10th NFC Award: Federation Cannot Afford Re-centralisation Of Resources

10th NFC Award: Federation Cannot Afford Re-centralisation Of Resources
Muhammad Farooq in this article explains why it is near impossible for the centre and provinces to reach a consensus on the 10th NFC Award.

Pakistan is a federation and has four federating units, Punjab, Khyber Pakhtunkhwa (KP), Sindh, and Balochistan. Other territories directly come under the administration of the federal government. These include Gilgit-Baltistan and Azad Jammu and Kashmir.

Since its Independence, Pakistan has been a highly centralized federation. If we look back at the history post-1973, instead of announcing 10 National Finance Commission Awards, the Federal government has announced only four awards so far – in 1974, 1990, 2005, and 2009.

Most NFC Awards were missed when the country was being ruled by dictators. It only happened once under a democratic government. The reason was non-cooperation between the center and the provinces.

From 1974 to 2009, the distribution of the divisible pool was completed based on population. Punjab, under this arrangement, used to receive a huge chunk of the divisible pool, leading to a massive disparity between Punjab and the other provinces.

But it changed in 2009 when the democratic forces devised a new formula, under which the significance of population share came down from 100% to 82% and that was what the smaller provinces had been demanding for long - a change in the distribution criteria. Although it is still a thorny issue because 82% share based on population is unfair, it is at least a start. The remaining amount in the divisible pool is distributed based on poverty or backwardness (10.3%), revenue collection (5.0%), and inverse population density (2.7%).

Under this formula, Punjab receives 51.74% of the total, Sindh 24.55%, Khyber Pakhtunkhwa 14.62%, and Balochistan 9.09%.

Out of every hundred rupees, 42.5% goes to the center whereas 57.5 is received by provinces. In the previous arrangement, centre’s share was 57, and 42.5% would go to the provinces.

Under the 18th Amendment, the share of provinces cannot be shrunk. Now, the federal government is planning a 15% reduction in the provincial share from the divisible pool. Under the proposed arrangement, the share of the center will go up to 60% while that of the provinces will shrink to 40%.

The federal budget for the fiscal year 2020-21 is possibly a month away. It wouldn't be an easy task for the commission to reach a consensus in such a divided atmosphere.

The author hails from Takht Bhai (Mardan). He has done Masters in Pakistan Studies from Pakistan Study Centre, University of Peshawar.