The National Finance Commission Award or NFC is a series of planned economic programs in

Pakistan Pakistan ( ur, ), officially the Islamic Republic of Pakistan ( ur, , label=none), is a country in South Asia. It is the world's List of countries and dependencies by population, fifth-most populous country, with a population of almost 24 ...

enacted since 1951. Constituted under th
Article 160
of the

Constitution A constitution is the aggregate of fundamental principles or established precedents that constitute the legal basis of a polity, organisation or other type of entity and commonly determine how that entity is to be governed. When these pr ...

, the program was emerged to take control of financial imbalances and equally managed the financial resources to four provinces to meet their expenditure liabilities while alleviating the horizontal fiscal imbalances. As per Constitution, the program awards the designs of financial formulas of economic distribution to provincial and

federal government A federation (also known as a federal state) is a political entity characterized by a union of partially self-governing provinces, states, or other regions under a central federal government ( federalism). In a federation, the self-gover ...

for five consecutive years. All together, a total of seven awards has been reimbursed since its emergence in 1951, by

Prime Minister A prime minister, premier or chief of cabinet is the head of the cabinet and the leader of the ministers in the executive branch of government, often in a parliamentary or semi-presidential system. Under those systems, a prime minister is ...

Liaquat Ali Khan. Stipulations and directions mentioned by the Constitution, the

provisional governments A provisional government, also called an interim government, an emergency government, or a transitional government, is an emergency governmental authority set up to manage a political transition generally in the cases of a newly formed state or f ...

and

competes to get higher share of the program's revenues in order to stabilize their own financial status. Intergovernmental transfer of economic resources is chaired by the

, and horizontal fiscal imbalances between four provinces. Government financial specialists,

mathematicians A mathematician is someone who uses an extensive knowledge of mathematics in their work, typically to solve mathematical problems. Mathematicians are concerned with numbers, data, quantity, mathematical structure, structure, space, Mathematica ...

, and

economists An economist is a professional and practitioner in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this field there are ...

studied the

mathematical Mathematics is an area of knowledge that includes the topics of numbers, formulas and related structures, shapes and the spaces in which they are contained, and quantities and their changes. These topics are represented in modern mathematics ...

and

statistical Statistics (from German: '' Statistik'', "description of a state, a country") is the discipline that concerns the collection, organization, analysis, interpretation, and presentation of data. In applying statistics to a scientific, industr ...

aspects of the program before recommending the government to enact the program. Due to the program producing a political realignment and the constitutional stipulation regarded a unanimous political concession between four provinces, the program has fever conclusive results, and only seven awards has been enacted since its emergence in 1951. In 2010, after series of reaching the concession and public debates successfully concluded the enactment of conclusive seventh award by the program, which affected the distribution formula. In a statement released by

Finance Minister A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation. A finance minister's portfolio has a large variety of names around the world, such as "treasury", ...

Shaukat Tarin Shaukat Fayyaz Ahmed Tarin ( ur, ; born 1 January 1953) is a Pakistani politician and banker who served as Finance Minister of Pakistan from 2008 to 2010 in the Gillani cabinet also and worked with the help of the Pakistan People’s Party's ...

, the inverse population

density Density (volumetric mass density or specific mass) is the substance's mass per unit of volume. The symbol most often used for density is ''ρ'' (the lower case Greek letter rho), although the Latin letter ''D'' can also be used. Mathematicall ...

, and the

derivative In mathematics, the derivative of a function of a real variable measures the sensitivity to change of the function value (output value) with respect to a change in its argument (input value). Derivatives are a fundamental tool of calculus. ...

poverty rate has become a new parametric factor in calculating the program's awards.

In federal law and the Constitution

The National Finance Commission is constitutionally established by the

which laid the foundation of equal distribution of revenues between the federal and four provincial governments of Pakistan. The Constitution grants powers to

President of Pakistan The president of Pakistan ( ur, , translit=s̤adr-i Pākiṣṭān), officially the President of the Islamic Republic of Pakistan, is the ceremonial head of state of Pakistan and the commander-in-chief of the Pakistan Armed Forces.five consecutive years. The Constitution further stated: # The share of the Provinces in each Award of National Finance Commission shall not be less than the share given to the Provinces in the previous Award. #The Federal Finance Minister and Provincial Finance Ministers shall monitor the implementation of the Award biannually and lay their reports before both the State Parliament and Provincial Assemblies.

