LAHORE -  The federal divisible pool share of Punjab has been increased to Rs.804 billion in fiscal year 2014-15, against the budget estimate of Rs.702 billion in FY 2013-14, mainly due to growth in Federal Board of Revenue’s tax collection by 23.5%.

As per budget document, total receipts less Food Account Receipts has been pitched at Rs1,095,123.832 million for the FY 2014-15 as compared to Rs919,314.576 million for Budget Estimates of 2013-14.

According to official sources, the increase in estimates of General Revenue Receipts for FY 2014-15 is mainly attributable to expected increase of 14.5% in the Federal Divisible Pool. The budgetary estimates of provincial tax receipts for FY 2014-15 have been fixed at Rs164,680.244 million in comparison with revised estimates of Rs 111,788.994 million for FY 2013-14. For non-tax receipts, an estimate of Rs 64,197.368 million has been fixed for FY 2014-15 against budgetary estimates of Rs 43,129.872 million in FY 2013-14.

According to experts, in 7th National Finance Commission Award, the political competition for development among provincial governments had picked up while the capacity constraints at new centres of power and money seemed to give diverging messages in the 2014-15 provincial budgets.

The provinces’ cumulative share in the federal divisible pool increased from 45pc in 2009-10 to about 58pc now — almost 13pc increase in five years —, providing a quantum jump in resources to the federating units but their inability to spend these funds is quite evident from Rs257 billion cash surplus returned by the four provinces to the centre during the concluding fiscal year.

Based on this, the federal government is anticipating a provincial surplus of Rs289 billion in current fiscal year.

According to experts, the federal grants including Development and Non-Development, consists of public sector development programs, grants from Federal Government as well as budget support grants received from foreign development partners. The federal PSDP grants are only pass through items. These grants are released to executing agencies for implementation of Federal Development Projects. Therefore, the estimates of PSDP grants are only made part of the revised estimates. The RE for FY 2013-14 for PSDP grants is Rs 39,447.769 million against budget estimates of Rs 3,231.145 million. In FY 2013-14 total receipts were estimated at Rs 1,180,214.210 million. Revised estimate are Rs 1,153,356.207 million. For FY 2014-15, total Receipts have been pitched at Rs 1,349,404.205 million.

It is to be noted that the IMF wants the revenue-sharing system revamped to raise incentives for provinces to rely less on federal transfers and more on their own revenue-raising efforts, so as to lift the pressure on the central government and cut its fiscal deficit to below 4 percent. In the Memorandum on Economic and Financial Policies signed with the IMF, the federal government complained that the NFC award, which granted 57.5 percent of most revenues to the provinces, had left it with an imbalance between its remaining expenditure responsibilities and revenue.