Provision of Article 3&4 of NFC: Rs 428 billion distributed among provinces

Federal government has reportedly distributed Rs 428 billion amongst the provinces in accordance with provision of Article 3 and 4 of the National Finance Commission (NFC), well-informed sources told Business Recorder. The Finance Ministry, sources said, has convened second meeting of the 8th NFC on February 21, 2012 in Islamabad in which provincial governments will also be directed to pursue fiscal discipline.
The sources said out of Rs 751.7 billion reported by the Federal Board of Revenue (FBR) up to December 31, 2011, the provisional share in divisible pool taxes worked out at Rs 411.74 billion. Additionally, Rs 9.20 billion were released to Balochistan in order to match the guaranteed figure of Rs 93 billion in accordance with clause 3 Article 4 of the Presidential Order. Similarly, Rs 7.23 billion was paid to Khyber Pakhtunkhawa on account of war on terror as per clause 2 of Article 3 of the Presidential Order. As such, the total amount of Rs 428 billion was distributed between the provinces in accordance with provision of Article 3 and 4.
The entire net proceeds of royalty on crude oil reported by the Ministry of Petroleum and Natural Resources up to December 31, 2011 has been distributed amongst the provinces in accordance with the provisions of Article 5.
Punjab received Rs 2.219 billion as royalty on crude oil, Sindh Rs 2.013 billion, KP Rs 4.113 billion and Balochistan Rs 0.001 billion, totalling Rs 8.376 billion. Royalty on Compressed Natural Gas (CNG) paid to provinces was Rs 15.7 billion out of which Rs 0.326 billion was given to Punjab, Sindh Rs 9.194 billion, KP Rs 1.7 billion and Balochistan Rs 3.715 billion.
Punjab also received Rs 0.574 billion as Gas Development Surcharge (GDS), Sindh Rs 6.618 billion, KP Rs 1.008 billion and Balochistan Rs 0.381 billion, totalling Rs 8.604 billion.
In this way, Punjab received Rs 1.4 billion, Sindh Rs 16.032 billion, KP Rs 2.753 and Balochistan Rs 4.119 billion. As per clause 2 of Article 6, GDS payable to Balochistan with effect from July 1, 2002 to June 30, 2010 based on the new formula was to be worked out and the arrears, subject to maximum of Rs 10 billion have been paid to government of Balochistan up to December 31, 2011.
In addition to this, Rs 10 billion were allocated as arrears prior to 1991 under Aghaz-e-Haqooq-e-Balochistan package. Out of which Rs 5.3 billion have been paid to Balochistan up to December 31, 2011. Sindh is entitled to receive grants-in-aid equivalent to 0.66 per cent of the provincial share in the divisible pool in lieu of losses on abolition of Octroi and Zila Tax. A sum of Rs 7 billion has been allocated in the federal budget 2011-12 for this purpose. In financial year 2011-12, the provincial share in the divisible pool is Rs 411.74 billion. The grant worked out Rs 2.720 billion, which has been paid to Sindh government.
The NFC accepted that sales tax on services is a provincial subject under the Constitution and will be collected by the respective provinces, if they so desire.Since this issue was linked with the implementation of Reformed GST, therefore, status quo for its collection has been maintained for the time being. In order to resolve the issue, the meeting of the provincial finance ministers has been scheduled on February 21, 2012.
On the account side, federal government spent almost 17.2 per cent as budget whereas combined expenditures of the provinces is 46.1 per cent. On the development side, the expenditure incurred by the federal government is 37 per cent while the expenditures of the provinces (combined) are 21.9 per cent.
Federal government extended the following grants to provincial governments during the period under report: (i) Rs 1.952 billion have been released to government of Balochistan for further payment to State Bank of Pakistan on account of overdraft of the province; and (ii) Rs 0.444 billion have been released to government of Balochistan for meeting the pay and allowances of 5000 posts under Aghaz-e-Haqooq-e-Balochistan.
The Finance Ministry had allocated Rs 2071.70 billion for the current fiscal year of which Rs 977.34 billion had been spent by December 2011 which is 47.2 percent of the total amount. The amount allocated for development expenditure was Rs 397 billion, of which Rs 146.85 billion had been released till the end of second quarter, which is 37 percent of total allocation. This implies total funds earmarked for current and development expenditure were 2468.7 billion, of which Rs 1124.19 billion were released which was 45.5 percent of total allocation.