The 7th award in 2010 attempted to correct irregularities by increasing the total allocation to provinces to 57.5% and reducing the population weight to 82%. Photo: file
ISLAMABAD:
Sindh Chief Minister Syed Murad Ali Shah has expressed concern over the withdrawal of three out of seven mandates of the National Finance Commission (NFC) in a move that may make it difficult for the Center to transfer the bulk of its expenditure to the federating units.
Official documents show that during the NFC’s maiden meeting, 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 to 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 Minister Imdad Ullah Bosal threw the ball back into Sindh’s court by declaring that President Asif Ali Zardari, who co-chairs the PPP – Sindh’s ruling party, had the final authority to decide which subjects 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 constitutional limits,” the documents said.
The term (d) relates to matters relating to the sharing of financial expenditure incurred or to be incurred by the Federation in respect of subjects and matters falling within the domain of the provinces.
Term (e) deals with matters relating to the sharing of financial expenses incurred or to be incurred by the Federation, the Provinces or both, in connection with trans-provincial matters.
Term (f) relates to issues relating to financial expenditure for national projects shared by federations and provinces.
Sources said during one of the follow-up meetings convened at the technical level, Punjab suggested that the NFC sub-group should cover only terms related to fiscal expenditure incurred by the federation in the provinces.
The sources added that in response to Sindh’s objections, the federal finance secretary stated that the commission was approved by the president and there were no restrictions on the president in terms of inclusion or exclusion of items.
The Federal Government was of the view that these expenses were indirectly part of Article 160 of the Constitution which deals with NFC.
The federal government said loans are also part of Article 160, which essentially means that such expenses fall within the purview of the NFC.
But over Sindh’s objections, the federal government also sought an opinion from Attorney General of Pakistan Mansoor Awan, who ruled in favor of the Centre.
He further explained that article 160, par. 2, is not limited to revenue issues; rather, it also includes borrowing powers, and borrowing is inherently associated with expenditure considerations.
The federal government complains that it cannot run the country with only 42.5% of the revenue left in its hands after transferring 57.5% of the divisible pool to the provinces.
However, despite limited resources, the federal government has continued to spend in areas that are provincial for political purposes.
In contrast to the 57.6% de jure NFC share, noted tax expert Dr. Hafiz Pasha earlier this month that the provinces actually received only 46% of the total federal revenue in the last fiscal year after adjusting for the impact of the undistributed oil tax and cash surplus.
Sources said the Sindh CM was of the view that provincial expenditure should be handled by the respective provincial assemblies and the National Economic Council.
Sources, however, added that despite the serious reservations of the Sindh CM, there is still a possibility for the provinces to take charge of higher education.
However, they are reluctant to take responsibility for BISP.
BISP expenditure is budgeted at Rs 716 billion. for the current financial year and is largely directed by the International Monetary Fund to be presented as a replacement for its harsh fiscal measures.
The Sindh CM also emphasized that consensus could only be developed through discussions within the forum of NFC and that the Commission should adhere to its constitutional mandate to move forward.
Khyber-Pakhtunkhwa (KP) Chief Minister Sohail Afridi urged all five stakeholders to put aside political differences and work together in a statement reflecting the province’s positive approach to issues of national importance.
Finance Minister Muhammad Aurangzeb also acknowledged the role of all 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 set aside political differences, maintain mutual respect and fulfill the constitutional responsibilities of the NFC.
The KP Chief Minister noted that the people of his province had made great sacrifices for Pakistan, which had not been duly acknowledged.
However, Afridi, who is also the provincial finance minister, termed the 7th NFC award since 2018 as unconstitutional, arguing that it does not address the needs of the over five million residents of the merged districts of KP.
KP is hopeful that its provincial share of total revenue will increase to nearly 19% after incorporating the impact of the newly merged population.
The NFC has also set up a working group to address KP’s concerns regarding the merged districts. Its first meeting is scheduled to take place today (Tuesday).
Sources said during the maiden meeting, Punjab stressed the need for equitable resource distribution and policy consistency between the federal and provincial governments.
Punjab also linked future resource allocation to improvements in the Human Development Index (HDI) and other key economic indicators.
