Experts Call for Equitable Resource Sharing in NFC

News Desk 

Peshawar: The National Finance Commission (NFC) is a constitutional body that regulates fiscal relations between the federation and the provinces under Article 160(1), which mandates its constitution every five years, said Dr Syed Akhtar Ali Shah, Founder of the Good Governance Forum, Peshawar.

Highlighting Khyber-Pakhtunkhwa’s fiscal constraints, Dr Shah said the province remains heavily dependent on divisible pool transfers, Net Hydel Profit (NHP), and federal allocations. He underscored the additional financial burden arising from the inclusion of merged districts and the province’s border-related security expenditures.

The Good Governance Forum, in collaboration with the Institute of Management Sciences (IMSciences), Peshawar, organized a high-level workshop on the 11th National Finance Commission (NFC) Award to deliberate on fiscal federalism, revenue sharing, and constitutional obligations under Article 160 of the Constitution of Pakistan.

Speaking on the occasion, Dr. Shah said the Commission comprises the federal and provincial finance ministers along with other members appointed by the President in consultation with the provincial governors.

He explained that the NFC is responsible for making recommendations to the President regarding the distribution of tax proceeds, grants-in-aid, borrowing powers, and other finance-related matters.

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Dr. Shah emphasized that Article 160(3A) serves as a constitutional safeguard, ensuring that provincial shares cannot be reduced below their share in the previous award, thereby protecting the principle of fiscal continuity and provincial autonomy.

Reviewing the evolution of NFC Awards, participants noted the shift from a population-based formula to the multi-factor model introduced in the 7th NFC Award, which allocated 82 percent weightage to population, 10.3 percent to poverty and backwardness, 5 percent to revenue generation, and 2.7 percent to inverse population density. 

Dr. Shah said the 11th NFC Award proposes incorporating new indicators such as climate vulnerability, human development, and infrastructure gaps to reflect changing national priorities.

He informed that under the proposed framework, vertical distribution may be set at 45 percent for the federation and 55 percent for provinces. The suggested horizontal distribution includes 50 percent for population, 20 percent for poverty and human development, 15 percent for revenue effort, 10 percent for climate vulnerability, and 5 percent for infrastructure gaps.

Highlighting Khyber Pakhtunkhwa’s fiscal constraints, Dr. Shah said the province remains heavily dependent on divisible pool transfers, Net Hydel Profit (NHP), and federal allocations. He underscored the added financial burden caused by the inclusion of merged districts and the province’s border-related security expenditures.

Dr. Usman Ghani, Director IMSciences, appreciated the Good Governance Forum’s initiative to generate substantive dialogue on fiscal decentralization. He said IMSciences had organized a series of workshops to link academia, students, and policymakers on critical public policy issues. He added that recommendations from the workshop would be shared with the government for consideration.

Former Finance Minister Himayat Ullah Khan said that since 2011-12, provinces have received 57.5 percent of the divisible pool under the 7th NFC Award, while the federation retains 42.5 percent. 

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He criticized the 82 percent population weightage, terming it inequitable for provinces like KP and Balochistan with sparse populations, higher service delivery costs, and border insecurity challenges. He proposed reducing population weightage and increasing the share for poverty and backwardness.

Khan stressed that the 11th NFC should be guided by the 1973 Constitution, particularly Parts V and VI and the Fourth Schedule, and account for the devastating fiscal effects of climate change. He also called for implementing Articles 161(1)(a), 161(1)(b), and 161(2) to enhance provincial revenue through excise duties on gas and oil, Net Hydel Profit, and royalties on LPG and oil.

Former Minister Adnan Jalil suggested introducing a 0.5% to 1% revenue allocation for climate change, which could cumulatively generate Rs 50–110 billion. Dr. Noorjehan emphasized that federal expenditures for Gilgit-Baltistan, Azad Jammu & Kashmir, and the Capital Territory must not be deducted from provincial shares.

Finance Advisor Muzammil Aslam said that although the erstwhile FATA had been administratively merged with KP, it was yet to be financially merged, leaving the province underfunded to meet additional development needs. “We do not seek anything beyond what is fair — only what we deserve and what we own,” he asserted. He also proposed that subsidies and stipends currently managed by the federal government, such as fertilizer and BISP payments, should be devolved to provinces under the NFC.

The participants strongly opposed the proposed Terms of Reference (ToRs) for the 11th NFC Award, echoing constitutional concerns raised by Senator Raza Rabbani. 

They termed several proposals unconstitutional, including any delay in forming the NFC, reducing the provincial share below 57.5 percent, or including non-provincial territories like ICT, AJK, and Gilgit-Baltistan without a constitutional amendment. They also rejected attempts to roll back fiscal devolution under the 18th Amendment.

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The workshop concluded with a joint resolution urging the Federal Government to ensure the timely constitution of the 11th NFC Award, uphold Article 160 in letter and spirit, and safeguard provincial fiscal autonomy and equity — principles fundamental to Pakistan’s federal structure.

The workshop brought together prominent economists, policymakers, academics, and civil society representatives, including Advisor on Finance, Government of Khyber-Pakhtunkhwa (KP) Muzammil Aslam; Chairman Good Governance Forum Dr. Syed Akhtar Ali Shah; Director IMSciences Dr. Usman Ghani; former Secretary Finance Syed Badshah Bukhari; former Minister for Industries and Revenue Adnan Jalil; Secretary Information JUI Abdul Jalil Jan; MPAs Aiman Jalil and Sobia; former Chancellor Dr. Noorjehan; Women Chamber of Commerce President Qurat-ul-Ain; SMEDA CEO Rukhsar; former President Sarhad Chamber of Commerce and Industry Haji Asif Ashraf; engineers Gul Bahadar Khan and Arif Khan; Barrister Syed Ali Shah; Governance Specialist Ashraf Khan; former Vice President Peshawar High Court Rehman Shah Advocate; Qumi Watan Party Spokesperson Tariq Ahmad Khan; and Haseeb Khan Urmar Advocate.