—Despite objections from provinces in past, ToRs for 10th NFC Award include additional share for federal govt
–Assessment of total public debt and allocation of resources for its repayment likely to face resistance from federating units
ISLAMABAD: The government has finally notified the constitution of the 10th National Finance Commission (NFC) as the five-year period of the previous NFC ended in April and the ones before that remained inconclusive for differences between the Centre and the provinces.
While the 8th and 9th NFC remained inconclusive, the revenue distribution mechanism set under the 7th NFC Award given by the Pakistan People’s Party (PPP) in 2010 would be extended to the new NFC.
Surprisingly, in the Terms of Reference (ToRs) of the new NFC, there were additions of a few terms which, according to insiders, were not part of the previous commissions.
They included assessment and allocation of resources to meet expenditures made on security and natural disasters and calamities. As the provinces objected to additional share for the heads of security and national disaster institutions in the past, it is likely that they will object to this as well.
Another addition was assessment of total public debt and allocation of resources for its repayment and may also invite objection from provinces.
As per the insiders, the rest of the ToRs were almost the same as those of previous commissions. The ToRs of 10th NFC included distribution between the federation and the provinces of the net proceeds of the taxes, including taxes on income, corporation tax, taxes on the sales and purchase of goods imported, exported, produced, manufactured or consumed, but not taxes on income consisting of remuneration paid out of the Federal Consolidated Fund.
As per the ToRs, the new NFC would also assess export duties on cotton, and such other export duties, duties of excise and other taxes as may be specified by the president. Grants-in-aid will be made by the federal government to the provincial governments.
Other ToRs included exercise of powers by the federal and the provincial governments pertaining to borrowing, assessing and allocating resources to meet expenditures related to governments of Azad Jammu and Kashmir (AJK), Gilgit-Baltistan (GB) and newly-merged districts of Khyber Pakhtunkhwa (erstwhile FATA). Rationalisation of subsidies given by the federal and provincial governments in their budgets and agreeing on a mechanism to finance them; and exploring ways to reduce losses of state-owned enterprises and agreeing on mechanism for sharing these losses between the federal and the provincial governments
COMPOSITION OF 10TH NFC:
As there was a constitutional issue in presiding over the NFC meeting by adviser on finance in the absence of a federal finance minister, the president, through the notification, allowed Adviser to the PM on Finance and Revenue Dr Abdul Hafeez Shaikh to preside over the commission’s functions in the absence of the minister.
Facilitating him to chair the meeting, the adviser was made a member of the NFC. However, officials claim, the final signature on any decision of the NFC meeting would be made by the prime minister as minister in charge.
According to the notification, Federal Finance Secretary Naveed Kamran Baloch will serve as an expert for the commission.
As per the composition of the NFC, finance minister would be the chairman, while finance ministers of four provinces will be members of the commission. Other members (experts) include PM’s finance adviser, Tariq Bajwa from Punjab government, Dr Asad Sayeed from Sindh government, Musharraf Rasool Cyan from KP government and Javed Jabbar from Balochistan government.
Under the existing NFC arrangements, the Federal Divisible Pool (FDP) is distributed under the ratio of 57.5 per cent to 42.5 per cent among the provinces and the federal government, respectively.
Currently, the issue of the NFC award and the 18th Amendment have become a point of conflict between the government and the opposition parties.
The NFC Award is a constitutional obligation, which is clearly mentioned in Article 160 of the 1973 Constitution. The constitution has made it mandatory for the government to compose the NFC Award at an interval extending not more than five years for the distribution of finances between the Centre and the provinces.
According to Article 160 of the Constitution, after every five years the president will constitute the NFC for a period of five years.
It is worth mentioning here that soon after becoming the finance minister, Asad Umar had directed the finance secretary to initiate the new NFC Award. Later, President Dr Arif Alvi had reconstituted the 9th NFC in January 2019, and the then-finance minister Umar had started negotiations with the provinces. However, after his resignation as the finance minister, the process of the consultation had come to a halt as the newly-appointed adviser on finance could not chair the NFC meetings due to legal reasons.