The inaugural meeting of the 10th National Finance Commission (NFC) would be held on Thursday (February 18) to work out a mechanism to distribute resources between the Federal Government and the provinces as well as the allocation of resources for the AJK, Gilgit-Baltistan, and the newly-merged districts of the KP from the divisible pool of taxes.
Sources told Propakistani that the inaugural meeting of the 10th NFC would be held at the Finance Division. Finance Division has invited all four provincial finance ministers to attend the meeting beside members of the NFC. Since the constitution of the 10th NFC last year, this would be the first meeting of the commission.
The NFC Award has been due from 2015 after the expiry of the 7th NFC Award and discussion on the previous 9th NFC remained inconclusive owing to differences between the Federal Government and the provinces over the distribution of resources. Finance Ministry, now after the approval of the President, in pursuance of Article 160 (1) of the Constitution, notified NFC with effect from April 23, 2020.
Under the 7th NFC Award, the tilt of resources had been shifted towards provinces and the Federal Government in the past, and the current one, had been complaining that after meeting the debt servicing and defense expenses; there was nothing left with the federation to meet other expenditures.
According to the notification issued last year, the composition of the commission was:
- Minister for Finance, Government of Pakistan – Chairman
- Minister for Finance, Government of Punjab – Member
- Minister for Finance, Government of Sindh – Member
- Minister for Finance, Government of Khyber-Pakhtunkhwa – Member
- Minister for Finance, Government of Balochistan – Member
- Advisor to the Prime Minister on Finance and Revenue – Member
- Tariq Bajwa, Government of Punjab – Member
- Dr. Asad Sayeed, Government of Sindh – Member
- Musharraf Rasool Cyan, Government of Khyber-Pakhtunkhwa – Member
- Javed Jabbar, Government of Balochistan – Member
- Finance Secretary, Government of Pakistan – Official expert
Later, Adviser to the Prime Minister on Finance and Revenue, Dr. Abdul Hafeez Sheikh, was removed from the National Finance Commission (NFC). Former senator, Javed Jabbar, had resigned from the 10th NFC, citing “political opposition to his nomination.”
Last year’s NFC notification said that the terms of reference (ToRs) of the 10th NFC included
a. Distribution between the federation and the provinces of the net proceeds of the taxes:
- Taxes on income including corporation tax, but not including taxes on income consisting of remuneration paid out of the Federal Consolidated Fund
- Taxes on the sales and purchases of goods imported, exported, produced, manufactured, or consumed
- Export duties on cotton, and such other export duties as may be specified by the President such duties of excise as well as other taxes as may be specified by the President.
b. Making of grants-in-aid by the Federal Government to the Provincial Governments.
c. Exercise by the Federal Government and the Provincial Governments of the borrowing powers conferred by the Constitution.
d. Assessment and Allocation of resources to meet expenditures related to the Azad Government of the States of Jammu and Kashmir, the government of Gilgit-Baltistan, and newly merged districts of Khyber Pakhtunkhwa (erstwhile FATA).
e. Assessment and allocation of resources to meet expenditures made on security and natural disasters/ calamities.
f. Assessment of total public debt and allocation of resources for its repayment.
g. Rationalization of subsidies given by the Federal and provincial governments in their budgets and agreeing on a mechanism to finance them.
h. Exploring ways to reduce losses of State-owned enterprises and agreeing on the mechanism for sharing these losses between the Federal Government and the Provincial Government.
i. Any other matter relating to finance referred to the Commission by the President. The Finance Division would, as per the Rules of Business, 1973, provide the Secretarial support to the Commission.
Under the existing NFC arrangements, the Federal Divisible Pool (FDP) is distributed under the ratio of 57.5 percent to 42.5 percent among the provinces, and the Federal Government, respectively.
Currently, the issues of the NFC Award and the 18th Amendment have become a point of conflict between the government and the opposition parties.