ISLAMABAD, Nov 18: The National Finance Commission (NFC) agreed on Tuesday to begin discussions on distribution of net proceeds of the divisible pool afresh as the provinces rejected the work done by the previous committee on NFC under the military government.
Three provinces — Sindh, Balochistan and NWFP — also refused to share the net proceeds of the divisible pool on the basis of population alone, while all the four provinces demanded an increase in the provincial share from the already agreed level of 40 per cent, Dawn gathered from interviews with the NFC members.
The next meeting of the NFC would be held in Lahore in December.
The meeting, presided over by Finance Minister Shaukat Aziz, decided that an informal meeting of the four provincial finance ministers would be held before the next NFC meeting so that a broader understanding could be reached on the question of sharing of resources between provinces.
The centre and the provinces also agreed to reach a consensus before the end of the year so that recommendations of the award could be incorporated in the next annual budget for the year 2004-5.
Sources said the provinces wanted to begin negotiations with the federal government on the question of increase in their share in view of rise in poverty level in each of the four provinces and given the fact that the federal government had agreed under the military government to increase the provincial share to 42.5 per cent.
The sources said the finance minister told the provincial representatives that the share of the federation could not be reduced from 60 per cent, proposed last year, because of defence needs, expenditures on running the civil government and obligations of debt servicing.
Shaukat Aziz told reporters at his residence that the discussions on sharing of divisible pool would be “threadbare” and added that the centre had also agreed to review the work already done and would adopt good ideas.
He said the federal government had handed over the copies of recommendations, discussions and minutes of the previous discussions to the provinces for their internal calculations and projections and for further inter-provincial discussions.
The minister said the centre had also agreed to increase the provincial share in the divisible pool from the existing level of 37.5 per cent but it could not be stated at the moment that how much would be the increase. The centre had agreed last year to increase provincial share to 42.5 per cent that included Rs20 billion for subvention and Rs32 billion from the 2.5 per cent of GST.
He said Sindh, Balochistan and the NWFP demanded sharing of resources on the basis of revenue collection, area and backwardness, respectively, while the Punjab wanted population to be the basis of the new NFC award.
The minister said the provinces had presented their positions to the NFC, and “now we would work on our projections and calculations and provinces would do the same and then we would workout something which is acceptable to all”.
Sindh Finance Minister Syed Sardar Ahmad told Dawn the meeting had agreed to finalize the NFC with a consensus so that it could be made effective from July 1, 2004.
To a question, Mr Ahmad said every province wanted increase in its share but it would have to be seen that how pressing was the requirement of each province because the centre had made it clear that it could not meet every demand with its limited resources.
He said Sindh presented its viewpoint in the NFC meeting which was based on a resolution of the Sindh Assembly which rejected population as the sole criterion for sharing of resources.
However, the minister conceded that the final criterion could be different from what the smaller provinces were demanding.
He said obviously every demand of the province could not be fulfilled but some give-and-take would have to be negotiated. He said the Sindh government would press for adoption of recommendations made by the Hafeez Pasha committee which had observed that nowhere in the world population was used as the sole criterion for sharing of resources among various units of a country.
NWFP Finance Minister Sirajul Haq said he informed the meeting that his province was not bound to accept recommendations of the previous NFC committee.
He said the meeting was informed that if the centre released Rs342 billion arrears on account of hydel profit to the NWFP, most of the province’s financial worries would be solved. He said he proposed that sharing of resources between the federal and the provincial governments should be made on 40:60 basis instead of the proposed 60:40 basis.
Sirajul Haq said good suggestions of the previous committee could be adopted and the A.G.N. Qazi formula should continue to be used for calculating the NWFP share in the hydel profit.
He said backwardness should be given weightage in the distribution of resources because daily per capita income in urban and rural NWFP stood at Rs27 and Rs17, respectively.
The minister said the NWFP government had arranged a meeting of political parties on Monday, and the position taken by the provincial government had full support of all parties including the opposition.
Balochistan Finance minister Syed Ehsan Shah said his government demanded that resource distribution should be made on the basis of backwardness and area in addition to population.
He said the share of Balochistan in the divisible pool had dropped by Rs400 million per annum due to 0.2 per cent reduction in population under the 1997 census and hence the province was a big loser because of continued adherence to population as the sole criterion for sharing the resources from the divisible pool.
Meanwhile, an official statement said Finance Minister Shaukat Aziz highlighted the need to develop consensus in terms of distribution of divisible pool between various provinces and increased allocation from the federal government to the provinces.
The minister agreed that the federal government would increase the provincial share in the divisible pool which would help provide more resources to the provinces for development and would also improve their financial position.
The meeting agreed to prepare projection of revenues and expenditure, discuss plans for improving revenue collection and curtailing non-development expenditure and increase expenditure on development and social sector projects.
The federal finance minister also urged provinces to develop provincial debt repayment strategies so as to reduce their debt-servicing costs.
The meeting discussed financial benchmarks, sharing formula between the federation and the provinces and among the provinces.
