The 18th Amendment, a landmark piece of legislation in Pakistan’s political history, was enacted in April 2010 to fortify the bond between provinces and the federation. This significant move, spearheaded mainly by the PML-N and PPP, was aimed at enhancing provincial autonomy and fostering collaboration between the federal and provincial governments.
One of the pivotal changes brought about by the amendment was the revision of financial distribution, whereby provinces contributing to the National Consolidated Fund (NCF) received an increased share, rising from 52 per cent to approximately 57 per cent. This adjustment provided provinces with greater financial autonomy to meet their expenditures.
However, since its inception, the 18th Amendment has faced challenges, with rumblings from some quarters regarding alterations to the amendment, potentially diminishing the protections it affords in financial distribution. The federal bureaucracy too has expressed discontent with the powers and resources -- however limited -- delegated to provinces.
Under the amendment, Article 160, Clause 3-A stipulates that the provincial share from the distribution pool cannot be reduced from the previous National Finance Commission (NFC) award. This safeguard ensures that the 57.5 per cent share allocated to provinces in the seventh NFC Award remains intact.
In the past, attempts to amend the 18th Amendment have surfaced. This happened notably in July 2020, when the MQM -- ally of the then-ruling PTI -- proposed changes to Article 160. The proposal was rejected in the Senate of Pakistan.
Recently, Dr Waqar Masood Khan, adviser to the caretaker prime minister on finance, criticized the NFC Award and expressed a desire for its review, reflecting a centralist perspective.
Surprisingly, the PML-N, which has previously been taking credit for the 18th Amendment and calling it its political success, now is rumoured to also be opposing its key features, with some reports claiming the party may be discussing changes in the amendment. While the party has denied any such speculations and reports, the PML-N’s Ishaq Dar recently spoke in the Senate about the need to change the financial distribution between the federation and the provinces.
Critics argue that the focus on amending the 18th Amendment distracts from addressing financial mismanagement within the federal government’s different departments —especially its corporations. These entities contribute significant annual losses to the exchequer, with institutions like PIA, Pakistan Railways, and others draining public finance. Calls for amendment detract from the need to address the inefficiencies within these federal entities.
The federal bureaucracy and those opposing this historical achievement of giving some financial power to the provinces must know that state corporations under the management of the federal government contribute an annual loss of Rs500 billion to the country’s finances. This amount and the amount of loans and guarantees given to these institutions constitute 10 per cent of the GDP. The World Bank has ranked Pakistan’s public corporations as the worst in South Asia. This has been discussed in detail in the World Bank’s Public Expenditure Review 2023 report for Pakistan.
In a press conference held on September 22, Caretaker Minister of Finance Dr Shamshad Akhtar gave the 2020 statistics of the 10 worst institutions among these corporations. As per the official figures, the Quetta Electric Supply Corporation caused a loss to the exchequer of Rs108 billion, National Highway Authority Rs94.3 billion, Pakistan Railways Rs50.4 billion, Sukkur Electric Power Company Rs40.8 billion, PIA Rs36 billion rupees, Sui Southern Gas Company Rs21.4 billion, Pakistan Steel Mills Rs20.6 billion, HESCO Rs17.7 billion, Pakistan State Oil Company Rs14.8 billion, and the Peshawar Electric Supply Company Rs14.6 billion.
The 18th Amendment sought to decentralize power by transferring key departments to the provinces. However, reports indicate that the central bureaucracy in Islamabad maneuvered things around to retain control by renaming and reclaiming several departments. This added unnecessary burden on public finances, undermining the intended decentralization.
While the 18th Amendment aimed to strike a balance between provincial and federal powers, challenges persist. Any efforts to amend the amendment should be critically examined, considering the broader context of financial mismanagement within federal entities. Addressing inefficiencies and upholding the principles of the 18th Amendment is crucial for fostering a more equitable and prosperous national landscape in Pakistan.
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