ISLAMABAD: Provinces may not get any increase in their share from the divisible pool under the 7th National Finance Commission Award 2013 in the upcoming finance bill for the financial year 2015-16 because government is likely to fail in constituting new NFC award.
The first official NFC award was enacted under this program in 1974 which produced conclusive results while 7th NFC award was enacted by then President Asif Zardari after reaching united concessions with the four provinces in 2010.
In order to maintain inter-governmental fiscal relationship, Article 160 of the Constitution provides for setting up of a National Finance Commission (NFC) at intervals not exceeding five years.
The mandate of NFC is to recommend to the President the distribution of resources between the Federal and Provincial Governments. The President, through Presidential Order, gives legal cover to the recommendations of the NFC.
“On the other hand, Ministry could have only finalized names of the committee members to seek and discuss the proposals moved by the provinces in this regard under the 7th NFC. This summary is lying pending with the competent authority awaiting approval so far” a well placed source at Finance Ministry told this scribe here on Monday.
The Finance Ministry has failed in finalization of the proposals and recommendations from the provinces for the upcoming budget about their share
The Seventh National Finance Commission Award was signed here on Wednesday by the finance ministers of the four provinces and the federal government. The signing was witnessed by Prime Minister Yousuf Raza Gilani, Punjab Chief Minster Shahbaz Sharif, NWFP Chief Minister Ameer Haider Hoti, Balochistan Chief Minister Aslam Raisani and members of the federal cabinet, while Sindh Chief Minister Qaim Ali Shah signed the accord because he holds the portfolio of the provincial finance ministry.
Under NFC award, the share of the Provinces in each Award of National Finance Commission shall not be less than the share given to the Provinces in the previous Award.
The Federal Finance Minister and Provincial Finance Ministers shall monitor the implementation of the Award biannually and lay their reports before both the parliament and provincial assemblies. “Main factors behind this failure of the Finance Ministry are the distraction of the Finance Minister and his economic team.
As per rules Finance Ministry is required to finalize proposals and recommendations from the provinces by May 20 every year for the inclusion in the finance budget because publication of the books and papers related to the finance bill takes more than two weeks.
Through this Award, the financial autonomy of the provinces has been strengthened by increasing their share in the Divisible Pool (taxes) from 50% to 56% in fiscal year, 2010-11 and to 57.5% from fiscal year 2011-12 onwards.
In accordance with the framework for distribution of resources structured by the
7th NFC Award, transfers to Provinces are estimated at Rs 1,720,182 million for
Financial Year 2014-15, reflecting an increase of 21.7% over revised estimates.
The sum assigned to the Provincial Governments under Article 3 shall be distributed amongst the provinces at the percentage of Balochistan 9.09%, Khyber Pukhtunkhwa 14.62%, Punjab 51.74% and Sindh 24.55%. One percent of the net proceeds of divisible pool taxes shall be assigned to Government of Khyber Pakhtunkhwa to meet the expenses on war on terror.
The 7th NFC award provides that the President shall constitute a National Finance Commission consisting of the Minister of Finance of the Federal Government, the Ministers of Finance of the Provincial Governments, and such other persons as may be appointed by the President after consultation with the Governors of the Provinces within six months of the commencing day and thereafter at intervals not exceeding five (consecutive) years.
It is pertinent to note here that the two NFC Awards enacted during the fiscal period of 1979 and 1984 remained inconclusive because President Zia ul Haq failed to reach consensus and ended in a deadlock. The fourth NFC award was declared in 1991 by the PML government after successfully reaching the concession with the four provinces.
The first fifth NFC Award was announced in 1995 which remained highly controversial. Soon, the second fifth award was announced in 1997. In 2002, the sixth NFC award under the NFC program was enacted by President Pervez Musharraf but failed to reach at a consensus decision. Although it was enacted but the sixth award’s results remained inconclusive.
