The latest NFC Award has been declared as a victory of the democratic forces. PML-N Quaid Nawaz Sharif has called it as a "fruit of democracy." Nevertheless, experience shows that in the end it is the bureaucracy that wins, as no real change is allowed. So, who has outwitted whom in this game? Who has won and who has lost? Only time will tell as deciphering the NFC maze is a complex undertaking. However, it is abundantly clear that the real issues of fiscal autonomy and equity have not been addressed which will continue to trouble the federation. Given the limited mandate of the commission, the current exercise is basically a tinkering with the distribution of the NFC pool within pre-determined parameters and constitutional constrains. The award does not address the issue of fiscal autonomy, the crucial indicator of stability of a federation. More than 80 percent of the provincial resources will again come from the federal level as the proposed award maintains the same taxation framework. Needless to say, Pakistan has one of the most centralised fiscal systems leading to severe vertical and horizontal imbalances with Balochistan generating its own-source revenues of 4 percent, NWFP 7 percent, Sindh 13 percent and Punjab 25 percent. Certainly, it will continue to be so under the new award. The Federal Board of Revenue will continue to function without any provincial representation. The real issue of the reduction in the size of the total divisible pool by transferring some of the major taxes to the provinces has not been touched. At present under the divisible pool based on 50/50 vertical distribution ratio for every Rs 100 collected by FBR, the federal government would receive Rs 50, Punjab Rs 28, Sindh Rs 12, NWFP Rs 7 and Balochistan Rs 3. This centralised federal tax collection and its distribution under the NFC do not provide any incentive for enhancing the revenues. It is one reason that the tax to GDP ratio is very low in the country. The total federal receipts include approximately 58.3 percent revenue receipts, 24.7 percent capital receipts, 12.9 percent external receipts and 4 percent privatisation proceeds. Only 20.4 percent of the total federal receipts are provided to the provinces as part of NFC and Straight Transfers. The distribution of receipts like interest, dividends, SBP profits, privatisation proceeds and foreign aid continues to be outside the purview of the NFC. In this backdrop, federal to provincial devolution can play an important role in increasing the provincial fiscal space. However, there seems to be no effort of devolving the federal offices performing provincial functions. The development budget of the federal government will continue to include schemes worth Rs 100 billion relating to provincial functions although these can be easily transferred through an executive order. The acceptance of measures other than population for allocating the provincial shares is being considered as an occasion for rejoicing. At the present stage of under-development in NWFP and Balochistan the proposed NFC formula will hardly have any real impact. Accelerating the development process cannot be achieved by allocating a small share of the pie to be distributed through indicators which may nullify each other's effect. On horizontal distribution, the population has been allocated a weight of 82 percent, backwardness 10.3 percent, revenue 5 percent and inverse population density 2.7 percent. A major principle of fiscal distribution is to have no indicator at less than 10 percent if any significant impact is desired. All provinces are trumpeting that their share will increase. After application of the multiple indicators the share of Punjab will be 51.74 percent, Sindh 24.55 percent, NWFP 14.62 percent and Balochistan 9.09 percent. Initially calculations show that Punjab and Sindh will lose, while NWFP and Balochistan will gain against the existing NFC Award. However, in order to assess the total impact one needs to analyse the transfers from the federal government, federal expenditure in the provinces and provincial own receipts. For example, the NFC shares in 2006-2007 were Punjab 56.1 percent, Sindh 25.6 percent, NWFP 13.2 percent and Balochistan 5.1 percent. The overall federal transfers (NFC share, straight transfers, grants and other transfers) were Punjab 49.8 percent, Sindh 27.7 percent, NWFP 12.8 percent and Balochistan 9.7 percent. Thus, Sindh and Balochistan posted gains. The total Provincial Consolidated Fund (PCF) receipts were Punjab 54.6 percent, Sindh 25.9 percent, NWFP 11.2 percent, and Balochistan 8.3 percent. At the PCF level Punjab gained while Sindh, NWFP and Balochistan lost. If the federal expenditure in the provinces is included and the situation is analysed on per capita basis the whole fiscal picture may change drastically. The inclusion of 2.5 percent of GST for transfer to the local governments in the existing NFC Award provided an additional safeguard and constitutional protection to the local governments. At this stage it is not clear how the NFC Award has dealt with the issue of financing local governments. According to reports, NWFP government will get one percent of the undivided federal divisible pool as the cost of conflict. Does it mean that when the conflict is over this amount will be stopped? Although international literature requires natural resources to be in the federal domain, the commission continues with the existing arrangements. The new NFC Award is a continuation of the past albeit with a democratic faade. It has created ripples, but is not strong enough to rock the boat. Political consensus does not mean that the root causes have been eliminated. The difficult reform related decisions in Pakistan have generally been left to the military. It was Musharraf who first broke the status quo and raised the provincial share to 50 percent. The democratic forces have been successful in carving an agreement and moving a step forward but it may not happen in future. Now is the time to consider the option of establishing a technical commission. In conclusion, it is premature to celebrate and take out rallies when many of the issues remain unsettled. The writer is an international development consultant and a former member of the NRB. Email: