Provincial nature PSDP projects: Centre decides to make it mandatory for provinces to share 50pc cost

ISLAMABAD: The caretaker federal government has reportedly decided to make it mandatory for the provinces to share 50 per cent of total cost of provincial nature projects in Public Sector Development Program (PSDP), well informed sources told Business Recorder.

This decision has been taken at high level meeting presided over by the caretaker Prime Minister, Anwar-ul-Haq Kakar.

Secretary Finance, Secretary Planning, Development and Special Initiatives (PD&SI), Secretary Poverty Alleviation, Secretary Industries and Production and Chairman Higher Education Commission (HEC) have been directed to prepare working paper for National Economic Council (NEC) for 50:50 financing of provincial nature projects in PSDP, Benazir Income Support Fund (BISP), subsidy on fertiliser and agriculture tube-wells, etc.

PSDP 2023-24: Planning ministry disburses Rs135.41bn

According to sources, Finance Division has also been directed to undertake technical work on National Finance Commission (NFC) award in the light of new census, which implies that now provinces’ unbridled funding will be linked to some conditionalities, aimed at ensuring transparency.

In the light of decisions taken at the high level meeting, Ministry of Planning, Development and Special Initiatives has also sped up its action with respect to curtailment of PSDP of provinces. The M/s PD&SI has authorised/ disbursed Rs 135.41 billion (14.3%), including Rs 5.66 billion foreign exchange component, in July and August 2023-24 against Rs 950 billion total budgeted allocation for the Public Sector Development Programme (PSDP).

Deputy Chairman Planning Commission has also directed that full year review of PSDP 2022-23 may be undertaken by Member (concerned), Planning Commission and complete the exercise. Subsequently, any impediments or problematic projects will be reviewed by DCPC next week starting from September 25, 2023 (tomorrow).

The sources said, in continuation of M/o PD&SI’s letter of August 16, 2021 whereby the policy approved by the NEC was circulated for processing/ approval of provincial subject projects for compliance, the NEC on recommendation of Annual Plan Coordination Committee (APCC), in its meeting held on June 6, 2023 has further approved the following policy: “ the sponsoring/ executing agencies should follow NEC approved policy 2021 regarding compelling provincial nature schemes and should bear at-least 50 per cent capital cost of such projects except in case of strategic nature important projects“.

M/s PD&SI has urged sponsoring Ministries/ Divisions and provinces to follow policy guidelines in letter and spirit, adding that these instructions should also be brought into the notice of attached departments under administrative control of Ministries/ Divisions/ Provinces.

Ministry of Planning, Development and Special Initiatives has also shared its letter of August 16, 2021 for implementation in letter and spirit.

The letter states: “federal government has been financing provincial projects which otherwise is the responsibility of provincial governments especially after 18th amendment to the Constitution to supplement provincial resources.

However, it has been observed that due to financial constraints and financing mega project of national importance by the federal government, it may not be possible to continue to finance provincial projects unless costs also be shared by the provincial governments.“

On recommendations of APCC held on May 28, 2021, the NEC in its meeting held on June 7, 2021 has approved policy to finance provincial projects which inter-alia include Federal/ PSDP funding with cover for only;(i) capital investment;(ii) projects located in deprived areas and;(iii) original approved cost. Any subsequent change due to scope or any other reason in cost would be responsibility of provincial governments.

The provincial governments would be responsible to;(i) bear the cost of land acquisition, resettlement, provincial taxes and cost of PMU;(ii) take over the projects on completion immediately; and (iii) in case of irrigation projects, provincial governments would simultaneously develop command area to fully benefit from the project.

The projects which are selected for financing by the federal government adhering to the policy would be approved by the competent forum.

On the issue of subsidy on fertilisers, the sources said, on a number of occasions, the provinces have been urged to share 50 per cent share in subsidy on urea but some have out-rightly refused to contribute their share whereas some showed reluctance. This stance of provinces has irritated the federal government.

Likewise, political parties, specially the PPP use BISP for political gains in elections but provincial government do not share a single penny on this account and the loans/ finances obtained from international financial institutions are repaid by the federal government.

The caretaker Finance Minister, Dr Shamshad Akhtar, has recently announced that she would hold a meeting soon with Minister for Planning, Development and Special Initiatives to review “unnecessary” projects started by the previous governments aimed at rationalising the PSDP.

Copyright Business Recorder, 2023