ISLAMABAD - Annual budget for next financial year would be based on 7th National Finance Commission (NFC) award, as the federal government failed to constitute new formula on centre-provincial revenue sharing.

The govt would extend the 7th NFC award for another year, 2017-18. The five-year constitutional term of the arrangement had expired on June 30, 2015. However, the PML-N govt had not paid any heed to the concerns of the provincial governments for making fresh revenue sharing formula in last couple of years. “Now it is impossible to have new award before the budget for next fiscal year, which will be announced on May 26,” said an official of the Ministry of Finance. He further said that the government would extend the previous award for the year 2017-18 as per constitution.

The federal government would transfer the revenue from divisible pool to provinces under 7th NFC award in the budget for upcoming financial year. Under the 7th NFC Award, the federal govt is bound to transfer 57.5 percent resources to all the four provinces from federal divisible pool. Under the current award, Punjab gets 51.74pc share, Sindh 24.55pc, Khyber Pakhtunkhwa 14.62 percent and Balochistan 9.09pc under the divisible pool.

The provincial governments of Sindh, Khyber Pakhtunkhawa and Balochistan had repeatedly asked the centre for constituting new NFC award ahead of the budget. Finance Minister Ishaq Dar once vowed to make new NFC award before December 2016.

Senate Chairman Mian Raza Rabbani also showed concerns on the delay of NFC award. “If the federal government fails to announce the NFC in stipulated time, the senate should have the powers to extend the award for a year and also to enhance the share of the provinces by one percent,” Rabbani said few months back. He also said that under the constitution it is the obligation of the federal government to announce the NFC after every five years but it is not being implemented. However, the federal government had failed to do so, he added.

The federal and provincial governments in December last year agreed to convene next meeting on NFC award in January 2017. However, no meeting took place yet since then. The federal govt, in last meeting on 8th NFC award, had floated a proposal for cutting down the overall size of the federal divisible pool by seven percent to the provinces, allocating three percent for the NSF and four percent for Gilgit-Baltistan, Fata and AJK. Every year, out of the divisible pool – meant for distribution of funds between the centre and the four federating units – seven percent is to be kept in this NSF and funds for the GB, Fata and AJK.

The Khyber Pakhtunkhwa is separately getting one percent of divisible pool as compensation for impact of war on terror. The federal govt and four federating units would share 92 percent of the revenue if the provinces agree with the proposal presented during the meeting of the NFC. The provinces would present their viewpoint in next meeting.

The Sindh provinces had termed the proposal as unconstitutional. Sindh CM Syed Murad Ali Shah said the federal govt’s proposal to allocate 3pc funds from the divisible pool for security arrangements for CPEC-related projects and four percent for the development of Fata, Gilgit-Baltitstan and Kashmir is unreasonable and against the constitution.