ISLAMABAD   -  The federal government has enhanced the revenue share of four provinces under the National Finance Commission (NFC) Award by over 18 percent for the upcoming fiscal year 2021-22.

The four provinces would receive Rs3.41 trillion from the centre under the divisible pool in next financial year as against Rs2.87 trillion of the outgoing fiscal year, showing an increase of 18.7 percent.  The share of provinces has increased by Rs538.14 billion due to the federal government’s decision of enhancing tax collection target for Federal Board of Revenue (FBR). The government has set Rs5.829 trillion tax collection target. The amount to be transferred to the provinces would depend on the FBR’s performance to achieve its collection target of Rs5.829 trillion in the fiscal year 2021-22.

The government has enhanced the share of the provinces under the NFC Award, but it has also asked them to give surplus budget of Rs570 billion to restrict its budget deficit at 6.3 percent of the GDP.

Under the 7th NFC Award, the Federal Divisible Pool was distributed as 57.5 percent share for the provinces and the remaining for Centre. The provincial governments get shares from the federal government under the NFC Award as per the said formula. Punjab gets 51.74 percent, Sindh 24.55 percent, Khyber-Pakhtunkhwa 14.62 percent and Balochistan 9.09 percent.

According to the budget documents, the federal government would transfer Rs1691.098 billion to Punjab in the next fiscal year against Rs1439.116 billion of the current fiscal year. Sindh will receive Rs848.208 billion in the FY2021-22 as compared to Rs742.03 billion of the outgoing year.  Khyber-Pakhtunkhwa will receive Rs559.257 billion as against Rs477.519 billion in the ongoing year. KP would get one per cent under the war on terror. The federal government would transfer Rs313.296 billion to Balochistan in next fiscal year as compared to Rs265.054 billion of the last year.  Federal government has deducted Rs50 billion of Balochistan as tax refunds.

The break-up of Rs3411.858 billion, which would be transferred to the provinces, showed that Rs3310.489 billion would be transferred from the divisible pool, which was Rs2817.212 billion in the outgoing year. Meanwhile, the federal government would transfer Rs101.37 billion as straight transfers during the next financial year that was Rs106.506 billion in the outgoing year.

The break-up of divisible pool taxes showed that Rs1232.877 billion would be collected as income tax, Rs3224 million capital value tax, Rs1435.588 billion sales tax on goods, Rs197.285 billion federal excise duty and Rs444.416 billion customs duty in the fiscal year 2021-22.

Similarly, the breakup of straight transfers showed that Rs16.468 billion would be accumulated as gas development surcharge, Rs51.564 billion as royalty on natural gas, Rs21.604 billion as royalty on crude oil, Rs11.733 billion as excise duty on natural gas.

The five-year constitutional term of the 7th NFC Award expired on June 30, 2015. Since then, the federal government is continuously extending the seventh award after failing to constitute the new NFC Award. The previous government of PML-N and the incumbent PTI government both failed to formulate the fresh resource sharing formula between the centre and the provinces.