Karachi, July 9: Two of the three proposals offered by the Balochistan government for setting distribution criteria of the resources in the current National Finance Commission (NFC) include revenue collection as one of the basis but it has been withdrawn in the third proposal apparently after developing some differences with Sindh on the Gas Development Surcharge (GDS) issue.
Sindh collects almost 70 per cent of the national taxes but has been given a very small share in all the NFC arrangements since 1974 when the first award was announced in late Zulfikar Ali Bhutto’s government, which declared population as the only basis of revenue distribution and it federalised completely the sales tax. Sindh’s consistent demand is to give some share on the basis of the revenue collection and had agreed for a token two per cent ratio in 2002 when the NFC negotiations got broken down.
Punjab is the biggest beneficiary of all the NFC awards and insists on retaining population as the only factor for revenue distribution. In 1955 One Unit was created in West Pakistan to set a principle of parity for revenue distribution and jobs allocation between East and West Pakistan.
East Pakistan’s population was 56 per cent.
“No federation in the world follows population as the sole basis for distribution of revenues among the federating units except for Pakistan,” the Balochistan position paper declares in clear words while giving examples of revenue distribution criteria of three federations of the world — India, Australia and Germany. In all the three federations population has been given 10 to 11 per cent ratio while other factors have been given much more weightages.
In the first proposal Balochistan has given 5 per cent share of the federal divisible pool to the revenue collection which has been identified as infrastructure and services compensation. In this proposal, the population has been given 60 per cent weightage, 10 per cent to the backwardness, 10 per cent to the fiscal efforts that provinces make to increase self-generation of resources and cut down on expenditure, 5 per cent to Inverse Population Density (IPD) and 5 per cent for the equality of the federating units (grants and subventions for development).
Share of revenue collection has been increased to 10 per cent in the second proposal in which the ratio of population weightage has also been raised to 70 per cent but no consideration has been given to fiscal efforts of the provinces and it maintains same ratios of 10 per cent for backwardness, 5 per cent for IPD and 5 per cent for equality of federating units.
It is in the third proposal that Balochistan wants population be given 85 per cent share, IPD two per cent and backwardness 13 per cent with no provision whatsoever for the revenue collection. According to the Balochistan document a zero share has been given to revenue collection in view of the position taken by the Punjab and the NWFP.
Balochistan has proposed 51.7 per cent of the total federal divisible pool for Punjab, 23.5 per cent for Sindh, 15.8 per cent for NWFP and 9 per cent for Balochistan. Under the 1997 NFC award, the share of Punjab is 57.36 per cent, Sindh 23.71 per cent, NWFP is 13.82 per cent and that of Balochistan is 5.11 per cent. The proposal slashes revenue shares of Punjab and Sindh to increase shares of Balochistan and Sindh.
“Governments raise public revenues, not for distributing cash per capita,” declares Balochistan government’s official document of its position on the sixth NFC award while making a case for distribution of revenues for public services. “The basis for distribution of divisible revenues should be cost of per capita of providing public services and not cash per capita,” is the main argument of Balochistan government.
In furtherance of this objective, the Balochistan government wants Inverse Population Density (IPD) be made a permanent criterion for the distribution of resources.
With an area that constitute almost 44 per cent of whole Pakistan and having a population of about 7.5 million which is merely 5.11 per cent, the Balochistan’s rate of delivery of public services has been calculated at 18.8 if Punjab’s rate is taken as one, NWFP 1.5 and Sindh 1.6. Balochistan wants Inverse Population Density (IPD) be made one of the factors as is the case with Australia and in many other federations of the world.
In all the five previous NFCs since 1974 and in most part of the current NFC proceedings, Sindh and Balochistan are reported to have supported each others’ views on the revenue distribution issues. Differences are said to have cropped up after the October 2002 elections when the NFC was re-constituted. In the reconstitution, Dr Gulfaraz, a retired bureaucrat who was a federal secretary of oil and gas ministry was nominated as Balochistan’s private member on the NFC. Also a retired brigadier, Dr Gulfaraz does not live in Quetta or any part of Balochistan. Mir Zafarullah Jamali who was the first Prime Minister after 2002 elections refused to endorse Dr Gulfaza’s name for long.
The credit for giving a share in oil and gas related revenues to the provinces go to Nawaz Sharif government. The 1991 NFC award recognised for the first time right of the provinces on their respective natural resources. But the bureaucrats never implemented this provision in the spirit it warranted.
Balochistan’s case is that investment at Sui was made in the decade of early fifties. Then the investment was not as high as it is in Sindh and Punjab. The differences between the average well head cost and average sale price of Sui Gas should be the highest. Balochistan’s share in the gas revenue should also be highest and that this principle should be recognised. In 2003, there was a series of negotiations between Sindh and Balochistan. Sindh was reported to have agreed to Balochistan’s position. But for mysterious reasons differences emerged and now the Balochistan Finance Minister Syed Ehsan Shah accused Sindh of backing out of its previous commitment on the GDS.
“The GDS is not an NFC issue,” retorted Syed Sardar Ahmad when he was asked to give an explanation of differences with Balochistan. He promised to give a position paper on GDS but never kept it.
Sindh is the biggest producer of gas and it gives it on subsidised price to the fertilizer plants. The fertilizer is sold and used in Punjab also. Sindh does not get a compensation for this.
Sindh and Balochistan both suffer because of obstinacy of the bureaucrats while the politicians remain silent spectators.