Just as there are contentious issues pertaining to distribution of financial resources between the federal government and the provinces, districts within the provinces are also concerned about the share they get from provincial resources.
Historically, the provinces have exercised control over their financial resources, especially during democratic governments that have been averse to the idea of sharing power and resources. Besides, there are allegations against the provincial governments for allocating funds to the districts on the basis of political priorities and personal likes and dislikes of the chief executives of respective provinces.
To address such complaints, the local government laws in the country call for the formation of Provincial Finance Commissions (PFCs) and devising of a funds distribution formula to ensure equitable distribution among the districts. Another purpose behind working out this arrangement is to put the funds at the disposal of the elected district governments and give them the autonomy to set their priorities.
This is in line with Article 140-A of the Constitution of Pakistan which states: "Each Province shall, by law, establish a local government system and devolve political, administrative, and financial responsibility and authority to the elected representatives of the local governments."
However, the ground situation is that there are no PFC awards. The reason for this is that there are no local governments. Though Balochistan has carried out local government elections, it is yet to work in this direction.
A study titled, Provincial Finance Commission: Options for Fiscal Transfers carried out by Qazi Masood Ahmed, Institute of Business Administration, Karachi and Akhtar Lodhi, Applied Economics Research Centre (AERC), Karachi, states two PFC awards were announced after the promulgation of Local Government Ordinance 2001. The first was announced in 2001 and the second in 2007.
The study further says several attempts have been made to construct district-wise deprivation index in each province.
The deprivation index, the study says, estimates "the percentage of population in each district not having access to basic services, such as education, health, housing (quality), housing services (basic utilities), and employment".
According to this index, Karachi is the least deprived, while Thatta is the most deprived district of Sindh. On the contrary, if the province selects only population as the single criterion of fiscal transfers then Karachi will get 32.4 per cent share in resources followed by Hyderabad 9.5 per cent and Larkana 6.3 per cent. Half of the Sindh’s financial resources will go to these cities as almost half of the population of Sindh lives in three districts namely Karachi, Hyderabad and Larkana.
Dr Ishrat Hussain, former Governor State Bank of Pakistan (SBP) and Dean at the Institute of Business Administration (IBA) says, "the roles of the federal government, provinces and districts, especially after the 18th amendment, have to be redefined so that authority and resources can be delegated to each of them according to their requirements. The responsibilities of provinces have definitely increased after the devolution of departments. Secondly, in the absence of local governments, most of the financial resources that should have gone to the districts are being retained and spent by the provincial governments."
An advisor to the provincial governments on local governance observes that the provinces do talk about PFCs but, at the same time, they are worried about the fate of their elected members of provincial assemblies. Their major concern, he says, "is what would their MPAs do if they are deprived of development funds for their constituencies. These people spend millions on their elections and will now find no reason to make such investments."
He says discussions on PFCs have started as the superior court has given deadlines to the provinces to hold local government elections. "The moment the local governments are formed, formation of PFCs will become binding on the local governments," he adds.
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The advisor fears that despite their expressed resolve to give powers to local governments, the provinces will make all efforts to retain direct or indirect control over funds and decision-making. He says the KP government has announced it will devolve a huge development budget to the governments and up to the village level. "One can only hope that it puts its words into action after the local government elections."
He tells TNS that "the former elected representatives of district governments are of the opinion that MPAs should simply legislate and the service delivery at the local level should be the domain of local governments only."
Besides, there are suggestions that backward districts and rural areas should be given additional resources to minimise disparities. "If this happens, the pressure for new provinces would also fizzle out gradually," he adds.
Economist Dr Qais Aslam criticises the governments for delaying this important matter. "What can we expect from them regarding the formation of PFCs if they cannot even meet for the NFC, which means flow of funds for them."
Aslam says the reluctance of provincial governments, especially Punjab and Sindh, to hold local government election shows they do not want to forgo their powers and financial resources. "Had the courts not intervened they would have never announced their election schedules," he says.
Aslam says the sense of deprivation among districts and regions within provinces is very harmful. The case of South Punjab, he says, is an example. Punjab raised its share by 35 per cent last year. But in spite of this, the amount could not be spent on South Punjab properly as decision-making rested with the Planning and Development Department Punjab, the chief secretary and the chief minister. "The authority to spend money is required to help the districts make best use of funds available with them. "PFC award can be a good step to ensure this," he concludes.
Under Section 120-A of the Punjab Local Government Ordinance of 2001, the governor was the competent authority to constitute a PFC to make recommendations for distribution of net proceeds of the Provincial Consolidated Fund resources among provincial and local government.
The last PFC was formed in 2006 by former Punjab governor, Lt Gen (retd) Khalid Maqbool for a period of three years. The provincial share under that PFC was kept at 58.1 per cent and the district governments’ share was 41.9 per cent of the net proceeds of Punjab government.