THE 10th National Finance Commission (NFC) began its deliberations on Thursday and constituted seven sub-groups for preparing recommendations for the next NFC Award.
The terms of reference for the NFC include developing a sustainable macroeconomic framework for the 10th NFC Award, vertical revenue sharing, selection of indicators for horizontal distribution formula, simplification of taxes to facilitate businesses and bringing erstwhile FATA at par with the rest of the country.
Distribution of financial resources is a sensitive issue and that is why it has been the endeavour of all stakeholders to get a greater share of the pie through changes in the formula for the purpose.
It was because of large-heartedness demonstrated by the federation and the Punjab province that helped arrive at a consensus in finalization of previous awards.
However, these awards have created greater financial strains both for the Federal and Punjab governments because of allocation of more resources to provinces and shifting of the focus away from the population criteria for distribution of funds from the divisible pool.
At the inaugural meeting, the members of the Commission highlighted emergent financial issues, including the need to increase the size of share for everyone, the rising burden of pension payments and the need for closer coordination between federal and provincial revenue collecting agencies.
Leaving aside what transpired at the meeting, media interaction of provincial representatives clearly conveyed an impression that the provinces were deadly against any cut in their share as has been proposed by the Federal Government and instead KP and Balochistan are demanding more funds in view of the fact that they are affected more by the menace of terrorism than other provinces.
Under the previous award, the four provinces are collectively entitled to 57.5pc of divisible pool and the share of the provinces is determined on the basis of population, poverty
and backwardness and revenue collection and generation besides special allocations for KP on consideration of war on terror. It is understood that the Federal Government needs greater resources as it takes care of defence, have to pay back national debt, undertake national projects and spend more money in tackling threats like terrorism.
If the provinces do not agree to part with a portion of their share then it obviously means imposition of more taxes on the already burdened masses to meet the growing expenses.
We hope an amicable solution would be found through intensive dialogue that should be held in the spirit of mutual accommodation.
