Thursday, December 10, 2009

Thoughts on the NFC

This whole debate on criteria for distribution of revenue between provinces is completely superfluous. We are a federation – at least in name. And the current government seems to want to make that a reality. It then follows that the NFC award should be abolished entirely and the system reversed. Provincial governments should get control of their own revenue and give only a fixed percentage to the center. No interprovincial redistribution is required. If the federal government wants to fund a specific project in a poorer province or supplement a cash-strapped or overpopulated province's budget, it can do so out of its own share.

I fail to understand the logic of wholesale transfer of taxes paid by residents of one province to another simply because the other province has more people. This just does not hold in a federation.

The fact that Sindh, which contributes 60% of Pakistan's revenue, gets to keep only 20% (25% of the divisible pool) for itself seems like an utter travesty. There is no incentive for people of Sindh to pay taxes because anything they contribute beyond a certain amount will not be spent on them at all. People living in other provinces, on the other hand, not only have their own taxes spent on them (excluding what goes to the federal government) but also get money from the people of Sindh.

I'm not saying that provinces should not help each other out or support development in other places. Once each province gets control of their own revenues then provincial governments can certainly lend and borrow from each other or even give aid. But taxes of a particular province should be spent in accordance with the wishes of its people and its elected government.

One could counter that the people of Sindh also have a voice in the federal government, which makes it equally qualified to spend Sindh's money. First, that is contrary to the concept of a federation. Second, because Sindh gets representation in the center according to its population, which is small, its voice cannot be heard as loudly. Historically, it has been very easy for Punjab to ride roughshod over the wishes of other provinces because it has the majority in the center. Just two days ago when IRSA stopped water supply to Punjab because it had drawn more than its share from the Indus, Punjab went to the center and forced it to release more water in contravention of the interprovincial watersharing agreement. Farmers in Sindh are going to get less than their share of water this season because of Punjab's arm-twisting. Lesson: justice for smaller provinces is hard to get at the center.

From where I stand, the NFC award is entirely suspect. Punjab asserting its right to the lions share of the revenue, most of which it did not generate itself, is laughable. If I'm paying oodles of money in taxes every month, I'd like to see them spent here, where I live, first.

No comments: