefly because of this reason, the federal government had to make distribution of resources under an interim arrangement in the budget 2003-04.

In case the provinces agreed to stand by the decisions already made and move ahead with discussion on only unresolved issues, then the NFC is likely to finalize its recommendations within two to three months, official sources said.

The NFC had agreed last year on 42.5 per cent share to the provinces in the sixth award. The NFC award is announced through consensus and could not be finalized through a majority vote.

The reconstitution of NFC had been delayed for a year because of federal government’s objection to the nomination of Dr Gulfaraz Ahmad by the Balochistan government but the provincial government refused to give a new name and insisted that Dr Gulfaraz Ahmad, a former federal secretary and member National Reconstitution Bureau (NRB) alone would represent Balochistan. Under article 160 of the Constitution, the NFC has to recommend the distribution of the net proceeds of taxes among the federation and the provinces, make grants-in-aid to the provinces and the borrowing powers.