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Express Tribune
23-06-2025
- Business
- Express Tribune
K-P's rightful share
The writer is a former Secretary to Government, Home and Tribal Affairs Department and a retired IGP. He can be reached at syed_shah94@ Khyber-Pakhtunkhwa is facing severe financial crisis for the last so many years. Rather than stabilising, the crisis is deepening due to spiraling energy costs, unchecked inflation, a volatile border policy with Afghanistan and persistent threat of terrorism. These challenges have collectively eroded the province's fiscal capacity and stalled both its economic growth and social development. The situation is further exacerbated by structural issues. The Newly Merged Districts (NMDs), with a population of 24.149 million, and Malakand Division, home to 10 million people, have rising expectations for basic services. Yet, with a limited taxable population and chronic tax evasion, the burden is disproportionately borne by the rest of the province. This fiscal imbalance hampers the government's ability to invest in education, healthcare and infrastructure development - areas that fall squarely within the provincial domain under the Constitution. While the Constitution entrusts provinces with responsibility for social services and development, these obligations remain unfulfilled due to the federal government's delays and reluctance in releasing constitutionally mandated funds - particularly under the Net Hydel Profit (NHP) mechanism as per the AGN Qazi Methodology. To break this deadlock and enable meaningful development, K-P, like other provinces, is fully justified in demanding the convening of the 11th National Finance Commission (NFC). Article 160 of the Constitution mandates that the NFC Award should consider multiple indicators, not just population size. These include poverty, revenue generation, security expenditure and geographic disadvantages. Moreover, following the merger of tribal districts, K-P's share in NFC Award stands at 19.46% - something that the federal government is constitutionally obligated to accept. But again, in the federal budget for the coming fiscal year, the enhanced share as per the addition of the population is missing. K-P's case for greater weightage in the NFC Award is grounded in logic and law. The province contributes significantly to national revenue through its oil and gas resources, and bears an extraordinary burden of security-related expenses due to its proximity to Afghanistan and the impact of terrorism. Despite this, K-P continues to suffer from delayed payments and withheld arrears under the NHP mechanism. Article 161(2) of the Constitution entitles provinces to NHP payments, and the AGN Qazi Committee's methodology - endorsed by the Council of Common Interests (CCI) and the Supreme Court - lays down the formula. Yet, the arrears continue to pile up. While the province was paid Rs6 billion in 1992 based on this methodology, inconsistencies have led to an estimated Rs75 billion in unpaid dues, with some sources placing the figure above Rs1 trillion. Under an interim arrangement approved by the CCI in 2016, a rate of Rs1.10 per kilowatt-hour with 5% annual indexation was set. Yet, even this has not been consistently honored. According to the White Paper on Budget 2025-26, excise duty on oil is not paid to the province, as the rate has not been determined yet. K-P produces more than 50% of the national oil production which means it absorbs the highest loss from the unavailability of this duty. The federal government collects Petroleum Development Levy on different petroleum products. This collection is not distributed among the provinces as it is excluded from the federal divisible pool of the NFC, which is a violation of the rights of the provinces. Also, despite multiple efforts, excise duty on oil is not determined despite constitutional provision. K-P government's Adviser on Finance Muzammil Aslam is on record saying that the province had last received Rs90 billion less due to the reduction in tax collections from the federal government. Similarly, K-P seeks a fairer and more transparent share of royalties on oil and gas produced within its borders. Article 161(1)(b) mandates that these royalties should accrue to the province where the wellhead is located. Moreover, Article 172(3), inserted into the Constitution through the 18th Amendment, clearly states that the ownership of natural resources is to be shared between the Centre and the provincial governments. This necessitates amendments to the Petroleum Act, Rules and Policy, enabling joint decision-making and equitable benefits for resource-producing provinces. Despite this constitutional clarity, the federal government maintains centralised control, which K-P rightly views as unconstitutional post-18th Amendment. The province's repeated demands for financial autonomy, timely fund releases and greater decision-making in resource governance are not just political rhetoric - they are rooted in constitutional rights and fiscal necessity. The Chief Minister of K-P has, through a letter, aptly highlighted the province's precarious financial position and urged the federal government to release the pending dues, especially those for the development of NMDs. This is not just about numbers on a balance sheet; it's about ensuring peace, promoting economic activity and healing the wounds of decades of marginalisation. Justice Munir once observed that the most persistent constitutional challenge in Pakistan has been the equitable distribution of power and resources between the federation and the provinces. Today, the Constitution provides a clear framework for resolving this longstanding issue. What remains is the political will to implement it in both letter and spirit. K-P is not asking for favours; it is demanding its rightful share under the Constitution. Fulfilling these demands will not only uphold constitutional justice but also help allay longstanding grievances and the deep-rooted sense of deprivation felt across the province.
