Daily Times editorial Nov 20, 2009

NFC deliberations

The ongoing deliberations on the 7th National Finance Commission (NFC) Award in Karachi bring together the federal finance minister, provincial finance ministers and ex-officio participants to hammer out a consensus Award. This will be the first real revision of the Award since 1990, when a caretaker government announced the Award that has more or less held the field to this day. Musharraf’s interim Award conceded the principle that the vertical distribution of the federal divisible pool should incrementally shift resources to the provinces from the centre. Under that arrangement, the provincial share went up incrementally annually from 41.5 percent in 2006-07 to 43.5 percent in the last fiscal year, 2008-09. It envisaged this share rising to 45 percent in 2009-10. However, the gist of the Karachi deliberations seems to have carried the spirit of the interim Award further by more or less agreeing that the share of the provinces should be more than 50 percent. The demands by Sindh and Balochistan that it should be increased to 60 percent, NWFP 80 percent and Punjab 65 percent could not be conceded since it would have an impact on the federal government’s budget at a time when it is footing the bill for the war against the militants. However, the bone of contention of 5 percent collection charges that accrue to the federal government seems to have been resolved along the lines of a reduction of some 2-3 percent.
The issue of a fair division of resources, first and foremost vertically between the centre and the provinces, and then horizontally, amongst the provinces themselves, goes to the heart of the federal scheme. The long standing demand for provincial autonomy is still to be met, but an NFC Award arrived at by consensus during the term of democratically elected governments is a positive signal and a harbinger, if the present spirit is carried forward, of moves towards greater provincial autonomy. The committee on constitutional change is deliberating on the abolition of the concurrent list. This would render some federal ministries unnecessary, thereby decreasing the centre’s burden. In any case, the abolition of the concurrent list and the federal ministries rendered redundant thereby upholds the principle that if something can be done at a lower level of the federal structure; it should not be done at a higher level. Whenever the constitutional amendment package is presented and adopted by parliament, it will be a historic victory for provincial autonomy, a demand that has bedevilled the country’s history and been the cause of much friction and divisions within the federation.
The discussions on the vertical distribution formula are tough enough, but perhaps even they will be overshadowed when the time comes to examine the criteria for horizontal distribution of resources amongst the provinces. What led to the interim Award under Musharraf was the failure to achieve a consensus on these criteria. But that ‘democracy’ was a hothouse flower nurtured under the shadow of military dictatorship. Hopefully the current genuinely democratic dispensation will succeed where the past incumbents failed. Currently, the basis for horizontal distribution remains population, which unduly favours the largest and ironically most developed province, Punjab. The smaller (in population) provinces have been crying themselves hoarse over many years for a change to multi-criteria horizontal distribution. Sindh wants revenue collection, NWFP poverty and backwardness, and Balochistan the latter two plus area factored in besides population to make the formula fairer and more in consonance with the disparate situation and needs of the four federating units.
The hope of course is that the spirit of mutual accommodation on display so far will help the stakeholders to arrive at a consensus Award that will satisfy the aspirations and development needs of all parts of the federation.