History

Background

Raisman Program in 1951

The program's existence was emerged in 1951 when

Liaquat Ali Khan responded remarkably for initiating a series of new economic programs. This revenue sharing program was called "Raisman Award Program" (officially declared as Raisman Award of 1951), and was notified on 1 April 1, 1952. The Raisman program had gained control of

taxation A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, o ...

and transferred to

with allocations of 50% of proceeds to the provinces. Since 1951, there were only three of these awards (1961, 1964 and 1970) enacted by the Raisman program. All of these were given in unusual circumstances and their results remained inconclusive. The Raisman program enacted the awards during the promulgation of One Unit Program, and equally distributed with West-Pakistan and East-Pakistan. In 1970, the Raiman program enacted the third award during the martial law and a year before East Pakistan seceded. Its results too remain inconclusive which became a one reason for this secession was also their resentment on the revenue distributions of the past.

National Finance Commission

After the separation of East-Pakistan as a direct resulting end of

war War is an intense armed conflict between states, governments, societies, or paramilitary groups such as mercenaries, insurgents, and militias. It is generally characterized by extreme violence, destruction, and mortality, using regular o ...

with

India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by area, seventh-largest country by area, the List of countries and dependencies by population, second-most populous ...

in 1971,

Zulfikar Ali Bhutto Zulfikar (or Zulfiqar) Ali Bhutto ( ur, , sd, ذوالفقار علي ڀٽو; 5 January 1928 – 4 April 1979), also known as Quaid-e-Awam ("the People's Leader"), was a Pakistani barrister, politician and statesman who served as the fourt ...

's government formed the commission under Chief Justice Hamoodur Rahman to investigate and study the loss of East Pakistan. While many factors had pointed out by the commission, generally marking the political, economical, ideological and geophysical reasons but the one emphasized the "Distribution of Resources" between each contingent. Controversially, the economic distribution of financials funds, grants, and resources were based on GNP performances and tax collection. The issue of population growth was never calculated and even raised by any civil servant or bureaucrat, since many had realized that if such factors determined, it would have resulted in greater share of East-Pakistan from the Federal Divisible Pool or in Federal Budget for East and West Pakistan. Efforts were applied to end the

economic disparity There are wide varieties of economic inequality, most notably income inequality measured using the distribution of income (the amount of money people are paid) and wealth inequality measured using the distribution of wealth (the amount of we ...

and depression among

and provincial governments of Pakistan by the government. While drafting the new

in 1973, the issue of financial distributions, economic equality, and

economic justice Justice in economics is a subcategory of welfare economics. It is a "set of moral and ethical principles for building economic institutions". Economic justice aims to create opportunities for every person to have a dignified, productive and creat ...

was specifically mentioned in separate chapter of the

. The Article 160 of the

of Pakistan, laid the foundation and philosophical existence of the National Finance Commission (NFC) and provides the logical framework of (NFC), in 1973. The

was unanimously approved by the all and major

political parties A political party is an organization that coordinates candidates to compete in a particular country's elections. It is common for the members of a party to hold similar ideas about politics, and parties may promote specific political ideology ...

in the country, and successfully promulgated the constitution in 1973. During the fiscal period from 1973 to 1974,

and his government collaborated with the provincial governments of four provinces and successfully enacted the first financial award under NFC program; the first award proved to be success after it had produced a positive conclusive results in 1974. The NFC program is viewed a step forward towards

decentralization Decentralization or decentralisation is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group. Conce ...

and establishment of

fiscal federalism As a subfield of public economics, fiscal federalism is concerned with "understanding which functions and instruments are best centralized and which are best placed in the sphere of decentralized levels of government" (Oates, 1999). In other words ...

to promote equality, accountability, cost effectiveness, and opportunities for empowering and serving the poorest people in four provinces.

NFC Formulation

Financial mathematics and statistics

The NFC Award is enacted through mathematical formulation between federal government and provincial governments. The NFC generalizes the five kinds of

, including the income taxes,

sales tax A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase. When a tax on goods or services is paid to a gove ...

