50:50 sharing of expenditure on devolved functions: Ministries, provinces directed to finalise proposal
ISLAMABAD: The caretaker federal government has directed ministries of Finance, Planning and Special Initiatives, Inter Provincial Coordination (IPC) and provinces to finalise proposal of 50:50 sharing of expenditure on devolved functions with provinces including but not limited to BISP, Higher Education Commission (HEC), power subsidies, official sources told Business Recorder.
The decision was taken at a recent meeting of Apex Council of the Special Investment Facilitation Council (SIFC), with representatives from civil and military leadership to facilitate investment.
The SIFC has also made it mandatory for the provinces to share 50 percent of total cost of provincial nature projects in Public Sector Development Program (PSDP).
The government is also extending subsidy of over Rs 1 trillion per annum to power sector consumers across the country and has suggested provinces contribute their shares.
According to sources, the Finance Division has been directed to undertake technical work on the National Finance Commission (NFC) award in the light of new census, which implies that now provinces’ unbridled funding will be linked to some conditionalities aimed at ensuring transparency.
M/s PD&SI has also urged sponsoring Ministries/Divisions and provinces to follow policy guidelines in letter and spirit, adding that these instructions should also be brought into the notice of attached departments under administrative control of Ministries/Divisions/Provinces.
The Ministry of Planning, Development and Special Initiatives has also shared its letter of August 16, 2021 for implementation in letter and spirit.
The letter states: “federal government has been financing provincial projects which otherwise is the responsibility of provincial governments especially after 18th amendment to the Constitution to supplement provincial resources.
However, it has been observed that due to financial constraints and financing mega project of national importance by the federal government, it may not be possible to continue to finance provincial projects unless costs also be shared by the provincial governments.“
On recommendations of the APCC held on May 28, 2021, the NEC in its meeting held on June 7, 2021 approved the policy to finance provincial projects which inter alia include Federal/PSDP funding with cover for only: (i) capital investment; (ii) projects located in deprived areas and; (iii) original approved cost. Any subsequent change due to scope or any other reason in cost would be the responsibility of provincial governments.
The provincial governments would be responsible to: (i) bear the cost of land acquisition, resettlement, provincial taxes and cost of PMU; (ii) take over the projects on completion immediately; and (iii) in case of irrigation projects, provincial governments would simultaneously develop command area to fully benefit from the project.
The projects which are selected for financing by the federal government adhering to the policy would be approved by the competent forum.
On the issue of subsidy on fertilisers, the sources said, on a number of occasions provinces were urged to share 50 percent in subsidy on urea but some have outrightly refused to contribute their share whereas some showed reluctance. This stance of provinces has irritated the federal government.
Copyright Business Recorder, 2023