National Finance Commission award

The Finance Ministry has, reportedly, sent a summary to the President for the constitution of a National Finance Commission (NFC) award team.
This comes in the wake of several actions that have already been taken by the newly elected federal and provincial governments, which include the selection of the provincial representatives to the NFC as well as the commitment of the federal government to use this platform as a means to not only enhance inter-provincial harmony but also to empower provincial governments by granting them greater financial autonomy.
There is little doubt that over the years the four provinces have increasingly become alienated over the division of the pie, which, in turn, was controlled by a centre jealously guarding its financial power over the federating units. This approach was more in synch with an autocratic regime than a democratic dispensation and it is, indeed, gratifying that the newly elected government is now proceeding in the right direction in this regard.
That the NFC award has been the root cause of disharmony in the past cannot be denied. And the reason is the single criterion fixed for the award, ie population that was adopted after the fall of Dhaka.
The population criterion not only unduly favoured the province that had a higher population rate - an approach in direct conflict with the critical need for a reversal in our very high population growth rate that was limiting the government's capacity to provide basic social and physical infrastructure to all; but it had also ignored other relevant criteria that were in use in democratic countries with federating units referred to as provinces or states, namely, linking the share of the unit to the point of tax collection and underdevelopment or the lower per capita income, that is, the lower per capita income the higher the share of unit.
It maybe recalled that India employs multi-criteria for allocation to the states, which include population, point of collection, and federal government subventions targeted towards greater outlay for underdeveloped regions. And what is also significant is that India through this multi-criteria approach successfully raised the number of administrative units as there was an economic incentive for this.
For example, in 1966, the Indian Punjab was divided into three states: the Indian Punjab, Haryana and Hinachal Pradesh. This subdivision of Punjab has, in turn, reduced the almost 'nationalistic' stance of provinces that is much in evidence in Pakistan of today. In the US the federal government collects taxes separate from the state - a model that may not be immediately workable in Pakistan as the provinces do not have the infrastructure in place to collect taxes.
In addition, the NFC award has also generated centre-provincial disharmony in Pakistan, as it is seen by the federating units as a controlling tool by a totalitarian centre. In this context, too, devolution of financial powers to the provinces would go a long way in easing the tensions. It is significant to note that in the last NFC award, under the tutelage of President Musharraf, even though there was agreement between the provinces to allocate a total share of 50 percent of the federal resources to the divisible pool, this did not happen. There is little doubt, therefore, that the advantages of a successful NFC award would be felt at all levels.
In the post-February 18 election scene there has been unprecedented evidence of increased inter-provincial harmony as reflected in the handling of the wheat crisis as well as in the meeting of the four chief ministers in Lahore in the recent past. The signs are auspicious and this is the right time for the federal government to strike a deal.