ISLAMABAD, June 4: Final efforts to evolve a consensus on the sixth National Finance Commission (NFC) award failed on Friday after a meeting held here could not reach a decision on a fund-sharing formula.
As a result, federal and provincial budgets for the next financial year will be prepared on the basis of the existing (fifth) award. Finance Minister Shaukat Aziz, who presided over the meeting, told Dawn that the budget would be based on the existing award.
"We made a lot of efforts and four parties - the centre, Punjab, the NWFP and Balochistan - were ready to finalize the new award but Sindh did not agree. "They (Sindh) also contacted London but did not alter their position and we said OK the previous award would continue."
The minister said he had invited the finance ministers and secretaries of the three provinces to look into their budget requirements. The finance ministers of the NWFP and Balochistan have been asked to stay in the capital to discuss shortfalls in their budgets that would be met through higher grants which are currently capped at Rs3 billion and Rs4.8 billion, respectively.
"A decision which should have been reached could not be made... All agreed that a decision is not possible at the moment because ministers said they had to go to their provinces and face the people," Balochistan Chief Minister Jam Yousuf told reporters after the day-long meeting held to resolve differences on the award.
"Issues could not be resolved," said Balochistan Finance Minister Syed Ehsan Shah after the meeting. Another participant said the finance minister had told the meeting that he would be sending budget documents for printing in the evening and there was not much time left for the new award.
The existing NFC award would be carried forward to the next fiscal year through a presidential ordinance, perhaps with an increase in subvention and grants for Balochistan and the NWFP, Syed Sardar Ahmed, Sindh Finance Minister, told reporters.
"There is no hope for the new award before the budget 2004-5 and I would present Sindh budget on the basis of the previous award, tentatively, on June 14," Mr Ahmed said.
"After a lot of discussions, other provinces refused to include revenue generation in the multi-factor formula and we cannot give up our principled stand on the issue," he said.
When asked whether Sindh told the meeting that it would consult MQM's leadership in London, Mr Ahmed replied in the negative and said that he had come to the meeting with the full backing of the provincial cabinet and the chief minister.
He, however, said: "I have now informed London, nine-zero and the chief minister and all agree that we have taken a principled stand." The meeting at the Punjab House in Rawalpindi followed a meeting between the chief ministers and President Gen Pervez Musharraf.
However, federal government sources claimed that the president was not involved in the NFC issue. They said that since the provinces were not able to arrive at a consensus no meeting was held with the president.
NWFP Finance Minister Sirajul Haq blamed what he called Sindh's inflexible attitude for the failure. He said not only the people of the three other provinces but the people of Sindh would also suffer due to non-finalization of the new award.
He said that provinces other than Sindh had agreed that 90 per cent weightage should be given to population and the remaining 10 per cent to multiple factors without revenue collection. But Sindh was adamant that in other factors revenue collection should be given some weightage.
Mr Ahmed said revenue collection was a matter of principle for Sindh and "we would stick to that demand". Balochistan finance minister said that he did not oppose the proposal to include revenue collection in the formula.
"We want inclusion of Inverse Population Density (IPD), backwardness and revenue in the formula," Mr Ehsan Shah said. "I would not term it a failure, rather we would pick up the thread on the Sixth NFC award after the federal and provincial budgets," Mr Shah added.
He said the NWFP and Balochistan ministers had been asked to stay on in Islamabad so that subvention and grants under the existing NFC award could be finalized. "We have demanded release of arrears under the Gas Development Surcharge (GDS) which is around Rs6 billion, and we have also demanded that Balochistan's overdraft, now touching Rs5 billion, be written-off," said Mr Shah.
"We hope that the centre would at least raise subvention and grants for smaller provinces which have been capped for the last two years," Mr Shah said. Under the existing award, the provinces would get 43 per cent from the divisible pool, including subventions and grants.
The federal government would be the major beneficiary of the NFC talks failure because it would save about Rs30 billion it could have otherwise given to the provinces on the basis of 47.4 per cent offer it had made to the provinces. Out of this amount, it would give Rs5-6 billion more in grants to Balochistan and the NWFP.