Tariq Mahmood Awan
It has been 25 years since the last National Finance Commission (NFC) award was introduced, despite the clear requirements outlined in Article 160 of the Constitution. This article states that the President must establish a National Finance Commission within six months of the starting day and convene it every five years thereafter. Consequently, three NFC awards should have been agreed upon and implemented since the last one in 2010. However, governments representing the three major national parties have failed to reach a consensus on this critical issue. Instead of working towards an agreement, these administrations have adhered to Clause 6, which allows the President to amend laws related to revenue distribution between the Federal and Provincial Governments in the absence of NFC recommendations. This reliance on presidential orders has stymied systematic progress in resource distribution and slowed provincial development.
The last successful consensus on the NFC award was achieved in 2010, when the Punjab government agreed to decrease the prominence of population in determining resource allocation. This agreement was reportedly facilitated by then-Chief Minister Shehbaz Sharif, who supported the Pakistan Peoples Party’s proposal to amend the Constitution, enabling a prime minister to serve three terms. As a result of the 2010 agreement, population was reduced to a significant 82 percent of the criteria for resource distribution. Other factors included poverty and backwardness at 10.3 percent, revenue generation at 5 percent, and inverse population density at 2.7 percent. This shift led to a decrease in Punjab’s share of funds from 57.88 percent to 51.74 percent and an increase in the shares for Sindh, Khyber Pakhtunkhwa, and Balochistan, reflecting a more balanced approach to resource allocation in the country.
There is now an urgent need to revisit the population component of the NFC award, as emphasized by the Planning Minister. The structure of the NFC should not incentivize population growth, which has become a major hurdle for provincial governments striving to manage their populations effectively. The current incentive system has created a tendency for exaggerating census figures to maximize resource shares under the NFC. This situation has led to numerous disputes over census results, as since 1972, every census has encountered challenges regarding its accuracy. Various segments of society have contested the credibility of these figures, viewing them as flawed or inaccurate, which has severely undermined public trust in the census process.
Pakistan can derive important lessons from India’s experience with resource allocation and the National Finance Commission. In India, the share of the population in determining resource distribution has been considerably reduced, with other criteria—such as fiscal discipline, distance, tax generation, infrastructure, and environmental factors—being incorporated into the NFC formula. This multifaceted approach has led to a more equitable division of resources across the different regions. Additionally, India has imposed a freeze on the number of seats in the Lok Sabha, an initiative initiated by Prime Minister Indira Gandhi and later extended by Atal Bihari Vajpayee. Political parties have now urged Prime Minister Narendra Modi to extend this freeze for another 30 years beyond 2026, ensuring that resource allocation is not solely influenced by shifting population statistics.
It is essential for Pakistan to reconsider and reduce the emphasis on the population factor within its NFC formula. To ensure fairness and accuracy in representation, it is crucial to address the trend of inflating population figures during national censuses. Conducting a national census and implementing NFC awards every ten years are constitutional responsibilities that previous governments have neglected. This failure reflects poorly on a system that is meant to promote equitable governance. Moreover, leaders must recognize that unchecked population growth poses significant challenges to sustainable development. A rapidly growing population can become a serious concern, undermining economic growth efforts and overall social stability.
In conclusion, the lack of a new National Finance Commission award for 25 years highlights the need for urgent reform. There is a pressing obligation for the nation’s leadership to meet constitutional requirements and implement a distribution system that responsibly addresses population growth. By reducing the weight of population in resource allocation, provincial governments can prioritize development that serves the interests of all citizens rather than simply striving to increase their share of resources based on inflated population claims. Effective management of population growth is crucial for achieving sustainable and equitable progress in Pakistan.
