The share of provinces in the federal divisible pool in the upcoming budget would be Rs 204 billion against Rs 176.36 billion for 2003-04, showing an increase of about Rs 28 billion or 15 percent over the previous year.
This makes the provincial share from the federal divisible pool nearly 42.8 percent for the coming budget, sources told Business Recorder.
The amount is inclusive of the subvention and grants to smaller provinces and distribution of 2.5 percent of General Sales Tax (GST) collection to provinces.
During the current fiscal, 2.5 percent of the GST amounted to Rs 21.76 billion. The subvention to smaller provinces is Rs 8.7 billion, out of which Balochistan has received Rs 4.8 billion, and NWFP, Rs 3.8 billion.
Apart from this, the straight transfers of funds, that was Rs 35 billion in current fiscal year, include excise duty/royalty on natural gas and royalty on oil, and gas development surcharge (GDS), which passed to provinces as soon as they are received from the petroleum ministry.
In a briefing with reporters, Finance Minister Shaukat Aziz said the request of smaller provinces for increase in subvention and grants in the next fiscal year would be entertained, and after getting approval from the President and the Prime Minister, we will take some decision on it.
Further, the federal government would try to resolve the issue of arrears of smaller provinces, particularly of Balochistan regarding the GDS arrears, and we would also request the State Bank to reduce mark-up on the overdraft taken by Balochistan, the minister said.
According to the official statement, a meeting of federal finance minister with the finance ministers of all the four provinces was held to discuss various issues related to the budget 2004-05 to be announced on June 12.
Shaukat Aziz advised the provincial ministers that the federal government would work to reduce the debt servicing cost of the provinces, which will create added fiscal space.
He also encouraged provinces to seek structural adjustment credits from the World Bank and the Asian Development Bank, the proceeds of which will contribute to reduce relatively expensive debt and help the development process in provinces.
While discussing the next year's budget, provinces were informed that due to increased tax collection, the divisible pool would be increased giving provinces additional resources.
The size of current fiscal year's net divisible pool was Rs 470 billion out of which the provinces were given Rs 176.36 billion, and in the next fiscal year it is going to be Rs 544 billion.
The meeting agreed to continue discussions on the National Finance Commission (NFC) award after the budget process.
The participants appreciated efforts of all NFC members and hoped that continuation of deliberations will lead to a satisfactory conclusion.
Senior Minister of Sindh and Finance Minister of Punjab informed the meeting that the budgets of Sindh and Punjab would be announced on June 14 and June 17, respectively.
Finance ministers of NWFP and Balochistan stated that the budgets of their respective provinces will be announced in the next few weeks as finalised by the provincial cabinets on their return.
The meeting was attended by Punjab Finance Minister Sardar Hasnain Bahadur Dareshak, Balochistan Finance Minister Syed Ahsan Shah, NWFP Finance Minister Sirajul Haque, Finance Minister of Sindh Syed Sardar Ahmad and Finance Secretary Naveed Ahsan.
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