NFC Award

While on his visit to Quetta, Prime Minister Shaukat Aziz announced that the National Finance Commission (NFC) would be convened again next month to finalise the financial Award.
The Prime Minister said he will himself chair the meetings of the NFC. He was optimistic that a fair Award in which the federation and the provinces would receive their due share would be hammered out by consensus.
In answer to newsmen's questions regarding the difficulties encountered in previous meetings of the NFC, particularly on the eve of the last budget, Shaukat held that the participants were close to a consensus but the Award could not be finalised because of some 'minor' problems.
The 'minor' problems referred to by the Prime Minister revolve around precisely a lack of consensus on the criteria to be employed for deciding the distribution of resources between the Centre and the provinces and amongst the provinces.
In past Awards, since the separation of East Pakistan, population has been the sole factor taken into consideration.
The plea of the minority provinces to include other factors besides population such as point of collection and need, has fallen on deaf ears.
This has led to heart burning and hardening of attitudes in the minority provinces. Even then in recent discussions amongst the stakeholders, other criteria have come to the fore, not to displace population as the main factor, but to redress the imbalance inherent in population alone as a criterion, given the differing demographies of the provinces.
It is no surprise, therefore, that a poor and backward province like Balochistan with a vast area but sparse population should demand that area and backwardness be given appropriate weightage when deciding the basis for resource distribution.
Similarly, NWFP wants backwardness included in the NFC criteria. Its other complaint about hydel net profit is in the process of being resolved outside the NFC framework through arbitration between the NWFP government and WAPDA, albeit the process has got off to a halting start.
Sindh claims the right to be compensated for its overwhelming contribution to taxes and duties. All the provinces demand that the share of the Centre be pared and that of the provinces enhanced.
Their demand for 50 percent of the cake in addition to the transfer of 2.5 percent GST to meet local bodies' expenditure produced a counter-offer last time from Shaukat Aziz as finance minister that the provinces could get 47 percent including the 2.5 percent GST.
For the Prime Minister's optimism to bear fruit this time round, it needs to be understood by all and sundry that a consensus will only be possible and sustainable if all the stakeholders, especially the provinces, feel a sense of ownership of the Award.
Such a sense of ownership will only emerge if the provinces receive through the process of negotiations to a greater or lesser extent at least one of their demands for a fairer deal.
If the relatively backward provinces of NWFP and Balochistan are to be compensated for the looming loss of subventions, the new formula should seek to correct their historically inherited backwardness through adequate weightage to their poverty.
If Sindh negotiates some weightage for its contribution to revenue generation, heavens will not fall, and the province would feel vindicated. In other words distribution under the Award shall have to be based on multiple factors and not on population alone.
It is the Centre and Punjab that have to show some flexibility and magnanimity if the new NFC Award is to see the light of day.
While the Prime Minister's optimism may be infectious, much hard bargaining lies ahead. It would be a test of the Prime Minister's sagacity and persuasive powers to get all the stakeholders on board and give the country an Award we can all live with.