LAHORE, April 17: Punjab has begun lobbying with other provinces to prepare ground for an interim National Finance Commission (NFC) Award for the fiscal year 2003-04 on the basis of negotiations held between them so far in view of little possibility of finalization of the award during the current year.
“The announcement of an interim award will provide some of the much-needed relief to the resource-starved provinces next year which will not be possible if the proposal is rejected by them,” a senior official privy to developments in this regard told Dawn here on Thursday.
The interim NFC award as suggested by Punjab is likely to enhance the provincial share in the federal divisible pool to at least 40 per cent from the existing 37.5 per cent.
Under the 1997 NFC award, the federal government retains a hefty 62.5 per cent of the federal divisible pool available for sharing with the provinces.
“You can well imagine how much room will the provinces be able to secure with the 2.5 per cent increase in the federal transfers to them. If an interim award is not agreed upon by the provinces, then they’ll have to live with the same old 1997 share of 37.5 per cent for at least one more year,” the official said.
The tenure of the 1997 award had expired on June 30, 2002. But the government enhanced its life for one year till June 30, 2003, due to the failure of the commission to finalize the new award in time.
The work on the new award was given up in October last year as the previous military regime wanted it to be announced by the elected government that took over in November. The government has so far not been able to notify the reconstitution of the NFC. “It is now absolutely incomprehensible as to why the government isn’t reconstituting the NFC when we finally have a finance minister to chair the commission,” said another provincial official.
The new NFC award is expected to increase the provincial share from the divisible pool to some 44 per cent from the current 37.5 per cent and slash the federal share to 56 per cent from 62.5 per cent as agreed between the centre and the federating units during the earlier NFC meetings. The provincial share would also include 2.5 per cent GST the federal government has agreed to transfer to the provinces to compensate the districts for the loss in income due to abolition of zila tax and octroi in 1997.
The fears about the finalization of the new NFC award stem not only from the utter failure of the government to reconstitute the NFC but also from the stand taken by Sindh and Balochistan to get the resource distribution formula changed.
The officials say that the four provinces had agreed in the negotiations held so far that population would be retained as the criterion for distribution of resources between the provinces in the yet-to-be-finalized award. However, they had also agreed to expand the resource distribution formula to include such other factors as backwardness, collection, area, etc in the next award.
The Sindh Assembly passed a resolution at the beginning of this year to urge distribution of funds collected in the pool between the provinces on the basis of the collection and transfer of the resources to the centre from the provinces on the basis of their populations.
Sindh contends that it had received Rs80 billion less than its share promised during the five-year tenure of the 1997 award. Punjab says it received Rs213 billion fewer than its share during the same period. It also contends that it has suffered a further loss of 0.5 per cent in its share during the ongoing year because of as much reduction in its population size in the 1998 census to 57.3 per cent of the total population of the country.
The 1997 award provided that the resources will be distributed between the provinces on the basis of the new census whenever it was held.
Balochistan’s finance minister is reported to have suggested a couple of days back that 50 per cent of the provincial share from the divisible pool be distributed between the federating units on the basis of their population and the remainder on the basis of their backwardness, collection, area, etc.
“In these circumstances it is foolish to expect that the award would be finalized this year even if the government announces the new commission right away. Hence, the Punjab has proposed that we (the four provinces) agree to have the interim award for the next fiscal year on the basis of the negotiations held so far in order to be able to get some relief in the form of enhanced resources,” the officials said.