Historic decision on NFC award!

[AgNoStiC MuSliM]

Punjab makes room for historic NFC accord​

By Nasir Jamal
Saturday, 12 Dec, 2009



Federal Minister for Finance Shaukat Tarin presides over the seventh meeting of the NFC Award at a hotel in Lahore. Sindh CM Syed Qaim Ali Shah and Punjab Finance Minister Tanveer Asharf Kaira are also seen in the picture. - Online File Photo

Understanding on horizontal distribution of resources

LAHORE: In what was described as a historic development, the four provinces, with the active support and participation of the federal government, agreed on the seventh National Finance Commission (NFC) award here on Friday.

The way to a consensus, which has been hailed as a victory of democracy, was paved by an agreement among the provinces on distribution of financial resources allocated for them in the federal divisible tax pool on the basis of a four-point formula.

The federation displayed unprecedented generosity by increasing the provinces’ share under the vertical distribution of funds from the divisible pool to 56 per cent in the first year of the award (2010-11) and to 57.5 per cent during the remaining period of the five-year award.

The share of the provinces in the pool is 47.5 per cent for the current financial year under the existing (sixth) NFC award.

The centre has also agreed to reduce collection (of taxes) charges to just one per cent from the existing five per cent, which will increase the actual transfers to the federating units from the divisible pool under the next award to more than 60 per cent.

This is for the first time in the country’s history that the provinces, particularly Punjab, have agreed to share funds from the federal tax pool on the basis of multiple criteria in place of the existing population-based formula for horizontal distribution.

The smaller provinces had been demanding inclusion of criteria other than population for horizontal distribution since 1980s. But Punjab resisted the demand all along because it feared a sharp cut in its share from the federal transfers.

The criteria agreed upon include population, backwardness (poverty), revenue (generation and collection having equal weight) and inverse population density.

Population has been allocated a weight of 82 per cent in the horizontal distribution formula, backwardness 10.3 per cent, revenue five per cent and inverse population density 2.7 per cent.

The agreement on the new formula for the sharing of the provincial pool was preceded by long-drawn-out negotiations among the provinces, especially between Punjab and Sindh, on the issue of revenue that forced the negotiators to extend the two-day meeting for another day to finalise the recommendations.

Chief Ministers Shahbaz Sharif of Punjab, Syed Qaim Ali Shah of Sindh, Amir Haider Hoti of NWFP and Nawab Aslam Khan Raisani of Balochistan remained actively engaged with the commission during the three days of talks to help negotiators narrow their differences and find solutions to contentious issues.

At the end of the day, the commission was able to find technical solutions to all the issues.

After implementation of the award, the percentage share of Punjab will be reduced by 1.27 per cent to 51.74 per cent from the existing 53.1 per cent. Sindh’s percentage share will decline by 0.39 per cent to 24.55 per cent from 24.94 per cent and NWFP’s share by 0.26 per cent to 14.62 per cent from 14.88 per cent.

The three provinces agreed to the cut in their percentage share in order to enlarge the share of Balochistan to 9.09 per cent from the existing 7.17 per cent in view of its special needs.

Balochistan will receive Rs83 billion from the pool during the first year of the award. A shortfall, if any, in this amount will be made up by the federal government from its own resources.

This arrangement for Balochistan will remain protected through the life of the next award.

In compensation for its acceptance of allocation of an equal weight to generation and collection of revenue, Sindh will receive an additional transfer of Rs6 billion -- equal to 0.66 per cent of the provincial pool from the federal government.

The federal government announced compensation for Sindh from its own pocket because all grants and subventions, which constituted around 10 per cent of the federal divisible pool created in the current award, have been done away with on the unanimous demand of the provinces.

The NWFP will get an additional one per cent from the undivided federal pool (that is before the determination of federal and provincial share in it) to compensate it for the losses suffered by its economy on account of the ongoing war on terror in the province. The amount will be equivalent to 1.83 per cent of the provincial pool.

Finance Minister Shaukat Tarin, who announced the award in his capacity as chairman of the commission in the company of the four chief ministers, said the federal government had committed to underwriting all the expenses borne by the NWFP because of the war against terrorism.

The NWFP chief minister said the allocation of funds from the undivided pool for his province meant that all the provinces owned the war on terror.

The next award is unique in the sense that the commission has also addressed several long-standing issues that have spawned inter-provincial tensions and weakened the foundations of the federation.

In addition to replacing the single-point population-based criterion with four-point multiple criteria, the commission has also amicably addressed non-NFC issues like the federal government’s dispute with the NWFP on net hydel profits and with Balochistan on gas development surcharge.

The two provinces are set to receive over Rs100 billion each as a result of resolution of these issues. The centre has also accepted the constitutional right of the provinces over sales tax on services and allowed them to collect the tax if they so desired.

