THE National Finance Commission, in only its third leg, has overcome the most contentious issue facing it, that of how the resources generated were to be distributed among the provinces. In the Commission's Karachi leg, according to the post-meeting briefing by Federal Finance Minister Shaukat Tarin, who also chairs the Commission, there was an agreement that the federal divisible pool would be distributed according to four factors, not the single one of population as at present, though that would remain one of the criteria. The criteria are to be: population, backwardness, revenue and inverse population density. In short, the NFC has admitted all the criteria proposed by the provinces. Whereas no single province's proposed criterion has been selected, no province can claim that the Award embodies its viewpoint, the accommodation of all provinces means that all can claim to have had their viewpoint accommodated. This decision also paves the way for the NFC to move towards a just and equitable Award in time for the next Budget, that of 2010-11, due in about seven months, next June. Even the latest criterion thought up by the NWFP government, the War on Terror, has been accommodated in the form of an agreement to set up a special fund to which the central and all provincial governments would contribute. Mr Tarin also disclosed that the demand by Sindh for payment to compensate for the wear and tear on infrastructure by people from other provinces had not been accepted by the other provinces. The NFC has thus settled in principle the basis for the vertical distribution of resources, and will now determine the horizontal distribution, between Centre and provinces in its next meeting, next month in Lahore. By this meeting, the weightages of the various criteria will be worked out. Mr Tarin said that any province adversely affected would be compensated by the giving of federal subventions. This means that one or more province is likely to be adversely affected by the new vertical distribution criteria. Another issue which has not been settled is how the revenue criterion is to be measured: from revenue generation or revenue collection. While revenue may well be mostly collected in Karachi, as is reflected in the revenue demand coming from Sindh, generation takes place in the Punjab, and thus that should be reflected in the final Award. It seems only fair that generation should be adopted, as actual consumption merits being counted, and it should not matter where a business entity has its headquarters, and thus where it pays taxes. Even though it is the largest province, the Punjab's representatives have a duty to ensure that no injustice is done to the province.