Federal govt pays Rs80bn to Balochistan to cover revenue shortfall

The 7th NFC Award guarantees Balochistan its due share regardless of any changes to the revenue target

ISLAMABAD: The federal government has paid an additional sum of Rs80 billion to Balochistan for the ongoing fiscal year to make up for revenue shortfall as the National Finance Commission (NFC) Award guarantees that any shortfall in the province’s share because of lower-than-target tax collection by the Federal Board of Revenue (FBR) would be paid by Islamabad.

Speaking to Profit, an official of the Ministry of Finance said that Balochistan received at least Rs80 billion in addition to what the provinces got after the tax department’s revenue target was revised the third time. 

Under the 7th NFC Award, unlike other provinces, Balochistan had been guaranteed its due share from the divisible revenue pool regardless of any changes to the revenue target, therefore, the province received its share on the basis of the Rs5.5 trillion revenue target set in the budget for fiscal year 2019-20 while the rest of the provinces were given their shares on the basis of the revised target of Rs3.8 trillion, the official added.

It is worth mentioning here that economists have said that the federal government has once again set an unrealistic target of Rs4.9 trillion for the next fiscal year and the Centre would again have to make up for the shortfall to Balochistan.

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The 7th NFC Award, which was signed in 2009 is still in effect under a presidential order after the expiry of its five-year tenure in 2015. Under the agreed division formula for financial resources, Balochistan’s share was spiked from 5.13 per cent to 9.09 per cent to meet the development needs of the province. 

As the Centre and provinces could not reach an agreement over another revenue sharing formula, the government once again prepared the budget on the basis of the 7th NFC Award, which means that it would be extended for another year.

Currently, Punjab gets the 51.74 per cent share from the total revenue, Sindh 24.55 per cent, Khyber Pakhtunkhwa (KP) 14.62 per cent and Balochistan 9.09 per cent. There are speculations that the federal government wants to secure an additional share in the divisible pool, but the provinces have strictly warned against reducing their share.

Besides protecting its existing share, last year, Balochistan tried to push stakeholders for significant changes in resource distribution arrangements between the Centre and the federating units as well as among the provinces in an attempt to secure a higher share from the federal divisible tax pool.

Balochistan wished an increase in weight of some indicators in the formula for division of resources among the provinces. Besides, it wanted to get another indicator — inverse cultivated land — added to the formula for horizontal resource distribution under the 9th NFC award.  However, the same is yet to be discussed by the stakeholders.

According to budget documents the federal government would transfer Rs2,873.72 billion to the four provinces under the NFC Award in the budget for the fiscal year 2020-2120 against revised Rs2,402.08 billion of the outgoing year. 

The federal government has increased the provinces’ share by 19.63 per cent for the upcoming fiscal year under the NFC. The amount to be transferred to the provinces would depend on the FBR’s performance to achieve its collection target of Rs4.963 trillion in the fiscal year 2020-21.

President Dr Arif Alvi had recently constituted the 10th NFC to reach an agreement over the 8th NFC Award. The 9th NFC had failed to constitute a new resource sharing formula between the Centre and four provinces during the five-year constitutional term. 

The five-year constitutional term of the 7th NFC award expired on June 30, 2015. Since then, the federal government is continuously extending the seventh award after failing to reach an agreement over the new NFC Award. Previous government of Pakistan Muslim League-Nawaz (PML-N) and the incumbent Pakistan Tehreek-e-Insaf (PTI) government both failed to formulate the fresh resource sharing formula between the federal government and the provinces.

According to the budget documents, the federal government would transfer Rs1,439.116 billion to Punjab in the next fiscal year against revised Rs1,135.45 billion of the current fiscal year. Sindh will receive Rs742.030 billion in the FY 2020-21 as compared to revised Rs592.32 billion of the outgoing year. Khyber-Pakhtunkhwa will receive Rs477.52 billion as against revised 

Rs379.097 billion in the ongoing year. KP would also get additional 1 per cent because of the war on terror.

The federal government would transfer Rs265.054 billion to Balochistan in the next fiscal year as compared to Rs295.983 billion of the outgoing year.

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Ghulam Abbas
The writer is a member of the staff at the Islamabad Bureau. He can be reached at [email protected]
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