KARACHI, Aug 7: President General Pervez Musharraf has summoned the governors and the finance ministers of all the four provinces for a meeting on Thursday at Islamabad to discuss the revenue sharing distribution arrangement in context of fiscal and administrative devolution.
Finance Minister Shaukat Aziz told Dawn by telephone from Islamabad that the governors and the finance ministers of the provinces are being updated on the new revenue sharing arrangement. He made a mention of a similar meeting held in the recent past in which the provinces were asked to collect additional 2.5 per cent GST.
He was firm that no National Finance Commission related issues are being taken up in the Thursday meeting. “We will convene NFC meeting in the next few weeks,” he disclosed but did not confirm or deny whether the new revenue sharing formula between the federation and the provinces and between the provinces will be announced before the elections.
“Will the NFC give award before the election?” is the question that is being raised in provinces but remains unanswered. This question is being raised because if the elections are held on schedule in October and the new quasi political set-ups emerge in Islamabad and the four provincial capitals, the existing NFC will cease to exist.
In the absence of any revenue sharing formula, the new set-ups will have to constitute a new NFC sometimes late this year or early next year and the whole exercise will have to be taken up afresh. In presence of elected legislatures at the federal and provincial levels and political parties functioning, the decision makers in the present set-up believe that it would become a tough job to evolve a consensus formula of revenue sharing.
Government circles in the provinces believe that NFC should come out with award before the elections and formation of new elected governments in Islamabad and the four provincial capitals.
But announcement of NFC award will have a direct bearing on the election campaign particularly in three smaller provinces, Sindh, Balochistan and NWFP, where tensions are mounting and feelings are very strong on the revenue distribution formula in operation since 1974.
“It is not exactly an NFC meeting,” a well placed source in Sindh government informed Dawn on Wednesday by telephone when asked about the Thursday meeting at Islamabad. But, he added, that the meeting will discuss the contentious issues of resources distribution between the federation and the provinces and between the provinces and the district governments.
Other sources in Sindh government expect the meeting to discuss the impact of the new package of provincial autonomy being worked out by the National Reconstruction Bureau (NRB) on the resources distribution arrangement.
Only a week ago, President General Musharraf directed all the provinces to reconstitute their respective Provincial Finance Commissions (PFCs) with inclusion of elected nazims of zila, taluka and union councils. These PFCs are expected to monitor the interim awards of resources distribution between the districts of the provinces.
Reports emerging from Islamabad suggest that a fresh constitutional package of provincial autonomy has been prepared by the NRB. Sources in Sindh government say that Thursday meeting may consider the fresh constitutional package on provincial autonomy particularly with reference to its impact on resources distribution arrangement. President General Musharraf is expected to announce this constitutional package on provincial autonomy in next few days.
Constituted in December 1999, the NFC award for next five years is now long over due. The NFC should have given its award sometimes in May or early June but was delayed because of the sharp differences between Punjab and other provinces and between Islamabad and the provinces.
Except for Punjab, all other three provinces want a change in the criterion of the resources distribution. Since 1974, population has been the only criterion for revenue sharing. There are strong feelings in the three provinces that this criterion has deprived them of their legitimate share in the revenue and Punjab is the only beneficiary. Therefore Sindh, Balochistan and NWFP want size of the province, resource generation capacity, backwardness, reward for curtailing expenditure and generating additional resources.
The contentious issue between Islamabad and the provinces is the resource distribution ratio between federation and the provinces. The last NFC award fixed a ratio of 62.5 per cent for the federation and 37.5 per cent for the provinces.
After the devolution and installation of elected governments in 106 districts, the provinces contend that resources have been thinned down and are not sufficient even to meet the establishment and operational cost. The provinces want equal distribution of resources between the federation and the provinces.
The federal government is reported to have reacted negatively on the provincial governments’ move to demand a 50 per cent share in the federal divisible pool. The fiscal space of about Rs78 billion obtained from debt relief is reported to have been offset by the unending tensions on the Pak-India borders where troops are deployed on either side. This perpetual tension has affected the economic activity and revenue generation.
Therefore, Islamabad wants status quo so far as the ratio of resources distribution between the federal and provincial governments is concerned.