ISLAMABAD - Prime Minister Nawaz Sharif has tasked Finance Minister Ishaq Dar to focus on evolving consensus on the National Finance Commission (NFC) award after presenting the federal budget, official sources said.

“Constitutionally there is no problem, the existing award will automatically get an extension until a consensus is achieved but the government is concerned about the political aspect. So the PM wants this to be done as soon as possible,” a cabinet member, close to both the PM and the finance minister, told The Nation.

“The government hopes to get an agreement at least before the end of 2015 if not sooner. The PM will also use his good office to seek a nod from the smaller provinces who are demanding more share by changing the population criteria”, he said. “The government is ready to listen to the smaller provinces and address their reservations,” he added.

The NFC award is the distribution of financial resources among the provinces by the federal government on annual basis. Certain types of taxes collected in each province are pooled then redistributed according to the NFC formula. The 7th NFC award was signed in 2009 during the tenure of the Pakistan People’s Party (PPP) and it came into effect at the start of the fiscal year 2010-11.

Under that agreement the provinces were to get Rs227 billion in the first year in addition to their share of Rs550 billion in financial resources. The amount was increased to Rs850 billion the following year and to Rs1,250 billion in the fifth year that ends on June 30. The 7th NFC award authorised the provinces to raise taxes from agriculture, property and services. In return, the provinces were required to increase their own revenue generation effort, as well as accept greater responsibilities of governance under the 18th Amendment.

Talking to The Nation, National Party (NP) lawmaker Sardar Kamal Khan Bangulzai said, “The basic difference is whether it (NFC award) should be in accordance with the population or other factors should also be considered.”

He said, “Balochistan is a poor province and we have to facilitate the people across the province. The population is sparse and we have to spend (more) funds to get to them. In Punjab you can start a water pump and thousands of people can benefit from it, but in Balochistan, hardly some dozens will get access due to the thin population.”

Bangulzai said it is strange the Punjab province, which was the main supporter of distribution of funds keeping in view multiple factors before the secession of the East Pakistan (now Bangladesh), is now opposing the smaller provinces’ demand to change the criteria. At that time they resisted funds distribution as per population only but now they support sharing the money according to the population to get more share, the NP legislator said.

He said the Balochistan province is insurgency infested and lacks resources like Punjab. “They should themselves realise this. Our population is of course small but we have to cover much more land. We have to ensure law and order and curb militancy,” he said.

Bangulzai said Balochistan was fighting for its and other smaller provinces’ right. “We should get our due share. What we deserve. Not what they want us to agree on. Other smaller provinces also support our demands. Population criterion is hurting them too”, he asserted.

PPP spokesman Senator Farhatullah Babar said the government must not ignore the smaller provinces and ensure their rights. “The PPP supports the idea to change the basic criterion of funds distribution. Of course, the smaller provinces have the same responsibilities (as Punjab). And if they (the smaller provinces) generate more revenue they should get incentives,” the PPP leader said.

Senator Babar said the existing NFC award will get an extension as the government was busy in preparing the budget but “this must not be delayed for long”. He said the Khyber Pakhtunkhwa and Balochistan provinces have more security issues than Punjab so they need more funding. “The PPP supports the idea to listen to the smaller provinces and resolve their differences on the NFC award. The NFC award should be a consensus agreement”, he added.

In April, the inaugural meeting of 9th NFC to finalise the 8th NFC award was held in Islamabad. Finance Minister Ishaq Dar had chaired the meeting which was attended by chief ministers and provincial finance ministers. During that meeting, federal finance minister underlined the need to take into account “significant expenditures” on the war on terror especially significant enhancement in capacity building of the law enforcement agencies.