Islamabad, provinces brace for 9th NFC award

The federal government is bracing for negotiations with the provinces for the distribution of resources in the divisible pool under the new National Finance Commission (NFC). The new award is due since 2015.
The target both sides—the center and the provinces—are eyeing at is to determine a favorable formula for vertical distribution of the pool.
The federal government intended to ask the provinces to give up 7pc of the undivided divisible tax pool so that the development and security expenditure of the erstwhile Federally Administered Tribal Areas (Fata), now part of Khyber Pakhtunkhwa, Gilgit-Baltistan and Azad Jammu and Kashmir are met. However, the demand faced a stiff reaction leaving the provinces unmoved. The provinces rather look otherwise, an official in Karachi says.
Over a week before the negotiations, Finance Minister Assad Umar attempted to ease out the situation saying the center was not thinking to start negotiations from a fixed position—the posture that PTI’s predecessor had resorted to.
The very first meeting of the reconstituted 9th NFC will be aimed at explaining to the provinces the economic and financial issues confronting the country and trying to build up a consensus on the points that need to be addressed in the next NFC award.
All four provinces have prepared their respective cases for the negotiation process which may be lengthily and painstaking too. A part such process comprises a joint stand from the provinces that they do not lose anything from their share. Meanwhile, they have their individual demands too.
Sindh government has decided in principle that it would demand to reduce the percentage of the distribution of resources on the basis of population. Also, it would push its other demand that the resource generation should be given more weight.
The list also includes permission to the provinces for collecting sales tax, infrastructure development cess, capital gain tax of evacue propery and rylaity on oil and gas.
The 9th NFC has been facing a deadlock over the centre’s demands since July 2015. Because of resistance from the provinces, the Pakistan Muslim League-Nawaz government thought it better to delay the discussions on the new award until after the election. The Pakistan Tehreek-i-Insaf recently reconstituted the commission to start negotiations afresh.
The last award, which distributes federal tax resources both vertically between the federation and the federating units and horizontally among the provinces for five years, was signed in December 2009. Effective since 2010-11, the award is often described as historic as it was agreed upon after a lapse of 20 years and drastically increased the combined provincial share from the pool that, under the Constitution, could not be revised down.
In addition, the last award also changed the formula for resource distribution between the provinces and allowed them to collect provincial sales tax on services, which helped Punjab and Sindh to substantially raise their provincial tax revenues.
Some, including the International Monetary Fund (IMF), have repeatedly called for a review of the formula for vertical division of the divisible pool resource, insisting that the reduced federal share from it was one of the major reasons for growing federal fiscal deficit. Critics have suggested that the provinces chip in a substantial amount from their share to fund certain federal functions such as expenditure on development of the ex-Fata districts, GB and AJK as well as on internal security. (By our correcpondent/ERMD)