THE federal government has taken the initial step in the announcement of a National Finance Commission Award by its notification of the NFC itself. This was not just an empty formality, but answered certain questions, which had been raised by the provinces. The first question is who would chair the Commission, whose setting up and functioning is determined by the Constitution. At present, the NFC would be chaired by the Prime Minister by virtue of his holding the Finance portfolio but the PM's Finance Adviser will be found a seat in the Senate so that he may be made Finance Minister, and thus be allowed to chair the NFC. That will require a fresh notification of the NFC, but that will prove a relatively minor matter, and should not pose a problem at all. This was supposed to provide an opportunity to the provinces, which are represented on the Commission by one non-official member apart from their Finance Minister, to name their nonofficial member. The last Award did not take place, as the NFC constituted by then President Pervez Musharraf met the same fate as those set up by the country's previous military ruler, Ziaul Haq, in not making an Award. Instead, the 1996 Award was amended and enforced. Just as had been done under Zia. It remains in force at present. However, the PPP government committed in this budget to setting up an NFC and making an Award, and the notification is a partial conclusion of this promise. At the same time, the Constitution commands the constitution of an NFC every five years, along with the announcement of an Award. This constitutional duty has been fulfilled, and now it is the Commission's responsibility to make an Award. The NFC is a major mechanism within the federal structure, because it tackles the all-important question of resource distribution. Though it has to be tackled, no government has been comfortable with it, particularly military governments. The main reason is that the Award involves the distribution of resources between the federal and provincial governments, both of which are cash-strapped. The NFC will have to tackle several difficult questions, the very first being the basis of the Award, presently population, which the Punjab wants continued. However, Sindh wants point of origin of taxation, Balochistan area and the NWFP need. If all the provinces are agreed, there will arise the question of the federal-provincial distribution. This is apart from the question of which taxes to put into the federal divisible pool, so all of this should make it clear that setting up an NFC is a long way from its making an Award. Extra hard work is needed as well as goodwill by all parties involved before the new NFC can do what it is supposed to.