Well I believe that the ratio of the resources Punjab gets at the moment should be reduced from 52 % to say 40 %, 12 % from what Punjab is getting at the moment may be divided into the remaining provinces…the provinces should be given a limited autonomy so that they can generate their own resources, and develop on their own…thats the only way forward!!!
Here’s an article from Dawn!
http://www.dawn.com/2002/09/09/ebr3.htm
**NFC award and the demands of justice
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By Sabihuddin Ghausi
With one stroke, decision-makers in Islamabad, have pushed out the ball from their court and have thrown it before the three provinces, Sindh, Balochistan and NWFP , to decide among themselves the distribution ratio of a ‘subvention pool’ reportedly of Rs5-6 billion size.
According to well placed sources, the three provinces have also been asked to determine the adjustment rates of this ‘subvention pool’ during the next National Finance Commission (NFC) award period of five years from 2003-04 to 2007-08.
Now it is upto Balochistan to squeeze out its share from this pool to meet the rising demands of its huge size. The NWFP will seek its share to cope with poverty and Sindh will try to get its compensation for tax collection and population influx.
All these three ‘small’ provinces of Pakistan have been agitating for last three decades before all the National Finance Commissions (NFCs) since 1974 to give due weightage to the size of province, backwardness, revenue generation and inter-provincial migration of population in the matter of allocation of resources. Since 1974, when the first NFC was formed, Sindh has been consistently demanding de-federalisation and total provincialization of sales tax in accordance with the universally accepted principle. Sales tax is essentially a local and provincial tax world over.
In its last two days session at Karachi on August 30 and 31, the NFC did take into account the position of three small provinces on distribution criteria of resources, but came out with a strange and unbelievable logic.“It was the unanimous view that such a paradigm shift could not be accomplished immediately and that the shift had to be gradual and well considered”, the NFC press release announced on August 31.
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Population as the only criterion for resource distribution is not practised in any federation or union of states of the world except Pakistan. In India, population gets only 10 per cent weightage. Many factors, other than population, are given weightages in Australia, Canada, USA, Germany and many other federations and unions of the world.** For the last more than 30 years, the successive NFCs were informed of these arrangements and it was not for the first time these issues were raised.
The Social Policy and Development Centre (SPDC), has carried out development ranking of all the 106 districts of the country and it should not have been difficult to measure backwardness of all the provinces. The SPDC findings show that northern provinces, Punjab and NWFP, are ahead in development and two southern provinces Sindh and Balochistan are far behind.
Similarly the financial problems because of size is also open and could be estimated. So is the revenue generation capacity of the province.
The current NFC, constituted by the military government in December 1999, also heard the same demands from the three provinces. **Only Punjab’s position was that of pro status quo as it was the only province that continues to benefit from this arrangement.
**
In their wisdom, the NFC did not accommodate smaller provinces’ demands in the distribution criteria ratio but has decided to set up a ‘subvention or grant pool’. Now the three provinces are in consultation to work out the distribution ratio based on size, revenue collection and the level of backwardness of individual provinces. The sharing of the subvention is bound to create a rift among the smaller provinces. “This is how rulers divide and rule” is a cynic’s comment but conveys more than a century-long colonial experience.
Now that all initial exercises have been completed and Islamabad has finally prevailed over all the hand-picked governments of four provinces to put their signatures, there is all the reason to believe that the scheduled meeting of the NFC (Sept 16) is going to be a mere formality and resource distribution award should be public in next few weeks.
It is almost certain that the distribution ratio of the federal divisible pool will be changed to 58:42 for the federal and the provincial governments. Under the existing arrangement, the federal government after retaining 5 per cent collection charges gives 37.5 per cent from the pool to the provinces and keeps 62.5 per cent with itself.
Provinces were already given 2.5 per cent of sales tax collection by the government earlier. This share in GST was given to the provinces because Nawaz Sharif government had arbitrarily abolished octroi and zila tax. Sindh then raised a lot of noise. The government then raised the GST from 12.5 per cent to 15 per cent and offered 2.5 per cent collection to the provinces as compensation. For the last three years Sindh was literally cheated in disbursement of this compensation arrangement. It is only a few weeks ago that President General Pervez Musharraf formalised the distribution of 2.5 per cent share for the provinces. Its impact pushed up the distribution ratio for provinces from 37.5 per cent to 40 per cent plus. Allocation for subvention pool would take out about 1.5 per cent more and total provincial share would go up to 42 per cent.In last 30 years five NFCs have given awards and the coming one will be the sixth in sequence. The current NFC is expected to give award during the military rule before the elected governments take over the responsibility. Before this three NFCs also gave their awards during authoritarian and undemocratic rule.
The first NFC was constituted in 1974 and gave its award in June 1975. Mustafa Khar and Hanif Ramay as rulers of Punjab literally pressed the federal government and managed to obtain 60.25 per cent share for their province on the basis of population. Sindh’s plea to provincialize sales tax remained unheeded.
In 1979, Ghulam Ishaq Khan headed the NFC and hardly held any serious meeting. It gave its award in 1983 and changed the population ratios on the basis of 1981 controversial population census. Punjab’s population ratio was re-counted at 57.79 per cent and Sindh’s ratio was raised to 23.34 per cent.
The third NFC was formed in 1985 headed again by Ghulam Ishaq Khan. In three years time it held 9 meetings. After removal of late Junejo’s government, late Dr Mahbubul Haq became the finance minister and chaired the NFC. In July-August 1988 he tried his best to obtain the signatures of representatives of the provinces on dotted lines.
Mr Akhtar Ali Kazi was then caretaker chief minister, Javed Sultan Japanwala was finance minister and A.W. Kazi finance secretary of Sindh. All these three had the guts to say NO to government of Ziaul Haq and preferred to pass on this responsibility to the future elected government. This is the solitary example of defiance of an authoritarian government. Till this day this remains the only act of courage to withstand pressures of an authoritarian regime. The subsequent PPP government also constituted an NFC in which Dr Mahbubul Haq was a member representing Punjab. This NFC could not complete the work.
The IJI government constituted NFC in 1990 which gave its award in 1991. Sindh and Balochistan got substantial benefits as for the first time these two provinces were given royalty and excise and share on surcharges on gas and oil production. The NWFP was given royalty on hydro power. All these three provinces have serious doubts on the way the accounts are being maintained of oil and gas production and distribution and NWFP has a big claim of recovery on account of hydro power.
The 1997 NFC award given by Farooq Leghari as president,with Malik Meraj Khalid as caretaker prime minister and Shahid Javed Burki as caretaker finance minister, has proved to be the proverbial last straw on the camel’s back. This award was based on fictitious revenue figures. Total revenue generation in 2001-02, according to this award, should have been Rs1,000 billion. It is not even half of the projected revenue and hence the provinces suffered a lot.
It is in this backdrop, that the current NFC is giving its award before the elected government takes over. There are strong feelings that this award is also not based on consensus but has been dictated by the powers that be. There is already bitterness and alienation and the new award will take Islamabad still farther away from smaller provinces
There is a legitimate question. If only population has to be the criterion then let the provinces be allowed to collect all taxes in their areas of jurisdiction and pass on share on the basis of their respective population to the federal government.
There is another question. Total foreign exchange loan burden on Pakistan is $36 billion. How much has Sindh and Balochistan received from this inflow. There are unending questions with no answers.
