The 7th National Finance Commission (NFC) Award announced in 2009 came to an end after its five years term in 2014 and the new Award was due in 2015 but so far the government has failed to create consensus on resource distribution formula between the federation and the provinces.

It doesn’t seem to be high on the priority list of the federal government which is facing threats to its very survival. For all practical purposes it seems obvious that the 8th NFC Award will have to wait for the new government. Unfortunately this government will join Zia-ul-Haq’s military dictatorship in the dubious distinction of not coming out with a fresh NFC Award and use the formula of the previous Award for distribution of financial resources for the interim period. General Musharraf’s dictatorship was no different. It also had failed in creating consensus on criteria for distribution of the financial cake even after declaring two National Finance Commissions (2000 and 2005). In 2006, General Musharraf arbitrarily declared the 6th Award after bypassing the procedure enshrined in the 1973 Constitution (Article 160 (1)).

Since 1973 population has been the sole criteria for distribution of financial resources among the provinces. In no other country in the world population is the only factor for distribution of the national financial cake. This arrangement clearly suits Punjab that has insisted on the continuation of this unfair basis despite the demands by population wise smaller provinces for diversification of the factors. There was a slight change brought in 7th Award announced by democratic government in 2009. Population still remained 82 percent basis for distribution of financial resources but some other factors were also recognized; poverty 10 percent, revenue generation 2.5 percent, revenue collection 2.5 percent and area 2.7 percent. Such high weightage to population is still against the best international practices where poverty and backwardness are given importance in the interest of harmony and even development but this is not the case in Pakistan. This situation has created extraordinary complications for the disempowered and socio economically backward smaller provinces. Punjab by virtue of its domination of the National Assembly (Punjab has 148 directly elected general seats of the total 272 general seats in the National Assembly) enjoys a veto on the money bill (annual budget). As if this isn’t enough, Punjab decisively controls the federal government by its total domination of civil and military bureaucracy. Therefore federal government is extension of Punjab’s power in the state system. While competing for their share in national financial resources the smaller provinces have to face not only the big brother Punjab as a province but also Punjab camouflaged as the federal government. This is the real secret behind the absence of a genuine fiscal federalism in Pakistan and the uneven socio economic development. Pakistan is a federation only in theory as it practically operates as a unitary state.

But it is important to point out the main reason for delay in the announcement of the 8th NFC Award. The 7th NFC Award was announced in 2009 and the 18th Constitutional Amendment was approved by the Parliament in 2010 and the Implementation Commission finished its work in June 2011 by devolving 17 federal ministries to provinces as a consequence of the abolition of concurrent legislative list. I also participated in a meeting of the federal cabinet on special invitation as a member of the Implementation Commission in the last week of June 2011. The Chief Ministers demanded devolution of financial resources to the provinces so that they could cope with the additional expenditure of the ministries evolved to the provinces. Their argument was that the 57.5 percent of the share of the provinces in the 7th NFC Award was accepted in 2009 before the 18th Constitutional Amendment so it can’t cater for their fresh requirements. The federal Finance Ministry was reluctant for obvious reasons. The then Prime Minister Yosuf Raza Gilani tried to find some middle ground. Ultimately an interim agreement was agreed upon. It was unanimously decided that there will be a block allocation in the federal budget for health, education and other ministries now devolved to provinces and the money will be transferred to the provinces. This arrangement was to continue up till the announcement of the new Award in which the provinces were to get more resources to meet their expenses on their own instead of depending on federal allocations.

Now the federal government is consciously avoiding the decision of raising the share of the provinces in national financial resources. But it has no argument to oppose this since Punjab government was part of the decision taken in June 2011 so it’s using delaying tactics. Unfortunately the provincial governments in population wise smaller provinces have not been able to plead their case more forcefully. Sindh and Balochistan governments have suffered from the capacity problem under the new Chief Ministers. Pakhtunkhwa government also had the capacity problem but it was further aggravated by the political priorities of the PTI which is the ruling party in the province. Their focus was more at overthrowing the sitting federal government than defending the interest of Pakhtunkhwa. Interestingly the Pakhtunkhwa government recently threatened to go to the court against delay in announcement of NFC Award. But it has never requisitioned the meeting of Council of Common Interest to plead its case and put pressure on the federal government with the help of other smaller provinces.

Be that as it may, it is important to introduce reforms to check this high handedness of the Punjab dominated federal government. One, Senate should have the power to discuss, amend and pass the money bill to counter the brute majority of one province in the National Assembly. Two, there should be a permanent National Finance Commission with experts from all sides so the deadlocks and delays can be avoided. But more importantly it is for the Punjab to decide as to whether it is prepared to accept a genuine and equitable federation or will it continue a myth of federation that will remain to be a mere extension of Punjab.

 

The writer is a retired Senator and an analyst of regional affairs.