Mr Tarin congratulated the provinces for their accommodating and generous role that helped to achieve the breakthrough on contentious issues which were stalling an agreement on the horizontal distribution.

‘All the provinces have shown magnanimity and flexibility to accommodate one another,’ he said.

The federal government too had played its role and tried to bridge the trust deficit between the federation and the provinces, he added.

It may be recalled that the government of former president Gen Pervez Musharraf failed to deliver a consensus award despite years of negotiations and had to impose an interim award through a presidential order.

This is the second award given by the elected government in 19 years. The 1997 award was finalised by the caretaker government of Farooq Leghari.

The finance minister said the federal government was making efforts to increase the size of the federal divisible pool to create more funds for the federating units.

‘We propose to boost our tax-to-GDP ratio to 13.9 per cent from the current 8.8 per cent over the next five years. In addition, the federal expense is being reduced to 12 per cent from 14.6 per cent. That will allow us to allocate more resources to the provinces,’ he maintained.

DAWN.COM | Pakistan | Punjab makes room for historic NFC accord

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We must give credit where credit is due. Congratulations to the PPP and Zardari for presiding over a consensus agreement on the NFC award. Kudos to the Finance Minister, Shaukat Tareen, who has been constantly engaged with all the players and managed to bring this about.

And a big kudos and thank you to the other political parties involved, the PML-N and the ANP, in working towards a consensus.

 

[PAFAce]

Agreed, credit where credit is due. I admire the PPPs initiatives for resolving the disgruntled Balochi issues in particular, this is very good news indeed. Hopefully, this additional money will make it to the common man and not n the coffers of the Sardars, Waderas, Mirs and whatnots.

I also admire the governments of Sindh and Punjab for showing unity with the underprivileged provinces of Balochistan and Sarhad. It should go some way in dispelling the myths spread by hate-based political parties.

 

[SandsofTime]

This is a highly appreciated step of the government. For the first time, we have been successful in getting a multi criteria NFC award passed.

Hopefully now, Sindh, NWFP, and Balochistan will not feel left out. Kudos to all including Punjab for showing flexibility.

 

[PAFAce]

This is a highly appreciated step of the government. For the first time, we have been successful in getting a multi criteria NFC award passed.

Hopefully now, Sindh, NWFP, and Balochistan will not feel left out. Kudos to all including Punjab for showing flexibility.

It makes sense if Balochistan and Sarhad feel left out, they've been quite neglected for the last 60+ years, but why would Sindh feel that way? The most important Pakistani city, by far, is Karachi. It is our only mega-opolis, it's our only real port city (until Gawadar is completed), its the center of Pakistani business, it's pretty much the backbone of our economy. Despite this if Sindh isn't able to achieve all its targets, then it really isn't the fault of Punjabis at all.

 

[SandsofTime]

@PAFAce

I am referring to perceptions here. Also, there was no percentage set for amount of revenue generation in the past NFC. The goods do end up being used in Punjab, but there is a cost for setting up infrastructure for revenue collection, roads, railways, storage and port services. The criteria now looks more balanced as several factors have been taken into account.

If you ever visited interior Sindh you would know that its infrastructure is very much under developed, even in major cities like Larkana and Hyderabad. Only Karachi is the fully developed city. True many problems are caused by poor governance, there are extrinsic factors too.

 

[fatman17]

^ i wait with baited breath, the start of the PPP 'propaganda', on how we (PPP)have 'saved' the federation and millions and crores of rupees will be wasted on this futile campaign!!!

the decision making was the easy part, it is the implementation that counts!!!

 

[TaimiKhan]

Well i may be wrong, but from my perspective PPP had no major role in this achievement, rather it was due to Mr. Shaukat Tareen & Punjab Chief Minister Shahbaz Sharief that NFC award became a success. As Shaukat Tareen in his capacity as Finance Minister did best to give as much as possible to the provinces and reduced federal share, while Punjab played their part by letting go more then 1% of their share and the 100% population formula.

PPP and especially Zardari will try to take the credit, but in reality they are not the ones to get the credit. The FM and all the CMs are the true heroes and should get the credit.

And i am really happy for Balochistan to have gotten their share increased and hope the other steps by the govt increasing the jobs for Balochistan youth and reducing the criteria for them will further bring harmony there, more has to be done but atleast we do have taken a step in the right direction.

 

[fatman17]

^the govt. in power will always take the credit, atleast this is my experience in Pakistan. after all S/Tarin is a Fed. Minister appointed by AZ.

 

[Creder]

doubt this money will end up where its supposed to

 

[alibaz]

It is quite heartning that atleast we have learnt to agree on some thing beneficial to all

 

[qaisar52]

PPP and especially Zardari will try to take the credit, .[/QUOTE]


Well Every Goverment If PMlN is in goverment will take the credit but dont forget PPP is still the largest party and i would like to say not one provience party.


