National Finance Commission: Article 160 of the constitution of Pakistan says that after every five years the president shall constitute a National Finance Commission. This National Finance Commission will review the formula for the distribution of funds, taxes and other monetary assets among the Center and the Provinces and among the four federating units of Pakistan namely, Punjab, Sindh, Balochistan, Khyber Pakhtunkhawa. Composition Of NFC Award:
1) Minister of Finance of the Federal Government.
2) Ministers of Finance of the Provincial Governments.
3) And such other persons as may be appointed by the President after consultation with the Governors of the Provinces.

Functions of National Finance Commission: Following are the major functions of national finance commission

i. The distribution of funds between the Federation and the Provinces of the net proceeds of the taxes.
ii. The making of grants-in-aid by the Federal Government to the Provincial Governments.
iii. The exercise by the Federal Government and the Provincial Governments of the borrowing powers conferred by the Constitution.
iv. Any other matter relating to finance referred to the Commission by the President.

National Finance Commission Award: The decision of national finance commission is called national finance commission Award. 7th national finance commission Award was passed in 2010

Salient Features of 7th NFC Award 2010
Size of Divisible Pool:
As a consequence size of Divisible Pool enhanced by Rs. 68 billion.
Share of Provinces was approximately Rs.39 billion.
Collection charges decreased from 5.2% to 1%.

2. Vertical Distribution
-Provincial share increased from 48.75% to 56% in the first year.
-The provincial share would increased to 57.5% after the first year.

3. Horizontal Distribution
-Multiple criterion have been set for distribution of share among the Provinces.
1 Population              82%
2 Poverty              10.30%
3 Revenue               5.00%
4 IPD (Inverse Population Density)      2.70%

4. Province Wise Weightages
1. Punjab                 51.74 %
2. Sindh                     24.55 % ,
3. Khayber Pakhtonkhwa   14.62 %
4. Balochistan               9.09 %

5. GST on Services
-Federal Government recognized that the Sales Tax on Services is a Provincial subject. NFC decided that it might be collected by Provinces if so desired
-Provinces will gain Rs. 30 billion as a result of this decision.

6. Gas Development Surcharge
-On account of GDS
-Balochistan     28.7 percent,
-KP         3.0 percent,
-Punjab     7.8 percent
-Sindh     60.4 percent.
-As per former formula, the loss of royalty to Balochistan is about Rs 2 billion which will be compensated through generating additional revenue of Rs 1.8 billion under the revised formula. (10 %)

7. Relief Measures for KP and Balochistan
-KP  NFC recognized the role of NWFP as front line province against War on Terror
-Federal Government to bear all expenditure
-1% of net proceeds of Divisible Pool ear-marked for KP
-Balochistan ,As the most under-developed province of Pakistan and having peculiar geographic and economic characteristics, Balochistan needed special attention of NFC. In the horizontal distribution, its provincial pool has been increased to 9.09% (approximately twice the 2009-10 Divisible Pool transfers). Moreover, Federal Government has promised to cover any short fall due to lower federal revenues.

July 9, 2010 | Talib Akhtar | No Comments | 225 views