PESHAWAR, April 25: The NWFP government would extend the interim Provincial Finance Commission (PFC) award for one more year instead of announcing a fresh award for three years as required under the devolution of power plan introduced on Aug 14, 2001, according to official sources.
The interim PFC award, envisaging a plan to distribute resources between the provincial and district governments would complete its one-year term on June 30, 2003.
The interim arrangement had been necessitated to monitor the performance of the fiscal plan evolved under the award by a seven-member commission.
Though fresh PFC award for a period of three years was supposed to be announced before the completion of the interim award on June 30, 2003, the Muttahida Majlis-i- Amal-led NWFP government, said its minister for local government and rural development Sardar Idrees, had decided to extend the interim award by one more year, i.e. up to June 30, 2004.
“Before adopting it for a period of three years, we would table it (interim award) before the provincial assembly for its formal approval,” said the minister when contacted by Dawn.
The interim award envisages distributing the total provincial revenue resources between the provincial and district governments on a 40:60 basis—once the provincial government’s obligatory expenditure requirements are met.
Mr. Idrees said that provincial cabinet had decided to continue with the current arrangement of transferring resources from the provincial government to district governments for one more year and let the provincial assembly discuss it at the time of presenting budget for the next financial year.
As per the arrangements laid down under the interim award, the provincial divisible pool consists of the entire provincial revenue receipts, including revenue assignment from the federal divisible pool, royalty on crude oil and gas, net hydel profit, subvention, provincial own receipts and the general sales tax on services, excluding the 2.5 per cent GST, which the federal government would transfer to provinces out of the total of 15 per ent GST collected.
The total current revenue receipts generated by the province do not form the divisible pool, rather, provincial revenue receipts are pooled for onward distribution among the provincial and district governments only after meeting the obligatory expenditure requirements of the provincial government.
However, well placed official sources said that though the resource distribution formula would remain the same for the distribution of resources between the provincial and district governments during the next financial year, minor changes would be made under the interim award to improve the fiscal management at the district level.
“The quantum of resources transferred from the provincial government to district government would remain the same during the new financial year, changes would be brought about to improve resource utilization at the district level,” said a senior government functionary.
The changes are aimed at improving fiscal management and plugging leakages in line with the recommendations of the review meetings held recently with the representatives of the district governments.
Though the PFC award — first of its kind — largely performed well during the interim period, some of the district governments did experience difficulties due to fiscal disparities, which would be removed through minor changes under its (award’s) application in the 2003-04 financial year.
In this respect, said the sources, district governments ran short of resources under some heads of expenditure during the 2002-03 financial year. This situation would be rectified during the next financial year by placing more funds under those heads.