50-50 cost-sharing formula: provinces protest against possibility of non-provision of funds by Centre

The provinces have protested strongly against the possibility of the federal government not providing financing for provincial projects on 50-50 cost-sharing formula, except those in the category of development packages, Business Recorder has learnt. Finance Ministry and Planning Commission have supported the proposal to end cost-sharing formula which was leading to a tug of war between the Centre and the provinces.
"At present, no project is being made a part of federal PSDP 2010-11 on cost sharing formula except the projects under development packages, like Multan, Larkana, Hyderabad and Balochistan," sources claimed, adding that this was decided in Annual Plan Co-ordination Committee (APCC) which met on Friday. Sources said that for cost sharing projects, a new mechanism would be devised later under the criteria agreed between provinces.
Finance Ministry failed to release funds to ministries and divisions due to poor cash flow from Friends of Democratic Pakistan (FoDP) and other donors, sources added. "Fifty percent allocation for water and power sector in the current year PSDP has been forwarded to next financial year's PSDP 2010-11," sources added.
There will be no block allocation for projects from next financial year (2010-11)."Ministries and divisions will have to submit quarterly report about progress on the projects to get funds for the next quarter," sources said, adding that this decision would facilitate the projects. The decision was taken keeping in view of the slow progress of ongoing projects, which was also resulting in cost escalation.
Under new NFC Award, the provinces' share in the divisible pool has increased from existing 47.5 to 56 percent in the first year. This implies that the provinces would receive Rs 227 billion in the first year in addition to their current share of Rs 550 billion - an amount that will increase to Rs 850 billion the following year and to Rs 1,250 billion by the fifth year. Thus, the provinces would be enabled to fund the entire development projects from their own resources.
Due to the tug of war with the provinces over the cost sharing formula, the Planning Commission (PC) had also sought intervention of Cabinet to settle the dispute with provinces in this regard. The Planning Commission wanted provinces to either share 50 percent cost of provincial projects with federal government, or bear complete cost of the projects.
General Pervez Musharraf had announced many development schemes in the provinces. At that time, it was decided that provinces would bear 50 percent cost for provincial projects with the federal government. "Since 2003, many development schemes had been launched, but provinces were not ready to follow the 50 percent cost sharing formula on the pretext of lack of funds," sources added.