The seventh award in 2010 attempted to rectify anomalies by increasing the aggregate allocation to the provinces to 57.5% and reducing the population weight to 82%. Photo: archive
ISLAMABAD:
Sindh Chief Minister Syed Murad Ali Shah has expressed concern over the inclusion of three of the seven terms of reference of the National Finance Commission (NFC), in a move that may make it difficult for the Center to transfer most of its expenditure to the federated units.
Official documents show that during the inaugural meeting of the NFC, the CM declared that the inclusion of these three terms of reference in the NFC notification was unconstitutional.
These terms relate to the transfer of expenditure from the Higher Education Commission (HEC), Benazir Income Support Program (BISP) and provincial projects that are part of the federal Public Sector Development Program (PSDP), as well as any expenditure on national projects such as mega dams.
However, in response to Sindh’s objections, Finance Secretary Imdad Ullah Bosal returned the ball to Sindh’s court by stating that it was President Asif Ali Zardari, co-chairman of the PPP (Sindh’s ruling party), who had the final authority to determine which issues could be included in the NFC.
Syed Murad Ali Shah is a member of NFC in his capacity as Finance Minister of Sindh.
“The Sindh Chief Minister observed that agenda items (d), (e) and (f) do not fall within the constitutional limits,” the documents said.
Term (d) relates to issues relating to the distribution of financial expenses incurred or to be incurred by the federation with respect to issues and matters that fall within the domain of the provinces.
Term (e) deals with issues relating to the distribution of financial expenses incurred or to be incurred by the federation, the provinces or both, with respect to trans-provincial matters.
The term (f) refers to issues related to the financial expenses of national projects that will be shared by the federation and the provinces.
Sources said that during one of the follow-up meetings convened at the technical level, Punjab suggested that the NFC sub-group should only cover terms related to fiscal expenditure incurred by the federation in the provinces.
Sources added that in response to Sindh’s objections, the federal finance secretary stated that the terms of reference were approved by the president and there were no restrictions on the president regarding the inclusion or exclusion of items.
The federal government considered these expenses to be indirectly part of Article 160 of the Constitution, which deals with NFC.
The federal government said the loans are also part of Section 160, which essentially means such expenses fall within the scope of the NFC.
However, due to Sindh’s objections, the federal government also sought the opinion of Pakistan’s Attorney General Mansoor Awan, who ruled in favor of the Centre.
He further explained that Article 160(2) is not limited to revenue issues; rather, it also encompasses borrowing powers, and borrowing is inherently linked to spending considerations.
The federal government complains that it cannot govern the country with only 42.5% of the revenue in its hands after transferring 57.5% of the divisible fund to the provinces.
However, despite limited resources, the federal government has continued to spend in areas of a provincial nature for reasons of political expediency.
Contrary to NFC’s 57.6% de jure share, prominent tax expert Dr. Hafiz Pasha said earlier this month that provinces in fact received only 46% of total federal revenue in the last fiscal year after adjusting for the impact of undistributed oil tax and cash surpluses.
Sources said the Sindh CM was of the view that provincial expenditure should be taken up by the respective provincial assemblies and the National Economic Council.
However, sources added that despite the Sindh CM’s serious reservations, there is still a possibility of provinces taking responsibility for higher education.
However, they are reluctant to take responsibility for the BISP.
BISP spending is budgeted at Rs 716 billion for the current fiscal year and is largely directed by the International Monetary Fund to present itself as a substitute for its tough fiscal measures.
The Sindh CM also stressed that consensus could only be developed through deliberations within the NFC forum, and that the Commission should strictly adhere to its constitutional mandate to move forward.
Khyber-Pakhtunkhwa (KP) Chief Minister Sohail Afridi urged the five stakeholders to put aside political differences and work in unity, in a statement reflecting the province’s positive approach towards issues of national importance.
Finance Minister Muhammad Aurangzeb also acknowledged the role of the four provinces in signing the National Fiscal Compact and their efforts to achieve fiscal surpluses to support Pakistan’s compliance with IMF requirements.
Afridi stressed the need to put aside political differences, uphold mutual respect and fulfill the constitutional responsibilities of the NFC.
The KP Chief Minister observed that the people of his province had made great sacrifices for Pakistan, which had not been duly recognised.
However, Afridi, who is also the provincial finance minister, called the seventh NFC award since 2018 unconstitutional, arguing that it does not meet the needs of the more than five million residents of the merged districts in KP.
The KP is hopeful that its provincial share of total revenue will rise to nearly 19% after incorporating the impact of the newly merged population.
The NFC has also constituted a working group to address KP’s concerns regarding the merged districts. Their first meeting is scheduled for today (Tuesday).
Sources said that during the inaugural meeting, Punjab emphasized the need for equitable distribution of resources and policy coherence between the federal and provincial governments.
Punjab also linked future resource distribution with improvements in the Human Development Index (HDI) and other key economic indicators.
