ISLAMABAD: The government on Friday reconstituted the 9th National Finance Commission (NFC) to give new award for sharing of federal divisible resources among the centre and provinces.

The Ministry of Finance has issued a formal notification for the reconstitution of nine-member commission after its reference was approved by President Arif Alvi. The commission will be headed by Federal Minister for Finance, Revenue and Economic Affairs Asad Umar and comprise four provincial finance ministers and four non-statutory members.

The non-statutory members, one from each province, include Dr Salman Shah from Punjab, Asad Sayeed from Sindh, Musharraf Rasool Cyan from Khyber Pakhtunkhwa and Mahfooz Ali Khan from Balochistan.

The finance minister has repeatedly been asking the provincial governments since Sept 3, 2018 to send their nominations to complete the NFC as the centre struggled finalising an economic package with the International Monetary Fund (IMF) since the federal government has to indicate a clear line about financing arrangements for tribal districts being merged with the Khyber Pakhtunkhwa and financing requirements for Gilgit-Baltistan and Azad Jammu and Kashmir.

The reconstituted 9th NFC would be required to give 8th NFC award for five years but would have to face yet another legal challenge in the absence of formal notification of the results of National Population Census because of concerns from various stakeholders — particularly regarding Karachi.

The parameters of the next NFC award are anticipated to change for various provinces particularly after the addition of about five million people from tribal region into KP. This required a meeting of the Council of Common Interest to endorse census results, notwithstanding objections, because a massive exercise of census could neither be repeated nor ignored.

As required under Clause (1) of Article 160 of the Constitution, the 9th NFC was constituted on April 24, 2015. Since new governments are in place both at Federal and Provincial levels after general elections 2018, re-confirmation of the non-statutory members from the provinces was necessary. The five-year constitutional term of 9th NFC is set to expire in June 2020.

The provinces have been delaying the NFC completion despite multiple calls from various quarters including the ministry of finance, the armed forces and the IMF to rebalance the transfer of larger chunk of divisible pool resources to the provinces under 7th NFC award even though no change could be affected without consensus of all the five stakeholders (the centre and four provinces). Also, the Constitution promised that provincial shares could not be reduced.

Practically, it would be a totally new NFC because all the finance ministers, except from Sindh, would be new faces on the constitutional body.

The PML-N government had last reconstituted the 9th NFC in February 2016 when Naveed Ahsan was made non-statutory member from Punjab in place of Dr Aysha Ghous-Pasha who became a provincial minister in Shahbaz Sharif’s cabinet. The NFC, however, held only a couple of formal meetings in five years instead of compulsory 10 bi-annual meetings.

As a consequence, the 7th NFC award announced in 2009 continued annual extensions and remains in place even now instead of constitutional term of five years that came to an end on June 30, 2015.

Under the 7th NFC award, the four provinces are collectively entitled to 57.5 per cent of divisible pool taxes besides the revenue from income tax, wealth tax, capital value tax, general sales tax, customs duties and federal excise. The provincial governments get shares from the federal government under the 7th NFC award as per the following formula: Punjab 51.74pc, Sindh 24.55pc, Khyber Pakhtunkhwa 14.62pc and Balochistan 9.09pc.

Published in Dawn, January 12th, 2019