KARACHI, Nov 25: The political leadership of the four provinces will begin a series of informal talks immediately after Eidul Fitr to work out a consensus on distribution of resources between the federation and the provinces.
The provinces are gearing up to prepare for the second meeting of the recently-constituted National Finance Commission, scheduled for Dec 13 at Lahore in which Finance Minister Shaukat Aziz is expected to brief the provincial leadership about Islamabad’s needs for resources to service debt, defence expenditure and establishment cost.
Wary of the existing resource distribution arrangement under which the federation takes bulk of taxation resources (62.5 per cent) and provinces get only 37.5 per cent, the provincial leadership is now expecting anywhere from 80 per cent, if the demand of a Balochistan leader is taken seriously, to 60 per cent being asked by an NWFP politician and a realistic expectation of 50 per cent by Sindh.
Islamabad had conceded almost 45 per cent of share in the national tax pool for the provinces in the last NFC, which failed to come out with a consensus award. “An expectation of 50 per cent share in the divisible pool is close to reality,” a well-placed source in the Sindh government said.
Provinces are expected to demand a schedule for relinquishing education, health and agricultural ministries. “These are provincial subjects and eventually are being passed on to the district governments,” the sources said and wondered as to why there should be such a massive secretariat of these subjects in Islamabad. This is an argument to be offered to Islamabad to cut down its expenses and establishment cost.
But Sindh also wants to retain its sales tax collection, contending it should be excluded from the divisible pool. Till the provinces are able to bring their revenue services up to the mark, Sindh will be ready to authorize Islamabad to collect this tax on its behalf and charge a fee. “But there is doubt if other provinces will support Sindh,” the sources said.
The NFC team in Sindh is also working out share ratios of the multiple criteria for resources distribution it has already proposed in the first NFC meeting this month at Islamabad. Sindh wants resource generation capacity, economic backwardness, needs of the provinces to be given due weight along with population.
A task force constituted by former Sindh Finance Minister Dr Hafiz Sheikh is reported to have worked out distribution ratios of population, needs, resources generation and backwardness.
But the new NFC team, with no representation from business community or professionals, is having a fresh look at the previous exercise.
Sources said the NFC team was considering resource distribution arrangements enforced in India, Australia, Canada and many other countries to find out how much weightage has been given to these factors in those countries.
“But one thing is certain,” a source said, adding “nowhere in any federation, the resources are distributed on a single criterion.” In India backwardness and need of the state is given more weight than population and, hence industrially- developed states like Maharashtra, Gujarat and Punjab are not happy with the arrangement.
Provinces also want relief in their debt burden resulting from accumulation of more than 17 per cent interest on the cash development loans taken from the federal government. The provinces have to pay back roughly Rs300 billion to Islamabad after having paid back more than three times the original amount of loan taken during the 70s and 80s.
President Pervez Musharraf is reported to have instructed all provincial loans to be written off during one of the meetings of the previous NFC.
Abdul Karim Lodhi, Sindh’s private member on the NFC, was reported to have drawn Gen Musharraf’s attention towards the provinces’ mounting debt problem, particularly of his home province.