The NFC award

The highly contentious issue of the National Finance Commission (NFC) award is back on the agenda once again. The NFC award decides the share of resources each province gets, and each province tries its best to maximise its share. Given this, the outcome of the first consultative meeting on the Ninth NFC Award was a positive one. However, a number of issues emerged from the meeting which are likely to be sticking points in negotiating another NFC award. Crucially, negotiations will begin without a census, which shows that the next five years or more will be affected by the failure to complete something so essential to modern statecraft. The signals are that the provinces are willing to agree on the NFC award without a census in place. While this may throw up more issues if and when a census is held, the federal government will be glad that it will have one less outstanding issue to deal with. This does not mean that the provinces are taking the negotiations lightly. The longstanding demand that provinces collect their own taxes has been raised loudly once again. It is unlikely that the federal government will be able to brush it aside this time.

The provinces argue that collecting provincial taxes is their right and would avoid issues like double taxation in the case of sales tax. The demand that the NFC award be constituted before December will require a speeding up of the process. Three of the four provinces had working papers ready for what they are looking for, but the federal government showed up without any such proposal. This was criticised by a number of provincial representatives, who then agreed on a list of recommendations to be presented to the federal government. While there was agreement that it would be ideal for the NFC award to be constituted after a census was completed, the urgency of a new NFC award trumped the need for the census. Punjab argued that the absence of the census would affect its share, but it would be willing to accept this. However, it appeared reluctant to say whether it would share two percent of its allocation with underdeveloped Balochistan as was done in the last NFC award. While the first consultative meeting has gone better than expected, it may not all be smooth sailing as the next NFC award is constituted. Differences of opinion will remain, with small provinces insisting that they need more to put themselves on a level playing field. In the context of the CPEC, the agreement and disagreement on the issue could shape a major part of the future political discourse in the country.