The 7th award in 2010 attempted to rectify anomalies by increasing the aggregate allocation to provinces to 57.5% and reducing the weight of population to 82%. Photo: file
ISLAMABAD:
Sindh Chief Minister Syed Murad Ali Shah has raised concerns over the inclusion of three out of seven terms of reference of the National Finance Commission (NFC) in a move that may make it difficult for the Centre to transfer a majority of its expenses to the federating units.
Official documents show that during the maiden meeting of the NFC, the CM stated the inclusion of these three terms of reference in the NFC notification was unconstitutional.
These terms are related to the transfer of expenses on the Higher Education Commission (HEC), the Benazir Income Support Programme (BISP), and provincial projects that are part of the federal Public Sector Development Programme (PSDP), as well as any spending on national projects such as mega dams.
However, in response to Sindh’s objections, Secretary Finance Imdad Ullah Bosal threw the ball back in Sindh’s court by stating that it was President Asif Ali Zardari, who co-chairs the PPPthe ruling party of Sindh, had the final authority to determine which subjects could be included in the NFC.
Syed Murad Ali Shah is a member of the NFC in his capacity as the 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.
Term (d) relates to issues concerning the sharing of financial expenses 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 issues relating to the sharing of financial expenses incurred or to be incurred by the federation, the provinces, or both, in respect of trans-provincial matters.
Term (f) concerns issues relating to financial expenses for national projects to be shared by the federation and the provinces.
Sources said during one of the follow-up meetings convened at the technical level, Punjab suggested that the NFC sub-group should only cover terms related to fiscal expenses incurred by the federation in the provinces.
The sources added that in response to Sindh’s objections, the federal finance secretary stated that the terms of reference were approved by the president and that there were no restrictions on the president regarding the inclusion or exclusion of items.
The federal government was of the view that these expenditures were indirectly part of Article 160 of the Constitution, which deals with the NFC.
The federal government said borrowings are also part of Article 160, which essentially means that such expenses fall within the NFC’s purview.
However, due to Sindh’s objections, the federal government also sought an opinion from Attorney General for Pakistan Mansoor Awan, who ruled in favour of the Centre.
He further explained that Article 160(2) is not limited to matters of revenue; rather, it also encompasses borrowing powers, and borrowing is inherently linked with expenditure considerations.
The federal government complains that it cannot run the country with only 42.5% of revenues left in its hands after transferring 57.5% of the divisible pool to the provinces.
However, despite limited resources, the federal government has continued spending in areas that are provincial in nature for reasons of political expediency.
Contrary to the 57.6% de jure NFC share, prominent fiscal expert Dr Hafiz Pasha said earlier this month that the provinces in fact received only 46% of total federal revenues in the last fiscal year after adjusting for the impact of the undistributed petroleum levy and cash surpluses.
Sources said the Sindh CM was of the view that provincial expenditures should be dealt with by the respective provincial assemblies and the National Economic Council.
However, sources added that despite the Sindh CM’s serious reservations, there is still a possibility that provinces may take responsibility for higher education.
They are, however, reluctant to assume responsibility for the BISP.
The BISP spending is budgeted at Rs716 billion for the current fiscal year and is largely being directed by the International Monetary Fund to be presented as a substitute for its harsh fiscal measures.
The Sindh CM also underscored that consensus could only be developed through deliberations within the forum of the NFC, and that the Commission should adhere strictly to its constitutional mandate to move forward.
Khyber-Pakhtunkhwa (K-P) Chief Minister Sohail Afridi urged all five stakeholders to set aside political differences and work in unity, in a statement reflecting the province’s positive approach towards matters of national importance.
Finance Minister Muhammad Aurangzeb also acknowledged the role of all four provinces in signing the National Fiscal Pact and their efforts in achieving fiscal surpluses to support Pakistan’s compliance with IMF requirements.
Afridi stressed the need to set aside political differences, uphold mutual respect, and fulfil the NFC’s constitutional responsibilities.
The K-P chief minister observed that the people of his province had rendered 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 unconstitutional, arguing that it does not cater to the needs of the over five million population of the merged districts in K-P.
The K-P is hopeful that its provincial share in total revenues would increase to nearly 19% after incorporating the impact of the newly merged population.
The NFC has also constituted a working group to address K-P’s concerns regarding the merged districts. Its first meeting is scheduled to take place today (Tuesday).
Sources said during the maiden meeting, Punjab emphasized the need for equitable resource distribution and policy consistency between the federal and provincial governments.
Punjab also linked future resource distribution with improvements in the Human Development Index (HDI) and other key economic indicators.
