The National Finance Commission (NFC) award is a cornucopia of complaints; particularly regarding oil and gas resources and a new sales tax has been imposed and is being collected directly on transactions that belong to the provinces. Sindh wants a reduction in the weight given to population in the award and this was agreed to by the Punjab. What other criteria will be suggested and implemented is up for debate and will be extremely subjective (and probably controversial). KPK is expected to push for a heavier weight for backwardness and demand more compensation for losses to its economy because of terrorism. Balochistan will disclose its demands when the negotiations for the award start but is most likely to seek greater weight for inverse population density and backwardness as well as demand that its share be on the basis of revenue projections made in the award rather than on the actual revenue generated by the federal government. The Punjab will argue that the other provinces need to pull their weight and generate revenue surpluses to meet the IMF’s demands.

The federal government has proposed that the provinces share the cost of counterterrorism and disaster management. This issue will cause the most friction in the negotiations. This is an attempt by the centre to take back some concessions. As it cannot reduce the provincial share below the last award’s level of 57.5% of the net federal tax collection, the federal government is trying to convince the provinces to share responsibilities in areas that fall in its domain. The problem is that the provinces see the award not as give-and-take, but as a hand-out. There is no motivation to generate more revenue or increase taxation as the award guarantees them money every time, even if the distribution is skewed. But the provinces have been given rights, despite having been lax with economic management. Pandora’s box must be opened by the Finance Ministry to create the new award.