ISLAMABAD:- The government has finally announced to compensate the NWFP for costs incurred in the war against terror and the Rs 110 billion due to the province as net hydel profit. The decision was taken during the National Finance Commissions subgroup meeting, chaired by Finance Minister Shaukat Tarin on Friday to stop the issues from blocking the formulation of the award. The federal government assured the NWFP that it would pay the entire cost of the war on terror faced by the NWFP . Therefore, the NWFPs two demands i.e net hydel profit and cost of the war on terror are now out of the NFC, since the Federal Government has fulfilled them upfront. The NWFP would get the net hydel profit about of Rs 110 billion in five equal annual installments, with the first tranche within this financial year. The issue of the payments against the cost of war on terror would also be settled between the federal and provincial governments. Since the NWFP getting share from the net hydel profit would set a precedent, Punjab would also get its share from the next year, sources said. The subgroup dealing with horizontal distribution of resources took up other issues including the revision in the Gas Development Surcharge distribution formula and changing the basis for the overall division of resources amongst the provinces. According to sources privy to the meeting, the center, along with three provinces, rejected the demand from Sindh that the General Sales Tax on services entirely belongs to the provinces from where it is collected. Punjab, NWFP , and Balochistan vehemently opposed the proposition from Sindh claiming provinces right over the GST on services. Punjab did show flexibility in changing the population-based formula of distribution of resources but only to the extent of giving the other factors including revenue generation and backwardness as marginal weightage. The meeting, however, left most of the conflicting issues in the NFC as open requiring further discussion. The next NFC meeting would be held in Islamabad on August 18 to followed by a sitting in Quetta on the same day or on the following one. Finance Minister Shaukat Tarin, while talking to the media after the meeting, appeared hopeful about the consensus in the NFC and vowed to finalize a new award in October 2009. He said that the Federal Government that was guarantor to the arbitration between the NWFP and the Water and Power Development Authority on net hydel profit dues must be paid to the province. In this regard, he said, Punjabs claim out of the net hydel profit was also justified. He said he had appointed a separate committee to deal with the net hydel profit distribution under the Article 161 of the Constitution. National Electric Power Regulatory Authority would also be duly consulted in this regard, he added. According to the Finance Minister, the American financial year ends in September and for the outgoing US financial year, the Obama Administration has already earmarked $900 million worth of financial assistance for Pakistan. The second subgroup of the NFC consisting of Federal and Provincial Finance Secretaries would meet here on Saturday. It would hammer out possibilities of increasing the provinces share from the divisible pool of resources. Currently, the provinces are getting 45 per cent against the centers 55 per cent. However, the provinces also get certain funds from the subvention pool and as grants as well.