Provinces agree to cut Centre's share to 50pc

KARACHI - A broader consensus has been developed among the four federating units to squeeze the current share of the Centre from 62.5 per cent to 50 per cent in resource distribution under the new National Finance Commission Award being discussed by the government, well-placed sources told The Nation on Monday.

The finance ministry had already sent a summary, which will be signed very soon by President Pervez Musharraf, and the ministry will issue a notification of the composition of NFC Award. The provinces have sent the names of non-official members as their representatives to federal government.

Sources in Sindh government confirmed that deliberations among the four federating units were in process on major issues. The official who remained part of these deliberations confirmed that the provincial governments were in constant contact with each other on financial issues.

"Though the notification has yet not been issued for the constitution of new NFC Award but the four provinces are discussing the formula of revenue distribution between provinces and the federation as homework", he said.

The consensus points for bringing changes in prevailing formula of resource distribution between the federation and provinces would not be a major issue in the new finance commission, the official remarked and added the consensus formula for distribution of resources among four provinces would be a challenging task for new commission which was a sole criteria of population.

He recalled that during previous National Finance Commissions under the un-elected regime of Pervez Musharraf and later PML-Q labelled as a democratic government, the four provinces had developed consensus to squeeze federal share to 50 per cent but it could not be finalised due to failure in developing consensus on formula about resource distribution among provinces.

The official claimed that rigid stand of provinces in regard led to the continuation of NFC Award 1997 with minor addition in the share of federating units and establishment of subvention pool.

Arguing in favour of squeezing the share of federal government, the provinces said the major responsibilities has already been shifted from provinces to district governments while devolution of responsibilities with financial powers from federal government to provinces has yet not come into being which was promised in the LGO 2001.

The official said the in a recent meeting of the representatives of provincial governments, the federating units stressed that federal government should also restructure itself to devolve responsibilities along with funds to provincial level for such functions which fall within the purview of the provinces. The responsibilities in areas such as labour and manpower, local and rural development, education and health should be transferred to provinces immediately.

Rather than accepting the viewpoints of federating units, the federal government always used its influence and vetoed the wish of provinces, said the official.

"The central government's opposition to the reduction in federal share, has always argued that Pakistan's public debt had reached alarming proportions while downward rigidity of budgetary expenditure and lack of buoyancy in revenue had generated persistently large fiscal deficits over the last two decades resulting in the accumulation of public debt at a much faster rate", he added.

Islamabad is not willing to reduce its share to 55 per cent from present level of 62.5 per cent, the official continued, adding the federal government always argued that it was facing deficit even in order to meet its budgetary expenditures such as defence and debt-servicing.

Besides, another senior official of finance ministry told The Nation that there were least chances of complete understanding on the formula of upcoming National Finance Commission as the provinces were not ready to show flexibility to accept each others positions. "The minor changes in present formula of resource distribution among the provinces will lead to ultimate decline in the share of Punjab so the consensus formula is not being seen in upcoming tenure of NFC, he added.