Interprovincial Harmony & The Role of the NFC Award

The Role of the NFC Award

Interprovincial harmony, undoubtedly, plays an important role not only in the development of a nation but also in nurturance and promotion of democracy. The centre plays a conciliatory role by ensuring that the provinces seek solutions to the issues through amicable negotiations and by avoiding unnecessary interference in matters where the interests of the provinces lie so that all the federating units can coexist in harmony. <div>

Sadly, Pakistan has never witnessed interprovincial harmony in true sense. After independence, the process of constitution-making created a lot of misunderstandings among the federating units and it ultimately resulted into the dismemberment of the country and creation of Bangladesh in 1971. The centre did not play its due role at that time; whether it was the issue of language or that of allocation of resources or of the representation of provinces in the government and bureaucracy, both military and civil.

This created a sense of deprivation in the then-East Pakistan which led to what is now one of the saddest chapters in our history. The dictum “history makes us wise” does not seem to hold true in our case as we have not shown any maturity in dealing with the provinces even after the 1971 debacle.

Fiscal decentralization is one of the basic principles of democratic federalism. The constituent units or provinces in democratic federation possess the right to collectively decide the extent to which the resources are provided to the centre to run its business. But, in Pakistan’s case, the things run opposite. Almost seven decades down the road and even after the passage of the 18th Constitutional Amendment, the provinces are still at the mercy of the federation when it comes to distribution of resources.

Since the inception of Pakistan, the National Finance Commission (NFC) Award has been controversial and has caused a great deal of resentment between the centre and the provinces and among the provinces also. Population was not the basis of the Award when East Pakistan was part of the federation rather revenue and inverse population density were made the basis for resource distribution. But after the separation of East Pakistan, population was made the sole basis for the distribution of the NFC award, instead of the previous criterion.

There is hardly any federal state in the world where financial distribution among the federating units is made solely on the basis of population. After the separation of East Pakistan, six NFC Awards — from 1974 to 2006 — were given on the basis of population.

According to the current 7th NFC Award, among the total divisible pool, 44 percent is directly taken by the Centre which is dubbed as vertical distribution. Out of the remaining 56 percent, Punjab gets 51.74 percent, followed by Sindh (24 .55 percent), Khyber Pukhtunkhwa (14.62 percent) and Balochistan (9.09 percent). Keeping in view the level of backwardness and poverty in provinces, barring Punjab, this distribution does not seem justified. Under this arrangement, Punjab takes the major share from both sides despite the fact that Sindh contributes nearly 70 percent to the total income of the country. If the assessment is made on the basis of revenue, the share of Punjab comes to 23.04 percent and Sindh will get 69.02 percent. This is what makes the NFC Award a contentious issue between the centre and the provinces as well as among the provinces.

The PPPP government announced the 7th NFC Award in 2009 according to which share of the centre and the provinces was fixed, as indicated above, which according to the principle that was practiced before the 1996 Award should have been 20 and 80 percent, respectively. The distribution of the present Award is based on multiple criteria but unfortunately 82 percent of the distribution is still based on population, whereas a share for poverty and backwardness, production and collection of revenue and inverse population density is 10.3 percent, 5 percent and 2.7 percent, respectively. This reflects that distribution of resources among the provinces is far from what can be termed as just and satisfactory. According to the 18th Amendment, the share of the provinces could be increased but cannot be decreased from the share fixed in the 7th NFC Award.

After the 18th Amendment, the NFC Award has become more crucial because the provinces need to adequately fund important services like education and health. However, the present government has cut a sorry figure in doing the needful. Instead of updating the Award, they have resorted to ad hoc extensions. The smaller provinces protested the delay in the recently held meeting of the National Finance Commission. It is startling that the NFC Award was not discussed even once during the eighteen meetings of the Council of Common Interests held during the last ten years.

The differences among the provinces persist when it comes to the ownership of natural resources and royalty distribution. Natural resources, of course, are blessings of nature to the people living in those areas. But, unfortunately, this has not been the case with Pakistan. Balochistan and Sindh feel deprived and discriminated due to the ownership of natural resources. For example, Sindh contributes 71 percent to the total gas production in Pakistan whereas share of Balochistan, Punjab and KP is 22 percent, 5 percent and 2 percent, respectively. The share of Sindh, Balochistan, Punjab and KP in oil production is 56 percent, 25 percent, 01 percent and 18 percent, respecti-vely. The centre has been taking away 88.5 percent of the royalty on natural resources before the 18th Amendment. The provinces used to receive only 11.5 percent which was further affected by red-tapism and corruption. After the Amendment, the subject of natural resources has been devolved to the provinces and the share of royalty on the natural resources has been increased from 11.5 percent to 50 percent. However, it still awaits implementation.

Water dispute among the provinces is also a existential threat to the federation and a major source of conflict among the federating units. The water dispute among the provinces should be resolved in the light of federal principles and international laws regarding distribution of water. The Indus River System Authority (IRSA) has failed miserably to ensure fair distribution of water. Council of Common Interests should play its role in this connection.

The above issues can bee resolved by engaging the provinces in negotiations and by launching development projects in the provinces that feel they are being ignored. The centre can play a crucial role by giving provinces their due share and also ensuring fairness in its dealings with the federating units. The leading political parties should also come forward to help the government resolve interprovincial issues. The sooner it is done, the better it is.

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