By Staff Reporter
ISLAMABAD: The government has convened the inaugural meeting of the 11th National Finance Commission on Thursday, kicking off what are expected to be contentious negotiations over the division of federal tax revenues between the central government and the provinces amid mounting fiscal pressures.
The session, chaired by Federal Finance Minister Muhammad Aurangzeb, will focus on laying the groundwork for talks on the horizontal and vertical distribution of resources from the divisible pool. The commission’s members include the four provincial finance ministers and four non-statutory representatives: Dr. Asad Sayeed from Sindh, Mehfooz Ali Khan from Balochistan, Nasir Mehmood Khosa from Punjab and Dr. Musharraf Rasool Cyan from Khyber Pakhtunkhwa.
Chief ministers from Sindh and Khyber Pakhtunkhwa, who hold their provinces’ finance portfolios, are also part of the gathering. Khyber Pakhtunkhwa’s chief minister, Sohail Afridi, will reach Islamabad with a sizable delegation that includes his adviser, Muzammil Aslam, along with the province’s non-statutory member and finance secretary.
The agenda will open with general discussions on the strategy for deliberations on the 11th NFC Award, including the proposed formation of sub-groups for deliberations on thematic areas. Each of the four provincial governments and the federal Ministry of Finance then delivers 10-minute presentations on their respective fiscal positions. The meeting will conclude by setting a schedule and timelines for future sessions, which are likely to rotate among the federal and provincial capitals until the talks wrap up.
The commission was formally constituted on Aug. 22 to devise a new formula for sharing federal divisible resources between the centre and the provinces. Its first meeting, originally set for Aug. 27, faced multiple postponements. An earlier attempt to hold the maiden session on Aug. 28 was deferred at the request of the Sindh government because of flood-related emergencies in the province. The NFC Secretariat later rescheduled the gathering.
Under the terms of reference outlined in Clause 2 of Article 160 of the Constitution, the 11th NFC is tasked with distributing the net proceeds of five major tax categories between the federal government and the provinces. These include taxes on income, encompassing capital value tax and corporation tax, but excluding taxes on income consisting of remuneration paid out of the Federal Consolidated Fund.
Ahead of the meeting, Khyber Pakhtunkhwa solidified a list of key demands, according to official sources. These include updating the 7th NFC Award to incorporate the merged districts of the former Federally Administered Tribal Areas; raising the share allocated for the “war on terror” from 1 percent to 3 percent; resolving disputes under Article 161 related to excise duty on oil; revising the excise duty on gas and the windfall levy framework; and establishing a monthly schedule for NFC meetings to ensure continuity.
The province also raised concerns that the current NFC setup is not consistent with Article 160 and is ultra vires because it fails to include the former FATA following the 25th Amendment. Thursday’s inaugural sitting is anticipated to approve the creation of technical sub-groups and endorse a structured negotiation roadmap for the months ahead.
Senior officials acknowledged that the negotiations are poised to be complex. They cited the central government’s limited fiscal space, escalating debt servicing obligations and intensifying demands from the provinces for a greater portion of national resources.
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