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September 6, 2018

Finance minister seeks NFC reconstitution, writes to CMs


September 6, 2018

ISLAMABAD: The day after Pakistan Tehreek-e-Insaf candidate Arif Alvi won the presidential election, Federal Minister for Finance Asad Umar has written to all provincial chief ministers to seek the reconstitution of the 9th National Finance Commission (NFC), with the aim to renew efforts to fairly allocate financial resources between the Centre and four federating units.

After receiving nominations for official and non-official members of the NFC from the provinces, an official summary would be presented to Prime Minister Imran Khan for approval. Under the Constitution, the President would grant formal assent for the reconstitution of the 9th NFC after Alvi is sworn in.

Formal deliberations would then take place to develop a consensus-based solution to the distribution of resources falling into the Federal Divisible Pool (FDP) between the federal government and provincial administrations. The PTI-led government would have to resolve thorny issues related to the horizontal and vertical distribution of resources into the FDP.

The caretaker government had recommended significant cuts to the share of the provinces, raising a hue and cry in the Senate. Senior senators, notably Pakistan People's Party stalwart Mian Raza Rabbani and members from Balochistan, termed any such proposal a violation of the Constitution and the spirit of the NFC award.

According to an official announcement here by the Ministry of Finance on Wednesday, letters have been dispatched to Punjab Chief Minister Sardar Usman Ahmad Buzdar, Sindh Chief Minister Syed Murad Ali Shah, Khyber Pakhtunkhua Chief Minister Mahmood Khan and Balochistan CM Jam Kamal Khan.

The letters state that, following the general election, new governments have assumed office at the federal and provincial levels, necessitating the re-confirmation of non-statutory members of the NFC from the provinces.

The Finance Minister has asked the provincial chief ministers to either reconfirm the earlier nominees or intimate a change in nominations to enable the Federal Government to notify the 9th NFC and begin its deliberations.

The NFC is required to be set up at intervals not exceeding five years under clause 1 of Article 160 of the Constitution. The federal and provincial finance ministers are the statutory members of the NFC. It is also customary to include one non-statutory member from each province.

The 8th NFC Award was constituted on July 21, 2010 but it did not make an award. Nor did the 9th NFC, constituted on April 24, 2015. Because of a lack of consensus, the 7th NFC Award has remained operative till a new award can be agreed upon and implemented.

In the budget for financial year 2018-19, the federal government estimated that the provinces would receive Rs2.59 trillion from federal revenue and straight transfers, reflecting a 11.8 percent increase over revised budgetary estimates of Rs2.23 trillion for the previous fiscal year.

Out of the total revenue of the federal government, Punjab stands to get Rs1.28 trillion, Sindh would receive Rs648 billion, Khyber Pakhtunkhwa would gain Rs426.605 billion (including 1 percent to compensate for the war on terror), and Balochistan would be allocated Rs233 billion.

Under the 7th NFC award, the provinces agreed that shares of the FDP would be calculated according to a formula under which population size determines 82 percent of the allocation. Another 10.3 percent would be determined by the incidence of poverty and backwardness, 5 percent on revenue collection and generation, and 2.7 percent on inverse population density.

In accordance with the framework for distribution of resources structured by the 7th NFC Award, the net transfers to provinces have been estimated at Rs2.71 trillion in the 2018-19 budget.

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