Financial autonomy

THAT three finance ministers and a senior minister from the four federating units should meet in Lahore to jointly recommend measures for a modicum of financial autonomy indicates that no province is happy with the concentration of financial powers in the centre. This in fact led to unending complaints from provinces over years that they have been deprived of their rightful share. A modest demand made at the informal meeting was to transfer the sales tax collection on services to the provinces. This is quite rational as a centralized tax collection system tends in cases to be inefficient and wasteful. Instead of the Federal Board of Revenue deducting 2 per cent as charges on a purely provincial tax, the provinces should be allowed to collect the sales tax on services themselves. This would add to their revenues. The demand to reduce the collection charges on sales tax on industry from 5 percent to 2 percent is also understandable. This too would add to the provinces' income. Despite the much hyped devolution of power, bureaucrats at distant Islamabad continue to decide the projects to be financed in the provinces under the PSDP programme, leading to wrong choices and sometime to funds remaining unutilised. It would be best if the provinces were allowed to identify projects in the light of their needs, and also to implement them. As a measure of financial autonomy the ministers have also asked the Centre to allow them to borrow from banks and other institutions. They have also demanded the transfer of the monitoring of their accounts from the Accountant General of Pakistan to the provinces. Financial autonomy needs to be accompanied by financial discipline, which has not been the hallmark either of the centre or the provinces. There is a need to debate whether the demands are in the best interests of transparency and good governance. A major and persistent complaint of the provinces is about royalties guaranteed in the Constitution, which have not been paid to them, in cases for years. The issue of royalty of hydel power projects has been raised by the NWFP since 1990. It now claims WAPDA owes it an accumulated Rs 129 billion. Punjab has added its voice, seeking Rs 15 billion as royalty on Ghazi Barotha project. Sindh has a claim of Rs 14 billion on WAPDA. Balochistan wants Rs 248 billion of gas development surcharge. The claims need to be settled urgently. Provincial autonomy is incomplete without maximum financial autonomy. The issue has been raised at a time when the same coalition is ruling the centre and the provinces. It is therefore an ideal time not only to formulate a national consensus on the matter but also to start implementing it.

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