Saturday September 18, 2021

Provinces’ share in NFC Award reduced

June 13, 2020

ISLAMABAD: The share of revenue transfer to the provinces under the National Finance Commission (NFC) Award has been reduced in the proposed budget for 2020-2021 against the estimated share of outgoing fiscal year 2019-20.

However, the share of transfer from the divisible pool of tax has been increased in the proposed budget for next fiscal year 2020-20121 in comparison with the revised estimates for the outgoing fiscal year 2019-2020 19.

The provinces will get Rs2.87 trillion in the new fiscal year from their share in the federal revenues under the NFC Award and straight transfers reflecting a decline of 11.7 percent over revised budgetary estimates for the financial year 2019-20, which were estimated at Rs3.15 trillion.

However, it increased by 19.6 percent in comparison with revised budget estimates of outgoing fiscal year 2019-20 which was revised of transferring of share of divisible pool of tax to the provinces of Rs 2.30 trillion.

Out of the total revenues of the federal government in 2020-21, Punjab stands to get Rs1.439 trillion, Sindh Rs742.030 billion, Khyber Pakhtunkhwa Rs477.519 billion (including one percent war on terror) and Balochistan Rs265.954 billion in the new fiscal year of 2020-2021.

While in ongoing fiscal year 2019-20, the Punjab was allocated Rs1.61 trillion but the revised estimates were Rs1.135 trillion, Sindh was allocated a Rs841.916 billion for the current fiscal year yet in the revised estimates for the ongoing fiscal year their allocation will be Rs592.321 billion, Khyber Pakhtunkhwa was allocated RsR533.261 billion for the current fiscal year but in revised estimates they will get Rs477.519 billion and same case with Balochistan, which was allocated Rs294.983 billion for the current fiscal year but its allocation was revised at Rs295.214 billion.

The break-up of Rs2.873 billion, which would be transferred to the provinces, showed that Rs2.817 trillion would be transferred from the divisible pool, which was Rs2.2 trillion billion revised estimates of the outgoing year.

Meanwhile, the federal government would transfer Rs56.506 billion as straight transfers during the next financial year that was Rs101.59 billion in the outgoing year.

The break-up of divisible pool taxes showed that Rs1156.193 billion would be collected as income tax, Rs1.74 billion capital value tax, Rs1098.916 billion sales tax (Excluding GST on Services), Rs198.403 billion federal excise duty and Rs361.957 billion customs duty in the fiscal year 2020-21.

Similarly, the breakup of straight transfers showed that 23.19 billion would be accumulated as royalty on crude oil, Rs52.736 billion as royalty on natural gas, Rs15.867 billion as natural gas development surcharge and Rs14.705 billion as excise duty on natural gas.

The provinces agreed sharing divisible pool under the National Finance Commission award that will take place on the basis of 82 percent population, 10.3 percent poverty and backwardness, five percent on revenue collection / generation and 2.7 percent on inverse population density.

One percent of the net proceeds of the divisible pool would be assigned to the government of Khyber Pakhtunkhwa to meet the expenses on the war on terror.

The budget documents also revealed, the net transfers to provinces are Rs 3.41 trillion in the budget estimates of 2019-20 that includes Rs 2.817 trillion of Divisible pool/Taxes, Rs 56.506 million in straight transfers, Rs 85 million in special grants/subversions, Rs166.345 million in project loans/grants.