950808

Change in NFC terms of preference

Provinces deprived

of over Rs 14.5 bn

TANVIR ZAHID

LAHORE: Provinces of Punjab, Sindh, NWFP and Balochistan have been deprived of substantial resources of more than Rs 14,500 million on the aggregate following dropping of excise duty on sugar and tobacco out of the divisible pool from the terms of reference (ToR) of the National Finance Commission reconstituted by the president last month. And strangely enough, no province has so far voiced protest.

The four provinces had recieved a total of Rs 4356.3 million against budget estimates of Rs 4560.0 million for 1994-95 as their share in excise duty on sugar with Punjab accounting for Rs 2521.438 million, Sindh Rs 1014.151 million, NWFP Rs 589.846 million and Balochistan Rs 230.885 million.

For 1995-96, budget estimates of Rs 4981.8 million - Punjab Rs 2883.466 million, Sindh 1159.763 million, NWFP 674.536 million and Balochistan Rs 264.035 million - on this account showing an increase of 14.4 percent on the whole.

Provinces received Rs 6887.1 million against budget estimate of Rs 6992.0 million on account of their share in excise duty on tobacco with Punjab receiving Rs 3986.65 million, Sindh Rs 1603.322 million, NWFP Rs 932.516 million and Balochistan Rs 365.000 million during the last fiscal.

For 1995-96, provinces' share out of the excise duty on tobacco was estimated to be Rs 9492.4 million - Punjab Rs 5494.201 million, Sindh Rs 2009.831 million, NWFP 1285.271 million and Balochistan Rs 503.097 million - showing an increase on the aggregate of 37.8 percent over the last fiscal figures.

On the whole, provinces had recieved a total of Rs 11243.423 million in 1994-95 and these had increased to Rs 1447.200 million on account of their shares in excise duty on sugar and tobacco and terms of reference of the new National Finance Commission has deprived them of these substantial resources without any plausible reason.

According to the information gathered from different sources, the National Finance Commission is constituted by the president under Article 160 of the Constitution for distribution of revenues between the federation and the provinces consisting of the federal finance minister, finance ministers of the provinces and "such other persons as may be appointed by the president after consultation with the governors of the provinces."

And taxes, as mentioned in the Constitution in its Article 160, included "taxes on income, including corporation tax, but not including taxes on income consisting of remuneration paid out of the Federal Consolidated Fund; taxes on the sale and purchases of goods imported, exported, produced, manufactured or consumed; export duties on cotton, and such other export duties as may be specified by the president; such duties of excise as may be specified by the President, and; such other taxes as may be specified by the President."

Neither there was any protest raised by any province over dropping of the excise duty on sugar and tobacco out of divisible pool nor apparently there was any move at any level for convening of the first meeting of the reconstituted National Finance Commission which has to submit its recommendations well before the commencement of financial year 1996-97 for its award will be applicable for a period of five years till the year 2002.

The NFC award distributed divisible pools on population basis fixed at Punjab 57.9 percent, Sindh 23.3 percent, NWFP 13.5 percent and Balochistan 5.3 percent.

Sources pointed out that excise duty on sugar, tobacco, ex-gratia grant equal to royalty on crude oil and surcarge on gas had been included in the divisible pool due to NFC Award of 1991.

The Federal Government deducts five percent of all receipts mentioned in the Terms of Reference (ToR) of the NFC as collection charges.

Out of the balance, 20 percent goes to the Federal Government and 80 percent of the balance are shared by the provinces on the basis of their population.

The exception to this rule is royalties, excise duty and surcharge on natural gas in which case the provinces receive the entire collection in accordance with the provinces' contribution after adjusting the cost of collection. In income tax, the federal employees emoluments are also deducted.

Sources further pointed out that the royalty on crude oil and surcharge on natural gas are transferred to the provinces on the basis of well head production after deducting two percent collection charges. The royalty and excise duty on natural gas are also transferred to the provinces in accordance with Article 161(I) of the Constitution which inter-alia reads "nothwithstanding the provision of Article 78, the net proceeds of the federal duty of excise on natural gas levied at well-head and collected by the Federal Government, and of the royalty collected by the Federal Government, shall not form part of the Federal Consolidated Fund and shall be paid to the province in which the well-head of natural gas is situated."