ISLAMABAD - President Dr Arif Alvi has constituted the 10th National Finance Commission, officials said on Tuesday.

They said the Adviser to the Prime Minister on Finance and Revenue will chair the meetings of the NFC. Each province has been given representation in the finance commission.

It will hold deliberations to evolve a consensus among the center and the provinces over resource distribution formula from the federal divisible pool. The terms of reference of commission as per Article 160 (2) of the constitution include assessment and allocation of resources to meet expenditures related to Azad Kashmir, Gilgit-Baltistan and newly merged districts of Khyber Pakhtunkhwa.

The 9th NFC had failed to constitute a new resource sharing formula between the centre and four provinces during the five-year constitutional term.

“In pursuance of Article 160 (1) of the Constitution of the Islamic Republic of Pakistan 1973, the President of Pakistan is pleased to constitute the 10th National Finance Commission (NFC) with effect from 23rd April, 2020,” stated a notification issued by the finance division.

The 10th NFC would consist of Minister for Finance and provincial Finance Ministers from Punjab, Sindh, KPK and Balochistan. Other members would be Tariq Bajwa from Punjab, Dr Asad Sayeed from Sindh, Musharraf Rasool Cyan from KPK, and Javed Jabbar from Balochistan. Federal Secretary Finance would also be part of the NFC.

“The President is further pleased to authorise Advisor to the Prime Minister on Finance and Revenue to chair the meetings of the NFC in the absence of Federal Finance Minister,” the notification added.

In terms of Article 160 (2) of the Constitution, the Terms of Reference (ToR) for the 10th NFC are as follows: distribution between the federation and the provinces of the net proceeds of the following taxes: taxes on income, including corporation tax, but not including taxes on income consisting of remuneration paid out of the Federal Consolidated Fund; (ii) taxes on the sales and purchase of goods imported exported, produced, manufactured or consumed. (iii)  Export duties on cotton, and such other export duties as may be specified by the President; (iv) Such duties of excise as may be specified by the President; and (v) Such other taxes as may be specified by the President.

The 10th NFC would also make grants-in-aid by the Federal Government to the Provincial Governments, exercise by the Federal Government and the Provincial Governments of the borrowing powers conferred by the Constitution.

 

Other ToRs included the assessment and allocation of resources to meet expenditures related to Azad Government of the State of Jammu and Kashmir, Government of Gilgit-Baltistan and newly merged districts of Khyber Pakhtunkhwa (erstwhile FATA).

 

The 10th NFC would also “review the assessment and allocation of resources to meet expenditures made on security and natural disasters calamities; assessment of total public debt and allocation of resources for its repayment; Rationalization of subsidies given by the Federal and Provincial Governments in their budgets and agreeing on a mechanism to finance them; Exploring ways to reduce losses of State-owned enterprises and agreeing on mechanism: for sharing these losses between the Federal Government and the Provincial Governments; Any other matter relating to finance referred to the Commission by the President.”

 

The 9th National Finance Commission (NFC) had failed to formulate a fresh resource sharing formula between federal government and the provinces in its almost five year’s constitutional tenure. 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.

 

Previous government of PML-N and the incumbent PTI government, both failed to formulate the fresh resource sharing formula between federal government and the provinces. In March 2019, the 9th National Finance Commission, under the chairmanship of former finance minister Asad Umar, had agreed to make efforts to finalise the NFC Award by December 31 2019. However, no concrete development had made since Abdul Hafeez Shaikh has assumed the charge of Adviser to Prime Minister on Finance and Revenue.

 

Under the existing NFC arrangements, the Federal Divisible Pool (FDP) is distributed under the ratio of 57.5 percent to 42.5 percent among the provinces and the federal government, respectively. The provincial governments get shares from the federal government under 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.