Shift in govt approach on NFC Award to avoid blame
http://www.syberwurx.com/nation/daily/today/main/top11.htm
By Hamid Waleed
LAHORE – On a very simple point that it doesn’t want to become a party to the issue, the present government has finally decided to leave the 6th NFC Award on the new political set-up, whatsoever it may be, in the days ahead, informed the sources.
According to the sources, a parallel idea that the military government should not announce the NFC Award was already running throughout the functioning of the four working groups on the issue from the day one. “Especially, the representatives from NWFP and Balochistan had a clear-cut view that the military government should not announce the award,” said the sources, adding: “But as far as Punjab and Sindh are concerned, they were of the opinion that it was upto the will of the members as if there is a consensus then well and good, otherwise better to drop the idea.”
A rethinking on the part of the Musharraf government with regard to such a thorny issue among the provinces has surprised the independent observers, who are of the view that it would be difficult for any political set-up to evolve a consensus over the issue. “It was only the military government having the ability to get agree all the concerned parties on the issue,” said one of the experts.
According to him, though it would be highly difficult for the new political government to have an agreement over the issue among the four provinces; however, he still believes that this is a price the nation would have to pay for a democratic order.
But some other financial experts have a different approach. According to them, no province other than the Punjab is in a position to bear with the continuity of the disagreement over the award; therefore, the three provinces under the new political regime would definitely prefer to get united to the distribution formula.
“Especially, when these provinces know that their share has raised to 40 per cent under the new arrangement besides the additional resources of 2.5pc of GST and subvention pool of Rs 20 billion,” they said.
It is pertinent to note that the prevalent NFC Award was approved in 1997 and made the federal govt responsible to constitute a divisible pool consisting of gross receipts of (a) taxes on income, (b) Wealth Tax, (c) Capital Value Tax, (d) taxes on sales and purchase, (e) export duties on cotton, (f) customs duties, (g) federal excise duties excluding excise duty on gas charged at well-head and, (h) any other tax which may be levied by the federal government. The award was for five years and expired in 2001-02.
A new award was due before June 30, 2002 and resources were to be distributed in 2002-03 under the new award. But the provinces could not agree on a formula and the resources had to be distributed according to the old formula.
The shares as recommended by the NFC are distributed as follows. The federal govt deducts five per cent of such receipts mentioned in (a) to (h) as collection charges. Of the balance, 62.5 per cent goes to the federal government and remaining 37.5 per cent are distributed among the four provinces according their population, based on 1981 census under the Distribution of Revenue and Grants-in-Aid Order, 1997.
All the four provinces have asked the federal govt to direct more resources towards provinces. An initial agreement had been reached in an NFC meeting in Peshawar and later on in Islamabad that the federal govt will retain 60pc share while 40pc will be offered to the provinces.
However, Sindh demands more weight be given to fiscal efforts while Balochistan wants more consideration to its geographical size. NWFP wants royalty for its hydroelectric potential. Punjab is not ready to loose ground on its stand which has made the task of declaration of award more difficult, although after the inclusion of subvention pool of Rs 20 billion and 2.5 per cent share in GST, the federating units may get roughly 44 per cent of the tax revenue but still they want more to be done.
“It was only the military government having the ability to get agree all the concerned parties on the issue,”
cough cough
Say that again, Man!
Now we begin to hear the full story!
http://www.dawn.com/2002/10/28/top9.htm
Cancellation of NFC meeting raises many questions
By Sabihuddin Ghausi
KARACHI, Oct 27: A number of questions are being asked about the government decision to put off the final meeting of the National Finance Commission (NFC) which was scheduled to be held on Friday (Oct 25) at Lahore.
After 27 months of the formation of the sixth National Finance Commission, it suddenly dawned upon the decision-makers in Islamabad that resource distribution formula between the federal and provincial governments should best be formulated by the elected government.
The NFC formation was notified in July 2000. Its formation was completed in December 2000 when all the four provinces nominated one statutory member each. It moved very slowly initially and could hold hardly three meetings in 2001. It picked up pace only in 2002 when four meetings were held in quick succession. President Gen Pervez Musharraf presided over one of these meetings and instructed quick finalization of the award.
The last NFC meeting has been cancelled with a statement from Finance Minister Shaukat Aziz that the next government should benefit from the spadework done by the sixth NFC team and work out a consensus formula.
The decision to put off the final session of the NFC has come as a big shock and disappointment for the Sindh government which was more than eager for award’s announcement before elections. The Sindh Finance Minister, Abdul Hafeez Sheikh, is not ready to talk on this issue. But there are people in Sindh secretariat who do not conceal their disappointment and one of them remarked rather loudly that “it is not for the respect of the elected government that the NFC award has been put off.”
**He blamed bureaucrats in Islamabad and Lahore, who, according to him, were not happy on the setting up of a Rs20 billion subvention pool for Sindh, Balochistan and NWFP. The proposed distribution formula for Rs32 billion of 2.5 per cent GST among the provinces was also not being endorsed by the axis of Islamabad-Lahore bureaucrats. **
Government circles estimate that Sindh’s share in the divisible pool should have been between Rs45 and Rs50 billion in the next fiscal year’s budget based on the new NFC formula as against Rs36 billion in the current fiscal year.
Hopes were also pinned on a significant increase in tax and non-tax revenue of the province. In short, the financial managers of Sindh were looking towards a beginning of a new era of clearing development backlog at a faster speed. But an abrupt cancellation of the NFC meeting has brought to naught all its plans. The only relief obtained by Sindh is of about Rs600 million or so from the change in population ratio.
**Sources in the Sindh government recall that the representatives of the Punjab government in the NFC remained hostile towards Sindh from the very beginning. This hostility became much more pronounced after the federal budget was announced in June in which the federal government’s development plan incorporated a few mega projects of Sindh on the interference of President Pervez Musharraf. **
In the final rounds of NFC session (Aug 30 and 31 in Karachi and then mid September in Peshawar), the representatives of the Punjab government were said to have made reference to the allocation of relatively more development funds for Sindh in the current fiscal year’s budget.
**Responding to this observation, the Sindh representatives proposed to take into account decades-long deprivation of Sindh rather than focussing on a single year allocation of funds. **
The sources said the Sindh finance minister proposed the formation of a commission with Saeed Qureshi as its chairman to determine allocation of resources to all the four provinces during the last 30 years to judge which province had benefited most in all the NFC awards.