Consensus over NFC Award

LAHORE The longstanding issue of 7th National Finance Commission (NFC) Award was resolved amicably in the Punjab capital on Friday, as the Chief Ministers of Sindh, NWFP and Balochistan termed the Punjab as a sincere elder brother, offering special thanks to Chief Minister Punjab Shahbaz Sharif for showing grace in acceptance of their demands.
The Chief Ministers of all the four provinces congratulated the nation on this occasion, terming the decision a 'historic move for promoting harmony and solidarity among the federating units.
Speaking on this occasion, the Chief Ministers of Balochistan, NWFP and Sindh unanimously said, the credit goes to Punjab for resolving the longstanding issue and indeed Punjab is our sincere elder brother. One NFC me-mber said Shahbaz had secured man-of-the-match award for playing key role in settling the longstanding issue.
The issue of NFC Award had been lingering on for the last 19 years, which has now been resolved with unanimity and owing to accommodating approach of the Punjab province. However, the federation has made historic sacrifices over the division of national resources among the provinces. The federation too has raised the provinces share by 8.5 per cent.
According to the new NFC formula, the provincial share of the divisible pool in the vertical distribution has been increased from the present 47.5 per cent to 56 per cent in the first year of the NFC and 57.5 per cent in the remaining years of the Award.
In another development, the federal government considering it a provincial subject has allowed the provinces to collect Sales Tax on Services at their own. Long standing demand of Sindh, NWFP and Balochistan to distribute the divisible pool according to multiple indicators has been accepted. The NFC expressed its special thanks to the government of Punjab for showing generosity in acceptance of this demand. The federation and the provinces reciprocated to the spirit of accommodation shown by each in reaching an amicable agreement on vertical and horizontal distribution of resources for the purpose of the 7th NEC Award, Federal Finance Minister Shaukat Tarin told reporters while addressing a news conference at Chief Ministers Secretariat.
CM Punjab Shahbaz Sharif, CM Sindh Syed Qaim Ali Shah, CM NWFP Ameer Haider Khan Hoti, CM Balochistan Nawab Muhammad Aslam Khan Raisani, PML-N leader Senator Ishaq Dar, ANP leader Bashir Bilour, Mian Iftikhar Hussain, finance ministers of the four provinces, finance secretaries, and members NFC were also present on this occasion besides provincial ministers and MPAs. Tarin further said that the share of Punjab in the divisible pool would be increased from the present Rs 419 billion to Rs 471 billion in the first year of NFC while it would be increased to Rs 938 billion in the remaining years of the NFC Award. Similarly, he said that the share of Sindh would be enhanced from the present Rs 197 billion to Rs 223 billion in the first year of the NFC and it would be increased to Rs 445 billion in the remaining years of the Award.
The share of NWFP province in the divisible pool will be increased from the present Rs 118 billion to Rs 133 billion in the first year of NFC and it will go to Rs 265 billion in the remaining years of the Award. The share of Balochistan will be increased from the present Rs 53 billion to Rs 83 billion in the first year of the NFC while it will be increased to Rs 165 billion in the remaining years of the NFC in the divisible pool.
Tarin further said that the federal government recognised the need of the provinces for a larger share in the divisible pool since provinces are assigned the task of provision of basic services like health, education, water supply and sanitation.
Divisible pool: The size of the divisible pool has been increased in the interest of national solidarity and provincial harmony. Federal government shall make major efforts to boost tax revenue. In addition the divisible pool will be increased by reducing the collection charges from 5% to 1%.
Sales Tax on Services: NFC recognised that sales tax on services is a provincial subject under the Constitution of Pakistan, and may be collected by respective provinces, if they so desire.
War on terror: The federal government and all the four provinces recognised the role of NWFP as a frontline state against war on terror. The federal government reiterated its commitment to bear all expenditures incurred on the war on terror. However, as a gesture of support by all provinces and the Federation, 1% of the total divisible pool has been earmarked for NWFP as an additional resource for war on terror during the Award period. This would be equivalent to 1.83% of the provincial pool.
Vertical distribution: The provincial share of the divisible pool will increase from the present 47.5% to 56% in the first year of NEC and 57.5% in the remaining years of the Award.
Horizontal distribution: The discussions among provinces on horizontal distributions of the divisible pool were held in a spirit of utmost cordiality and accommodation. All the four provincial Chief Ministers actively participated in the discussions.
According to the new formula, the federation and the provinces of Punjab, Sindh and NWFP accepted the special needs of Balochistan and agreed to provide Balochistan Rs 83 billion (9.09 %) of the provincial pool in the first year of the award.
Any shortfall in this amount would be made up by the federal government from its own resources. This arrangement for Balochistan would also remain protected through the remaining four years of the Award.
Sindh would receive an additional transfer of Rs 6 billion from the federal government, which is equivalent of 0.66% of the provincial pool.
The multiple indicators and their respective weights as agreed upon were as follow: population 82.0 per cent, poverty/backwardness 10.3 per cent, revenue collection/generation 5 per cent and Inverse Population Density (IPD) 2.7 per cent. After giving effect to the special needs of Balochistan and application of the aforesaid multiple indicators, the final percentage share of the Punjab will be 51.74 per cent, Sindh 24.55 per cent, NWFP 14.62 per cent and Balochistan will be 9.09 per cent.