I hope we will put the Personalized theory separate that i like BB or Nawaz or Zardari etc. Pakistan should become First.
If they achaive NFC award it it is All parties credit.

 

[ice_man]

i personally don't care if PML N or PPP takes credit...for me what is the main outcome is that for once our big people who have all the power actually just agree on something & not just quarrel like they are doing on the issues of DAMS & are not turning people of one province against the other in order to gain more votes!! & for once PUNJAB actually played a role of the big brother even if 1% is peanuts in the current situation! but atleast for once punjab actually stood up & played its part!

this is victory of the common man PROUD TO BE A PAKISTANI!

 

[AgNoStiC MuSliM]

Compliments flow at post-accord conference​

Saturday, 12 Dec, 2009


LAHORE: The city of Lahore lived up to its big-event billing when the four provinces and the centre agreed upon the seventh edition of the National Finance Commission award here on Friday. The post-agreement press conference, which brought together the four happy-looking chief ministers and a seemingly proud federal minister in a sign that Pakistan’s democracy had come of age, was a rare occurrence in itself.

Compliments flowed to and fro as the representatives from Punjab, Balochistan, the Pakhtunkhwa, Sindh and Islamabad took turns to hail the award that took 19 long years in coming. In between there was an NFC award ‘imposed’ on the wary provincial units by a caretaker government in 1997.

Fittingly, Chief Minister Shahbaz Sharif, in his speech, remarked how the repeated scuttling of democracy had delayed a settlement that was acceptable to all provinces.

‘There would have been no consensus had there been no democracy,’ he said. ‘This shows that politicians are capable of finding solutions to problems.’

The sentiment was echoed by Finance Minister Shaukat Tarin and the chief executives of Sindh, Pakhtunkhwa and Balochistan. Pakhtunkhwa Chief Minister Amir Haider Hoti described the merry confluence as ‘the beauty of democracy’ while Mr Tarin was thankful to the president and the prime minister for empowering him to ably play his role at the NFC meetings on behalf of the federation.

Mr Shahbaz Sharif said: ‘This is our second gift to the people after the restoration of judiciary (earlier this year).’ He drew a parallel with the distribution of the financial award and the way resources are prioritised during a war; they are diverted to the front where they are needed the most (in this case Balochistan).

The Punjab chief minister, as well as his counterparts from the three other provinces, thanked the federal government and especially Mr Shaukat Tarin for their parts in making the award a reality. Chief Minister Hoti extended the federal minister the ultimate compliment when he said that if the NFC agreement were to be credited to one man that man had to be Mr Tarin.

Mr Hoti also appreciated the role played by ‘elder brother’ Mr Shahbaz Sharif in the difficult journey that culminated in the accord and applauded the efforts of all those who had diligently worked backstage to make the negotiations on the NFC award successful.

Chief ministers Nawab Aslam Raisani and Qaim Ali Shah welcomed the accord as a good beginning. Mr Raisani described it as a step towards provincial autonomy and said now it was ‘our responsibility that we allowed democracy to flourish’.

Sindh Chief Minister Qaim Ali Shah added that democracy and ‘the country could only be strengthened by strengthening the provinces’ and was happy to hear that Islamabad planned to progressively transfer the funds to the four units in the federation. He recalled how his leader, the Pakistan People’s Party founder Zulfikar Ali Bhutto, had been instrumental in the realisation of the NFC award way back in 1974.

After days of hectic number crunching, Mr Shah provided all and sundry some comic relief by confusing Mr Shaukat Tarin with former prime minister Shaukat Aziz. The mistaken retreat to the universally condemned dark age of Messrs Aziz and Musharraf was laughed off in the spirit of the camaraderie and goodwill that prevailed in Lahore on Friday giving people hope in these extremely difficult times.

DAWN.COM | Pakistan | Compliments flow at post-accord conference

 

[AgNoStiC MuSliM]

doubt this money will end up where its supposed to

Certainly that is a possibility - but you are conflating two different issues - 1. How resources are distributed between the units of the federation and 2. How they are utilized by the provincial governments.

Taking care of the first issue means that you remove a major distraction from public discourse, of the provincial governments shifting blame, for lack of development etc. to the Center.

 

[ajpirzada]

well PPP will and should take the credit for this. its the federation which gave up around 9% of their share. i doubt if that is something less. without this increase punjab might not have agreed to let its more than 1% go. bec even with this reduction, punjab will be gettin more in money terms.

secondly FM was also appointed by this current gov and not bec of any pressure comin from other parties.

thirdly this award has been announced after 19 yrs. if this was such an easy thing then this should have been resolved in the era of past govts.