Express Tribune
14-06-2025
- Business
- Express Tribune
Centre agrees to resolve 'financial matters'
Khyber-Pakhtunkhwa Finance Advisor Muzammil Aslam has announced that the federal government is now willing to recognize the province's rightful shares in net hydel profit, National Finance Commission Award (NFC Award), royalties, and other revenue heads. A meeting for the 11th National Finance Commission (NFC) has been scheduled for August, and the Center has also agreed to resolve outstanding financial matters concerning the merged tribal districts, which are administratively integrated but still face economic challenges. Addressing a post-budget press conference in Peshawar on Saturday, Aslam revealed that K-P has presented its largest-ever budget, amounting to Rs2,119 billion. He noted that the province is on track to generate Rs93 billion from its own resources. "Whether the federation provides funds or not, we are committed to spending on the tribal areas from our own treasury," he declared. Aslam emphasized a shift away from reliance on federal support, announcing plans to construct the Peshawar-DI Khan Motorway independently. He defended the provincial government's economic performance, recalling criticism when the current administration took office last year amid concerns of an empty treasury. "Today, we have presented a Rs157 billion surplus budget," he said, highlighting timely salary payments and increases of 10 per cent in salaries and seven per cent in pensions for government employees in the new fiscal year. The minimum wage has also been raised to Rs40,000. Aslam contrasted K-P's development budget of Rs547 billion with the federal government's Rs1 trillion-plus allocation, pointing out that despite being a smaller province, K-P has managed substantial development spending. He acknowledged that while the province remains under debt — currently at Rs680 billion — loan repayments have been made and a dedicated repayment fund established. He clarified that any current inflows under debt are part of previously agreed contracts, and there are no plans for new borrowing unless required for a major project. Criticizing the center for sidelining K-P, he stated that only Rs550 million have been allocated to the province this year. "Despite minimal federal cooperation and receiving Rs90 billion less under NFC allocations, we increased our development budget," he noted. K-P also allocated Rs20 billion from its own funds to the tribal districts, demonstrating its commitment to inclusive development.
Express Tribune
30-04-2025
- Business
- Express Tribune
Centre decides to constitute new NFC
Listen to article The federal government has decided to constitute the 11th National Finance Commission to finalise a new formula for distribution of resources, as the finance ministry disclosed on Tuesday that it spent Rs638 billion on subjects which, under the Constitution, are provincial matters. The Rs638 billion spending in four provinces, Islamabad territory and special areas is exclusive of any development spending, indicating that a huge chunk of federal money is still pouring into provinces without any legal obligation. For the first time, the Ministry of Finance made public a write-up covering current expenditures of the federal government on health, education and social protection subjects ahead of notifying the new commission. The ministry said that these subjects stand devolved to the provinces with the enactment in April 2010 of the 18th Amendment. The amendment transferred several subjects from the federal legislative list to the provincial domain, effectively decentralising power and responsibility, and allowing provinces greater financial and legislative autonomy, it added. The report revealed that the federal government spent a total of Rs638 billion in four provinces, special areas and Islamabad district in the last fiscal year on health, education and social protection. The amount was Rs36 billion higher than the preceding year, showed the report. The spending on the development projects were in addition to Rs638 billion, which the finance ministry did not disclose. Meanwhile, during the April 28th meeting of the Council of Common Interests, the federal government informed the four provinces that it was in the process of establishing the 11th National Finance Commission to finalise the 8th award. It has already written letters to the provinces and sought their nominations for technical members. Sindh has again nominated Dr Asad Sayeed as its technical member while the Sindh finance minister will be the other constitutionally-nominated member on the