NFC Award – recommendations to resolve imbalance, disparity

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  • And the constitutional dilemma
The National Finance Commission or the award is not only imperative for the survival of the federation, but also constitutionally binding. The past awards have not been regularly held on time at the expense of grave social and political costs. This is the only forum which constitutionally allows the division of resources or finances amongst the federation and provinces. Inked in the constitution under article 160 which has put biding conditions on what resources, taxes, duties, or revenues could be put in the “divisible pool” which is then distributed amongst the provinces upon an agreed formula.
As a student of constitutional law, I understand that financial matters within federations such as above if remain unresolved or deferred can instigate issues such as Irish-UK ethno nationalistic uprising of the 1970s, or similar resentments with the federation. Even in neighboring India, their NFC award holds a strategic importance and it is seldom postponed.
The last award, 7th NFC held in 2009 under President Zardari’s tenure meant to resolve disputes through an agreed improved formula for dividing the resources. According the new formula the following weights were agreed: population 82 percent which was possible only after Punjab agreed to its reduction, poverty and backwardness given 10.3 percent, revenue collection or generation five percent and inverse population density 2.7 percent.
Lessons from last award:
The above formula meant that  the share for Punjab dropped the most, while that of Balochistan rose significantly and interestingly, Sindh’s share has like always remained nearly the same. The share for Sindh which has remained leveled since 1990s implies that Sindh has little incentive to improve. Two, Punjab then was dissatisfied over total federal share nearing 44% which it considered to be significantly high. However, PML-N government which later came in center, switched stances, and their finance minister wanted greater share (6-7pc increase from 44pc) in the federation’s share on account of security needs and the needed funds for Gilgat Baltistan–Azad Kashmir region. Despite an increase in the share of Balochistan, and urban Sindh, little improvement was registered in both these regions. Gilgit-Baltistan remained neglected according to some, while the issue to raise additional 6-7pc for “security” remained unresolved. The “suggestion” to increase federal government share in NFC for “security need”, according to a few was raised for “political reasons” which led to unwanted tension between the political government and the security agencies.
Recommendations:
1) The idea or basic democratic constitutionally acceptable debate should be around first determining the benchmarks for federal-province share. The benchmark for instance, may be taken from neighboring India where the provinces’ share was increased from 32pc to 42pc. India’s share of tax collection is far better than that in Pakistan hence the percentage increase (from 32pc to 42pc) means that the center is willing to share a lot more of its share than Pakistan.
Balochistan has lot of potential for improvement because it is starting from a low base, unlike Punjab which has a worked lately and stands at a higher base
2) The share for south Punjab and rest of the Punjab should also be discussed there and decided at NFC award level. This should be part of the NFC so that the disparity between the central Punjab and rest while the poverty stricken South or Western Punjab should not be ignored. If poverty is an indicator then it is a criterion as well, south or neglected part of Punjab should not suffer anymore.
3) The share for the northern areas or Gilgat Baltistan belt, which are not provinces as per constitutional definitions, yet these are Pakistanis, should also be discussed, and funds committed should be made part of the meetings. The federal government takes chunk of the share in their name so the funds which would be set for Baltistan or AJ&K should be spilled out and inked. The amount which will be committed for Gilgit Baltistan should also be discussed and the federation’s spent or commitment should be made part of the award. It should be a check on federal government that it will lose its share in NFC if it does not spend in the poverty stricken Baltistan.
4) A positive reward criteria should be introduced in the NFC formula for improving social variables; provincial per capita income and efforts to improve social variables like, education and healthcare should be added and encouraged in the NFC formula. Extra points or basis points should also be awarded for those provinces like Balochistan and KPK who try to better themselves. The criteria or points are to encourage involvement from Balochistan and to reward KPK for competing with Punjab.
5) Monitoring and evaluation from third party and other provinces (something which needs to be carefully planned) so that there is an inventive towards developing needed sectors within provinces. Balochistan has lot of potential for improvement because it is starting from a low base, unlike Punjab which has a worked lately and stands at a higher base.
Strategic challenges:
One key issue that remains is how to reduce the poverty gap in the least developed areas such as Balochistan, KPK’s FATA and the rest of Pakistan. Two, the allocation and execution of development funds which if remain unchecked may lead to social problems such as deprivation amongst youth, resentment against the federation and intra provincial rivalry. Three, with the induction of FATA there is need for NFC awards, its proper allocation and ratio to be adjusted for such variables.