Once again, controversy over the criteria for distribution of financial resources between the federation and the four provincial units has cropped up, compelling Prime Minister Mir Zafarullah Jamali to make a call for mobilizing adequate financial resources for all the five stakeholders.

The controversy dates back to the breakup of Pakistan and the creation of Bangladesh in 1971. Before that the principle of parity prevailed between the then East Pakistan and the then West Pakistan, as the western wing was more than satisfied with the principle.

But after the secession of the eastern wing, the proponents of the parity principle became the pleaders of population as the criteria for distribution of resources. In doing so, the other determining factors such as revenue generation, size, backwardness and the demands of development were totally ignored.

So the first NFC award 1974 was adopted on the population basis to the detriment of Sindh, NWFP and Balochistan. It was quite natural that all the three provinces now demand adoption of a balanced approach while dealing with the NFC award 2004, in order to be fair to all the provinces. However, Punjab is not prepared to follow any formula other than population.

Sindh demands for multiple criteria and stands for the principle of revenue generation capacity. It has been pressing for this point, ever-since 1974 when the first NFC Award was declared. Sindh's resentment seems to be quite legitimate that revenue generated in the province are mostly consumed in Punjab and other provinces.

Sindh wants 2.5 per cent of the sales tax collection estimated at about Rs36.4 billion and it wants this big chunk to be kept outside the divisible pool and be given to the provinces on the basis of their actual sales tax collection.

Sindh and other provinces also suggest that Islamabad should retain only 2 per cent of the total divisible pool as collection charges and not 5 per cent as is the practice for the last three decades.

Another grouse is that on the basis of the belatedly audited accounts of the provinces, octroi and zilla taxes collected before their abolition, Sindh's share should be 46 per cent, Punjab's 42.6 per cent, NWFP 6 per cent and Balochistan 5.3 per cent. Sindh complains that in this domain too, Punjab had enjoyed a share before the accounts were audited in excess of what was its due share.

The NWFP demands net hydel power profit, without which the NFC Award 2004 would not be acceptable to it, while Balochistan wants distribution of resources on the basis of territory, poverty, backwardness, natural gas production and population.

Its provincial government has already filed a claim of Rs6 billion on account of gas development surcharge (GDS). The federal government has already given Rs80 million out of this claim to Balochistan. However Balochistan continues to press for clearance of the entire arrears of Rs6 billion without any further delay.

Balochistan is the only beneficiary of the GDS because difference between production cost and gas price exists in this province only. Gas output in all other provinces is carried out at break-even points while GDS is produced only in Balochistan.

But GDS is distributed among all the provinces on production basis. Balochistan, claims that in order to make GDS an explicit tax, the surcharge should be collected at well ahead. It should be levied on per unit basis.

Balochistan also claims that the methodology for GDS computation should be scientifically evolved. It should be according to international accounting practices as laid down in the report of International Consultants M/S. Arthur Anderson and Co, prepared for the ministry of petroleum and natural resources.

Moreover, At the same time, Balochistan complaints that there has been constant decrease in GDS receipts. This decrease has been attributed to lesser ratio of gas from Balochistan in the overall quantity of gas injected in the Pakistan gas system.

Thus direct transfer (excise duty on natural gas, royalty on natural gas, surcharge on gas) and GST (provincial) have dropped to Rs8.12 billion in FY 2003-04 from Rs10.20 billion in FY 2002-03. The drop is due to difference in payment of share.

Balochistan has been paid at the rate of Rs26 for 1,000 cubic feet of gas as against Rs126 for the same quantity to Sindh and Punjab. Now Balochistan and Sindh are seeking for a negotiated settlement on this natural gas issue.

Balochistan is also opposed to sharing the federal divisible pool on population basis. The 1998 population census brought down Balochistan's population ratio to 5.1 from 5.3 per cent in the past.

This diminution in the divisible pool of taxes due to low population calculation in 1998, has caused a big loss to Balochistan. Its share has been reduced by Rs400 million. As a matter of fact, Balochistan's population has a verified growth of 7 per cent as per 1981 population census.

Even on the basis of downward adjusted growth rate of 4.51, Balochistan population comes to 6.44 and not 5.3 per cent. This calculation has caused the province a loss of Rs1.5 billion.

Balochistan's present ratio of 5.1 per cent population in Pakistan is not only a fall of 0.2 per cent in population ratio, but also a 3.6 per cent cut in its share from the federal divisible pool.

It is therefore apprehended that Balochistan's annual loss of Rs400 million in its share from the divisible pool on account of reduced population might not be enhanced when the NFC takes up fresh exercise in resources distribution among the provinces during FY 2004-2005.