Resources Distribution and Transfer.

ISLAMABAD: Pakistan is a federal democracy. In order to maintain inter-governmental fiscal relationship between the federal and provincial governments, Article 160 of the Constitution provides for the setting up of a National Finance Commission (NFC) with intervals not exceeding five years. The NFC so constituted is mandated to make recommendations after due deliberations to the President for the determination and distribution of resources between the Federal Government and the Provincial Governments of Punjab, Sindh, Khyber Pukhtoonkhwah (formerly NWFP) and Balochistan. The recommendations of the NFC when submitted to the President and approved by him are then given legal cover through a Presidential Order , commonly known as the NFC Award, which is initially valid for a period of five years. However, it can subsequently also be extended on year to year basis till a new NFC Award is notified.

For the first time in the politically chequered history of Pakistan, multiple indicators were adopted in the 7th NFC Award for determination and distribution of provincial shares in the divisible pool of taxes and duties on horizontal basis whereas in all the previous NFC Awards, population had remained the sole criterion for determination and distribution of the provinces" shares with special grants as subventions to the smaller provinces.

A special feature of the 7th NFC Award is long overdue recognition of the requirements of most backward and area-wise the largest with sparsely populated province of Balochistan. Its share out of the Divisible Pool of Taxeexts and Duties was notified and guaranteed at Rs 83 billion during the financial year 2011-12 which was more than double from the actual divisible pool share of financial year 2009-10. It was also ensured that Balochistan province will be receiving its share in the divisible pool, based on the budgetary projections instead of actual collection by the federal government's main tax generation and collection agency, Federal Board of Revenue (FBR). Shortfall, if any, based on the actual collection, which may be reported by FBR, is then made up by the Federal Government out of its own share. This arrangement is in practice since financial year 2011-12 and is continuing till 7th NFC Award is operative.

The 7th NFC Award was notified by President Asif Ali Zardari in 2010 and it was to be enforced from first day of July 2010 till stipulated period of five years. Since no new NFC Award was notified...