PESHAWAR: A crucial meeting of the National Finance Commission (NFC) is set to take place on December 4 in Islamabad and it has gained exceptional importance for Khyber Pakhtunkhwa (KP) which is preparing to present documented evidence showing that after the merger of Fata the province’s actual NFC share becomes 19.64 percent instead of 14.63 percent.
According to the working paper this difference translates into an annual amount of Rs213 to Rs220 billion which the province has continuously been deprived of.
The official working paper shows that after the merger of Fata the NFC share of KP increases in the following manner. Under the population indicator, the province’s share rises from 11.33 percent to 14.16 percent which amounts to Rs119.91 billion. Under the poverty indicator, the share goes from 2.87 percent to 4.71 percent adding another Rs78.2 billion. Under the inverse population density indicator, the share rises from 0.18 percent to 0.52 percent which equals Rs14.65 billion. The revenue collection indicator remains unchanged at 0.25 percent. Taken together the overall NFC share goes from 14.63 percent to 19.64 percent creating a total financial effect of Rs213 billion per year.
The working paper also calculates Fata’s financial impact separately which further strengthens KP’s case. Under population, Fata alone accounts for 1.99 percent equal to Rs84.67 billion. Under the poverty indicator Fata’s weight is 2.82 percent adding Rs119.63 billion. Under the inverse density factor, Fata adds 0.36 percent equal to Rs15.29 billion. Altogether the separate impact of Fata comes to 5.17 percent which translates into Rs219.59 billion every year.
The federal government had committed under the 25th Constitutional Amendment that it would provide Rs100 billion annually for former Fata but according to documents, KP has received only Rs160 billion so far in seven years. This means Rs540 billion remain unpaid causing severe difficulties for the development and rehabilitation programme in the merged districts.
Muzzamil Aslam, Adviser to CM on Finance told this correspondent that KP’s security, policing, infrastructure and development responsibilities have increased many times since the merger while the federation continues to withhold the additional Rs200 to Rs220 billion that legally arise from the NFC formula. He maintained that the province will not accept any NFC share without the involvement of former Fata and that the federal government has consistently reduced KP’s rightful resources for the past 7 years pushing the province towards a deepening financial crisis.
He said that the 4 key points will dominate the December 4 meeting: updated population poverty and backwardness indicators, the formal inclusion of Fata’s weight in the NFC, the possible adjustment in the vertical share of provinces and the issue of outstanding dues and financial commitments. The KP delegation is fully prepared with documented evidence and all the numerical support.
Muzzamil said that upcoming NFC meeting is, therefore, more than a fiscal exercise as it is a decisive moment for KP. Despite the merger, the province has been deprived of its rightful share not only in the NFC but also in the promised annual funds for Fata.
The source claims that failure to correct the share of 19.6 percent and failure to release Rs213 to Rs220 billion annually along with the promised Rs100 billion for merged districts could create a new wave of friction in centre-province relations.
Source said that at the federal level rising debt, defence spending and subsidies are creating pressure and it is expected that during the meeting, the proposals such as reconsidering the provinces’ collective 57.5 percent share or shifting more expenditure responsibilities to the provinces may emerge.
