Population to be given 82 percent weightage, Poverty 10.3percent, Revenue collection 5 percent (2.5percent revenue generation, 2.5 percent revenue collection) and Area 2.7 percent
The Award was announced by Federal Finance Minister Shaukat Tarin, who was flanked by Punjab Chief Minster Shahbaz Sharif, Sindh Chief Minister Qaim Ali Shah, NWFP Chief Minister Ameer Haider Hoti and Balochistan Chief Minister Aslam Raisani. Provincial finance ministers, NFC technical members from all provinces and senior government officials were also present on the occasion.
Under the new NFC Award, the federation has met the provincial governments' demand for a greater pie in the vertical sharing of national resources. Hence, the provincial share of the divisible pool would increase from the present 47.5 percent to 56 percent in the first year of NFC and 57.5 percent in the remaining years of the Award.
As for inter-provincial sharing of the divisible pool, it would be made on the basis of multiple criteria formula and their respective weight as agreed upon are population 82 percent, poverty/backwardness 10.3 percent, revenue (generation/collection) 5 percent and poverty 2.7 percent. Consequently, under the new formula, Punjab would get 51.74 percent from the divisible pool, Sindh 24.55 percent, NWFP 14.62 percent and Balochistan 9.09 percent.
In the revised percentage of share of the provinces, Punjab would give up 1.27 percent, Sindh 0.39 percent and NWFP 0.26 percent, while Balochistan has gained. In monetary terms, it translates into Rs 471 billion for Punjab, Rs 223 billion for Sindh, Rs 133 billion for NWFP and Rs 83 billion for Balochistan. These are the projections for FY 2010-11 and based on 56 percent share.
For the remaining years of the new Award, based on provincial share of 57.5 percent, Punjab would receive Rs 938 billion, Sindh Rs 445 billion, NWFP Rs 265 billion and Balochistan Rs 165 billion. It mat be recalled that at present, Punjab is receiving Rs 419 billion, Sindh Rs 197 billion, NWFP 118 billion and Balochistan 53 billion.
However, Sindh would receive an additional transfer of Rs 6 billion from the Federal government, which is equivalent of 0.66 percent of the provincial pool. The Commission also decided to devolve sales tax on service to the provincial level on the pretext that sales tax on services is a provincial subject under the Constitution of Pakistan.
Also, the Federal and provincial governments pledged commitment to bear all expenditures incurred by NWFP government on war on terror. Thus, as a gesture of support by all provinces and the Federation, 1 percent of the total divisible pool has been earmarked for NWFP as an additional resource for war on terror during the Award period. This would be equivalent to 1.83 percent of the provincial pool.
While briefing the media, Shaukat Tarin said the Federal government recognised the need of the provinces for a larger share in the divisible pool since provinces are assigned the task of provision of basic services like health, education, water supply and sanitation. He observed that strengthen of Federation is directly linked with the strengthening of provinces, and hence it is essential to reinforce them.
"A number of measures have been taken to increase revenue of provinces, including enhancing federal revenue and curtailing government expenditure. This had given extra 5 percent fiscal space, while the federation has decreased its NFC charges from 5 percent to 1 percent. Thus, the extra savings from these factors have been transferred to the divisible pool," he added.
Tarin observed that NWFP was frontline province against war on terror and hence the federation and the three provinces unanimously agreed to help out the northern province. He said in the whole exercise the federation and the provinces should commitment and good will gestures and without political process and democracy the final outcome was not possible.
He appreciated Punjab, Sindh and NWFP for sacrificing minor percentage of their share for Balochistan and added that the Federal government also played its part by reducing the trust deficit between the federation and provinces. "In this connection, NWFP claim of hydel profit and Balochistan's demand for gas development surcharge has also been resolved," he added.
According to him, in the whole process of finalising the 7th NFC Award, many thorny issues were resolved between the federation and provinces and among the provinces. The credit goes to all the chief ministers who through a political dialogue removed hurdles that surfaced. The Punjab Chief Minister's role is highly appreciable who accepted the demand of other provinces to divide resources on multiple indicators (rather than on population alone) and showed flexibility on the NFC, which paved way for its conclusion.
Punjab Chief Minister Shahbaz Sharif said today is of historic importance in the national history, as the unanimously approved award will bring prosperity to the people of the country. He said Punjab had announced that it would adopt a flexible attitude on the award and it feels proud to have honoured its promise to the people of Pakistan as well as brethren of Balochistan. "The decision taken today has proved that political leadership of the country is fully aware of the sensitive nature of the problems being faced by the country and is capable to deal with them," he added.
According to him, the last NFC award was launched 13 years ago in 1997 and later due to long periods of dictatorship no NFC award could be announced. Had there not been democracy in the country such consensus on this award could not have been achieved. After revival of judiciary, the NFC award is the second biggest gift of democracy to the people of Pakistan.
"The poor masses of Pakistan have similar problems whether they are in Sindh, Balochistan, NWFP or Punjab. Poverty, ignorance and disease are the common enemies and there is need to wage collective struggle against them. It is the principle of warfare that more troops are sent to the area or front where the enemy is in larger numbers and the decision to provide more resources under the new NFC formula is based on the same strategy," he added.
Sindh Chief Minister Syed Qaim Ali Shah in his address termed this as historic day in Pakistan and said that only a representative government could gain such achievement, and not under a dictatorial government. He observed that the previous army regimes ignored the provinces and people, rather then giving them relief they oppressed them. "Pakistan is strong only if the provinces are strong," he added.
He said all the issues are resolved through dialogue, which created a consensus on the award. He was of the view that had the Punjab Chief Minister not agreed on multiple-criteria formula in Karachi then there still would had been a deadlock. He expressed gratitude to the Punjab Chief Minister for showing flexible attitude. "The approval of NFC award is only a beginning and rapid progress would be made towards the achievement of our objectives," he added.
NWFP Chief Minister Amir Haider Khan Hoti said Pakistan is facing many challenges and in this backdrop the today's achievement is indeed a welcome news for people of Pakistan. He said democracy has bore fruits and the approval of this award has proved that we are moving in the right direction. "NWFP is fighting for survival of the country and the example set by the provinces of giving one percent from the pool to NWFP in war against terrorism is very rare. Now, Pakistan is moving in the right direction," he added.
Balochistan Chief Minister Nawab Aslam Raisani termed the approval of the 7th NFC Award as a good and productive beginning in the history of the country, which would result in strengthening the country. He said this is an important step towards provincial autonomy. "Under the new formula for sharing of resources, Balochistan would financially gain manifold," he added
It may be recalled that the sixth meeting of the commission, originally scheduled for two days, took three days to strike a consensus on the thorny issues pertaining to horizontal distribution of the national resources. The provinces had objection to weightage given to multiple-criteria formula, based on population, inverse population density, revenue (generation/collection) and poverty. Former finance minister Ishaq Dar was also present.