7th nfc awards kashif nabi

Analysis of The Recent NFC AWARD

KASHIF NABI AS: 130

PAKISTAN ADMINISTRATIVE SERVICE

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SEQUENCE OF PRESENTATION• INTRODUCTION

• CONSTITUTIONAL PROVISION AND COMMISSION COMPOSITION

• CHRONOLOGY OF NFC AWARDS

• SALIENT FEATURES OF 7TH NFC AWARD

• IMPEDIMENTS

• CONCLUSION

• RECOMMENDATIONS

31/01/20147TH NFC AWARDS

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INTRODUCTION 1/2

• Pakistan a federation with centralized Government structure

• Resource Distribution • Systematic (4 Stages)1 • Random (Grants, Discretionary funds etc)

• National Finance Commission responsible for finance award for transferring revenue to the federating units

• Economic Programs enacted since 1951


1. National Finance Commission Awards in Pakistan: A Historical Perspective by Iftikhar Ahmad

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INTRODUCTION 2/2

• Constitutional provision for NFC Awards: Article 160

• Rationale behind NFC Award

• Step forward for decentralization and Fiscal Federalism

• Taxes collected in each province redistributed according to the NFC formula

• 7 NFC awards announced since 1973 1


1. http://en.wikipedia.org/wiki/National_Finance_Commission_Award

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CHARTER OF NFC• Distribution of the net proceeds of the taxes between the

Federation and the Provinces

• Making of grants-in-aid by the Federal Government to the Provincial Governments

• Exercising borrowing powers by the Federal Government and the Provincial Governments

• Any other matter relating to finance referred to the Commission by the President


1. Constitution of Pakistan 1973

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COMMISSION COMPOSITION

Federal Finance Minister (Chairman)

Provincial Finance Ministers

Suitable member appointed by President


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CHRONOLOGY OF NFC AWARDS 1/2

Awards Presented by Status Projected Fiscal year

First NFC Award 1974 Zulfikar Ali Bhutto Conclusive 1974–79

Second NFC Award 1979 Zia-ul-Haq Inconclusive 1979–84

Third NFC Award 1985 Zia-ul-Haq Inconclusive 1985–90

Fourth NFC Award 1991 Nawaz Sharif Conclusive 1991–96



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CHRONOLOGY OF NFC AWARDS 2/2

Awards Presented by Status Projected Fiscal year

Fifth NFC Award 1995 Benazir Bhutto Inconclusive 1995–2000

NFC Award 1997 Nawaz Sharif Conclusive 1997–2002

Sixth NFC Award 2002 Pervez Musharraf Inconclusive 2002–07

Seventh NFC Award 2010 Yousaf Raza Gillani Conclusive 2010–15



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PROVINCIAL DISSENT • Punjab

• Sole Population based criterion• Royalty on wheat and cotton

• Sindh• Consideration for Sales Tax and Services Collection

• Baluchistan• Geographical Size• Royalty on Natural Resources• Backwardness

• KPK• War on Terror Attrition • Backwardness• Royalty on Hydro Electric Power Projects


1. Fiscal Federalism in Pakistan : The 7th NFC Award and Its Implications by Usman Mustafa

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SALIENCE OF 7TH NFC

• Unanimous consensus after a lapse of 13 years

• Multi Indicator based distribution criterion

• Collection charges cut from 5% to mere 1%

• Compensation for KPK and Baluchistan

• Sales tax on services as provincial subject



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DISTRIBUTION CRITERION 1/2

INDICATORS % WEIGHTPopulation 82.00

Poverty/backwardness 10.30Revenue Collection/ generation 5.00

Inverse population density 2.70TOTAL 100



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DISTRIBUTION CRITERION 2/2


82%

10%

5%

3%

Population Poverty/BackwardnessRevenue Collection Inverse population density

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PROVINCIAL SHARE

FINANCIAL YEAR %AGE SHARE2006-07 41.50%2007-08 42.50%2008-09 43.75% 2009-10 45.00%2010-11 56.00%2011-12 onwards

57.50%



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COMPARATIVE ANALYSIS 1/2

SHARE 6TH NFC AWARD 7TH NFC AWARD EFFECT

FEDERAL SHARE 52.7% 44% REDUCED

PROVINCIAL SHARE

47.3% 56% INCREASED



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COMPARATIVE ANALYSIS 2/2

PROVINCE 6TH NFC AWARD

7TH NFC AWARD NET EFFECT

PUNJAB 53.10% 51.70% 1.26%

SINDH 24.94% 24.55% 0.39%

KPK 14.88% 14.62% 0.26%

BALUCHISTAN 7.17% 9.09% 1.29%



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NFC AWARD AND NATIONAL INTEGRITY


NATIONAL INTEGRATION

Financial Autonomy to

provinces

Socioeconomic development of

provinces

Inclusion of multiple criteria

Bridging of trust deficit

between centre and provinces

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IMPEDIMENTS• Lack of political will

• Weak financial management and lack of accountability

• Financial liabilities for Federal Government

• Instable service base under GST1

• Disparities in distribution to lower tiers



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CONCLUSIONNFC award is a major accomplishment and a product of the democratic process. Formulation of multiple criteria is a commendable step forward which will foster provincial fraternity as well as provincial fiscal autonomy. This will bolster provincial roles in alleviating poverty, undertaking development projects and effectively running institutional machinery. However, Federal Government has taken a substantial cut in its revenue and its resources will not be sufficient


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RECOMMENDATIONS• Good Governance

• Improvement in Financial Management

• Increasing accountability

• Strengthening Council of Common Interest

• Ownership of natural resources, fiscal autonomy, and taxation/revenue collection be further negotiated


Thank You

Q & A

05/01/2023 227TH NFC AWARDS

05/01/2023 237TH NFC AWARDS

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ARTICLE 160(1)Within six months of the commencing day and thereafter at intervals not exceeding five (consecutive) years, the President shall constitute a National Finance Commission consisting of the Minister of Finance of the Federal Government, the Ministers of Finance of the Provincial Governments, and such other persons as may be appointed by the President after consultation with the Governors of the Provinces


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7th nfc awards kashif nabi