Commission. Under the Constitution, every government can have two representativesone finance minister and one technical member. The commission is set up for a period of five year and the 10th Commission is going to meet its term on July 23rd without finalizing the 8th award. The last award was finalised in 2010, which expired in 2015. Since then, the President of Pakistan has been extending the last consensus award every year on an ad-hoc basis. The Khyber Pakhtunkhwa government pressed the federal government in the CCI to call the meeting of the 10th commission and announce an interim award, said Muzammil Aslam, the K-P's Finance Adviser to the Chief Minister while talking to The Express Tribune. He said that the K-P government has not yet nominated its technical member for the 11th Commission due to the reason that it wanted the meeting of the 10th Commission before the budget to get its due share on account of net hydel profit and merged districts. The finance ministry report has revealed how the federal government has been spending in provinces in areas which under the constitution are provincial subjects. Under the 7th award, the provinces get 57.5% of the resources and yet the federal government has been spending money in provinces despite scarcity of resources. The government and four provinces signed a weak National Fiscal Pact last year under the IMF guidelines, which does not have legal cover. Social Protection In the last fiscal year, the federal government spent Rs466 billion on social protection, including Rs350 billion that was spent in four provinces, according to the Finance Ministry. The federal government disbursed Rs169 billion in Punjab under the BISP, Rs96 billion in Sindh, Rs67 billion in KP and Rs18 billion in Balochistan, according to the report. In addition to that it also 7.4 billion through Pakistan Bait-ul-Mal, an autonomous body contributing to poverty alleviation, said the Finance Ministry. Health In the health sector, Rs45 billion were spent in the last fiscal year on current programmes. These included Rs12 billion spent on employees, another Rs12 billion on operations and Rs21.3 billion on Expanded Programme on Immunization. The Finance Ministry said that the Expanded Program on Immunization (EPI was running since 1978 to protect children against vaccine preventable diseases. However, the virus spread could not be controlled since then. Rs11.2 billion were spent in Punjab under the EPI, Rs5.1 billion in Sindh, Rs1.2 billion in KP and Rs3.5 billion in Balochistan. Some of the health expenditures were related to Islamabad Capital Territory (ICT). An amount of Rs5.2 billion was spent on Pakistan Institute of Medical Sciences (PIMS) and Rs4 billion on the Federal Government Polyclinic (FGPC). The expenditure of the Federal Government on health also covers the National Institutes of Health (NIH), an institution involved in multi-disciplinary public health related activities like diagnostic services, research and production of vaccines as well as the National Institute of Rehabilitation Medicine (NIRM) which serves people with special abilities Budgetary allocation is also made for the Federal Government run Shaikh Zayed Hospital, Lahore, a hospital gifted for the people of Pakistan in 1973 by the then president of the UAE, Shaikh Zayed bin Sultan Al-Nahyan. The federal government spent Rs4.9 billion on Shaikh Zayed hospital. The funds were also allocated for the administrative costs of the Ministry of National Health Services, Regulations and Coordination. The actual expenditure of the ministry was Rs3.7 billion in the last fiscal year. Education The Finance Ministry stated that Rs114 billion were spent on education in the last fiscal year, majority of it in the provinces. The largest chunk of the federal government expenditure on the subject of education is earmarked for higher education and is disbursed to the Higher Education Commission (HEC) in the form of grants. An analysis of this expenditure highlights that in fiscal year 2023-24 around 16% of funds were disbursed by HEC to universities and institutes in ICT, AJK and Gilgit Baltistan while the remaining funds were allocated for universities in provinces, said the Finance Ministry. Punjab related federal education spending amounted to Rs31 billion, in Sindh it was Rs15 billion, Rs11.6 billion was spent in KP and Rs3.7 billion on education in Balochistan. The Finance Ministry said that the funds were also kept for the Action to Strengthen Performance for Inclusive and Responsive Education (ASPIRE) Program of the World Bank and Rs8.6 billion was spent under this head in the last fiscal year.
