The disagreement between the federal government and the provinces over the distribution of net federal tax revenues this fiscal year has hampered the presentation of the National Budget in Parliament for debate and approval. The centre-provinces controversy over the distribution of divisible resources is not a new phenomenon. This highly contentious issue dates back to the early years of independent Pakistan, when the former East Pakistan and West Pakistan were often at loggerheads over financial resources. This ultimately became one of the main factors driving Bengali nationalism to the point of no return.
The 18th Amendment and the 7th NFC Award
The 18th Amendment was passed in April 2010. This paved the way for the 7th National Finance Commission (NFC) Award. The credit for this NFC Award goes to the post-Benazir regime of the Pakistan Peoples Party. The shares of the provinces and the federal government from the divisible pool of resources were fixed at 57.5 and 42.5 per cent, respectively. This distribution was made according to a multi-factor formula, with population accounting for 82 per cent, followed by poverty/backwardness (10.3), revenue collection (5), and population density (2.7). Taking these criteria as the basis, the share of each province was fixed. Punjab received the major share of 51.74 per cent, followed by Sindh with 24.55 per cent. The shares of the smaller provinces, Khyber Pakhtunkhwa and Balochistan, were fixed at 14.62 and 9.09 per cent, respectively.
The centre and the provinces were to formulate their Public Sector Development Programmes (PSDPs) or Annual Development Plans in accordance with their net provincial tax revenues and shares from the central divisible pool as delineated above. It was believed that the chronic controversy over the distribution of resources had been resolved once and for all, and that there would be no opportunity for centrifugal forces to exploit such centre-province disputes to fuel separatism. However, our incompetence and extravagance returned to haunt us. The federal regime resorted to robbing the provinces of their legitimate share of the federal divisible pool.
Failure of Successive NFC Awards
Disagreement over the sharing of resources resurfaced when the 8th NFC Award was being constituted. Successive governments constituted the 8th and 9th NFC Awards but failed to finalise them. Thus, the country continued to operate under the 7th NFC Award since 2010, with provinces receiving 57.5 per cent of the divisible pool. It was also constitutionally stipulated that the share of the provinces as fixed in the 7th NFC Award would not be reduced. The constitutional amendment required to dispense with this clause was not easy to secure. Therefore, the federal authorities resorted to political inducements, political blackmail, and coercive measures. This highly contentious issue needed to be handled carefully.
The Pakistan Muslim League-Nawaz administration (2013–2017) under Mian Nawaz Sharif, and later under Shahid Khaqan Abbasi, failed to finalise the 8th and 9th NFC Awards. Our feudal and landlord lawmakers have always been ready to advance any proposal found useful for their political, economic, and financial interests, and to kill those that conflict with their unjustified privileges. The subsequent Pakistan Tehreek-e-Insaf regime also failed to announce the 8th NFC Award. Pakistan Muslim League-Nawaz administrations have always dealt with the provinces in an authoritarian manner. Cynics say that Asif Ali Zardari saved Sindh and his provincial administration by surrendering this year's Annual Development Plan.
Provincial Autonomy and Federal Overreach
While augmenting the quantum of provincial autonomy, the 18th Amendment, apart from other things, provided for the transfer of all residuary subjects to the provinces. The 1973 Constitution contained a large number of residuary subjects which were not explicitly assigned to either the federal Parliament or provincial legislatures. These included, inter alia, the Ministries of Health, Education, Agriculture, Local Government, and their auxiliary departments. This was intended to reduce the burden of overhead expenditure borne by the federal government. However, the federal government did not implement this aspect of the constitutional amendment and retained these ministries in one form or another. In place of the Ministry of Agriculture, a new Division of Food Security was created. The Ministries of Higher Education and Health were retained, even though the provinces had established their own Higher Education Commissions.
The sprawling Jinnah Hospital Karachi, originally a federal entity, exchanged hands several times between the federal government and the provincial administration of Sindh. The Sindh government established the National Institute of Cardiovascular Diseases, a state-of-the-art healthcare facility, and the National Institute of Child Health within it. The overhead expenditure of the federal government continued to increase. The federal government never cut its coat according to its cloth. The size of government kept expanding, with an army of ministers, advisers, and special assistants sauntering through the corridors of the Prime Minister's Office. The foreign junkets of rulers continued apace, while constituency-based development funds doled out to lawmakers were never reduced or properly accounted for. This represents a significant waste of both federal and provincial resources. These funds have never been properly audited since 1985, when the practice was initiated to keep the non-party Assembly of 1985 under discipline. This legalised corruption should have been curbed.
Wasteful Expenditure and Elite Privileges
The federal government could have avoided all this wasteful expenditure and provided for the strategic needs of the country. Our rulers at the centre want to hold two melons in one hand — the federal and provincial exchequers. They will not curb their wasteful expenditure. Whenever faced with a shortage of finances for vitally important sectors, they immediately think of provincial exchequers, robbing them of their legal and constitutional resources. Our feudal and landlord lawmakers have always been ready to advance any proposal found useful for their political, economic, and financial interests, and to kill those that conflict with their unjustified privileges. They have successfully thwarted vital political and economic reforms, including the promotion of a plural and democratic system of governance and the redistribution of state resources that could have adversely affected their privileges, including land reforms.
The ruling class has been ruthlessly devouring the meagre resources of the country. The United Nations Development Programme's National Human Development Report 2021 found that the economic privileges granted to Pakistan's elite groups, including the political class, corporate sectors, landlords, and the military, amounted to around $17.4 billion, or approximately six per cent of Gross Domestic Product. This amount must have increased tremendously with the rise in salaries, daily allowances, and privileges enjoyed by lawmakers and the ruling class. The federal government should have taken this money from them and allocated it towards our strategic needs. Large landlords pay little more than land revenue and agricultural water rates, which are minuscule amounts given the current financial crunch the country is experiencing. If we cannot carry out land reforms, we can at least tax the annual incomes of these landlords who saunter through the capital cities in their sport utility vehicles and Land Cruisers. Every year, they harvest dividends worth millions, depending on the size of their landholdings. They must surrender a small portion of their enormous incomes for the security of the country.
