Provinces to get resources under 18th Amendment

ISLAMABAD: While raising objections over decline in share of provinces owing to shortfall being faced by the Federal Board of Revenue (FBR), the federating units have asked the Centre to divert its own share from the divisible pool for catering to the Fata development and security requirement instead of slashing down the share of the provinces.

The Centre assured the provinces that fiscal allocation will reflect the spirit of 18th Amendment which protects the share of provinces as it cannot be reduced from the last finalised award.

Sindh’s non-official member Asad Sayyed told reporters that the Centre assured to protect the Article 160(3A) of the 1973 Constitution, which states “the share of the provinces in each award of National Finance Commission shall not be less than the share given to the provinces in the previous award”.

Sindh also asked the Centre to allow collection of GST on goods arguing that their collection through the GST on services achieved 26 percent growth while the federal government’s collection just went up by 12 to 13 percent. Sindh Chief Minister Murad Ali Shah told reporters after the NFC meeting that more tax collection should be in domain of the provinces. KP raised the issue of net hydel profit and difficulties being faced on account of funding required for retirement benefits of employees.

The provinces asked for finalisation of population census results before moving towards distribution of resources on vertical and horizontal basis. With the latest population results, the share of Punjab is bound to decline if there is no change in the distribution formula. In order to compensate this loss, Punjab’s Minister for Finance Makhdum Hashim Jawan Bakht stated that the revenue mobilisation effort should be made part of the criteria to incentivise the province for increasing its share.

The maiden session of the 9th NFC constituted six sub-groups including tribal districts requirements, ease of doing business, macroeconomic issues, vertical and horizontal distribution. The NFC meeting decided that first vertical distribution would be finalised as currently the share of Centre and provinces stood at 42.5 and 57.5 percent respectively out of the total Federal Divisible Pool (FDP).

Minister for Finance Asad Umar stated before the NFC participants that the 18th Amendment was a step in the right direction. “Although, the NFC has nothing to do with the 18th Amendment, but it is step in the right direction,” Asad Umar told journalists after chairing the maiden session of reconstituted NFC here.

He said that the Centre and provinces made projection of revenue during the NFC meeting and it was decided that the provinces would participate in deliberations with the IMF while discussing fiscal issues. The role of the provinces becomes immensely important for achieving the overall fiscal deficit. The reconstituted NFC kick-started its deliberations at the Cabinet Division in which the federal government and representatives of the provinces made presentations on fiscal issues.

Murad Ali Shah told reporters that positive things happened in the meeting as the finance minister declared the 18th Amendment as a step in the right direction. Sindh, he said, raised objections over decline in revenue share as provinces and others got less revenue in the first seven months compared to the last fiscal year. The federal government assured the provinces that revenue collection would be improved in the remaining five months (Feb-June) period, so the revenue distribution would be increased. He said Sindh got Rs60 billion less and it was projected that overall it was going to get Rs104 billion less in the ongoing fiscal year.

He said that it was the stance of the Sindh government that Fata was part of the federal government and after its transfer to KP, the Centre should spare its share on vertical basis to meet its development requirements. He said the whole responsibility of Fata was with the Centre which could not be transferred on shoulders of provinces. Murad said the Centre did not discuss the placement of single tax authority, but the meeting took up the issues of duplication of taxes in order to bring ease of doing business.

Makhdum Hashim Bakht told reporters that the NFC kick-started its deliberations in a positive manner because there was a need to overcome the economic crisis. He said there is a need to analyse how resource mobilisation could gear up at both federal and provincial levels. He said the Punjab Revenue Authority had done well and incentives were needed to be provided to those who performed well.

He said that the share of Punjab through transfers from the Centre and its own revenue collection faced a shortfall of Rs70 billion so far. Punjab’s member Dr Salman Shah said the NFC discussed the rising public debt burden, as it crossed Rs30 trillion mark, and the issue of circular debt. He said the federal and provincial governments need to estimate revenues and expenditure projections over the next five years as it was a transitory year when different governments changed and the FBR faced revenue shortfall so far in the current fiscal year.

Finally, Finance Minister Asad Umar told reporters that next meeting would be held in Lahore after six weeks. He said that the federal and provincial governments would have to increase resource generation to meet increasing requirements of the country. He said that without raising revenue, it would be hard to meet expenditure requirements. He offered to the provinces to become part of discussion with IMF on fiscal issues and all of them accepted it as their consultation was important for achieving fiscal consolidation.

He said that apart from distribution, the NFC should also address critical issues related to developing a sustainable fiscal structure for the Centre as well as the federating units. “It should also address the social development and poverty alleviation challenges and facilitate the private sector with a view to fostering economic development opportunities for the general public,” he said.