, wealth taxes,

capital gains taxes A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, bonds, precious metals, real estate, and property. Not all countries impose ...

, and

custom duties Customs is an authority or agency in a country responsible for collecting tariffs and for controlling the flow of goods, including animals, transports, personal effects, and hazardous items, into and out of a country. Traditionally, customs ...

taxes. The program is constituted under

, statisticians and

. In 1997, changes in NFC formulation was carried out by

Nawaz Sharif Mian Muhammad Nawaz Sharif (Urdu, Punjabi: ; born 25 December 1949) is a Pakistani businessman and politician who has served as the Prime Minister of Pakistan for three non-consecutive terms. He is the longest-serving prime minister of Pak ...

after including the custom duties taxes with the award. Before 1991, the custom duties taxes revenue had been awarded to federal government while the revenue of Worker Welfare Fund (WWF) remain in the four provinces where they are collected. The principality of 1991 NFC Award specifies that 63.12% of collected revenue of taxes were directed to the federal government and 37% distributed to the four provinces. Prime Minister Sharif was widely given credited for declaring a consensus on formulating the 7th NFC Award with some positive recommendations. Earlier in 1991, the financial resources were vertically distributed at a fixed ratio of 20:80 among federal and provincial governments. Trends in Poverty - 1999 to 2008

Majority of the taxation and revenues are collected from

Punjab Punjab (; Punjabi Language, Punjabi: پنجاب ; ਪੰਜਾਬ ; ; also Romanization, romanised as ''Panjāb'' or ''Panj-Āb'') is a geopolitical, cultural, and historical region in South Asia, specifically in the northern part of the I ...

and

Sindh Sindh (; ; ur, , ; historically romanized as Sind) is one of the four provinces of Pakistan. Located in the southeastern region of the country, Sindh is the third-largest province of Pakistan by land area and the second-largest province ...

provinces of Pakistan.Pakistan's Taliban Fight Threatens Key Economic Zone – 7th Paragraph
/ref> Almost all custom duties are collected at the

Port A port is a maritime facility comprising one or more wharves or loading areas, where ships load and discharge cargo and passengers. Although usually situated on a sea coast or estuary, ports can also be found far inland, such as H ...

of Karachi. Based on the formula determined in 1997, the taxation revenue collected from four provinces are: 65% of taxation revenue are collected from Sindh; the 25% taxation revenue from comes from the Punjab; 7.01% of taxation revenue collections are collected from Khyber-Pakhtunkhwa; lastly only 3.09% of taxation are collected from the largest province,

Balochistan Balochistan ( ; bal, بلۏچستان; also romanised as Baluchistan and Baluchestan) is a historical region in Western and South Asia, located in the Iranian plateau's far southeast and bordering the Indian Plate and the Arabian Sea coastline. ...

province. Due to a constitutional obligation, the NFC Award can not be announced if the four provinces have failed to develop consensus. Minor changes in NFC formulations were carried out by

Finance minister A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation. A finance minister's portfolio has a large variety of names around the world, such as "treasury", ...

Shaukat Aziz Shaukat Aziz ( ur, ; born 6 March 1949) is a Pakistani former banker and financier who served as 17th prime minister of Pakistan from 28 August 2004 to 15 November 2007, as well as the finance minister of Pakistan from 6 November 1999 to 15 ...

in 2001, allocating ~50% of revenue to the four provinces against the prevailing formula of 62.89% as of 1995 NFC calculations. In 2005, President

Pervez Musharraf General Pervez Musharraf ( ur, , Parvez Muśharraf; born 11 August 1943) is a former Pakistani politician and four-star general of the Pakistan Army who became the tenth president of Pakistan after the successful military takeover of t ...

finalizes the formula and enacted the award under the NFC program by the ratio of 52:48 among federal government and provincial governments.

Current formula and factorial changes

Due to growing economic and financial demands, the NFC formula had to be changed to modern formula to compete with economic challenges. In 2009, Finance Minister

stated that population won't be the only parametric equation used in calculating the next NFC award. For the economic and financial distribution of the new award under the NFC program, factors such as inverse population density and rate of change in poverty have also been added and inserted in equations calculating the NFC formula by mathematicians and government statisticians in their research. In 2009, the work on new formula begins to determine the formula for new NFC award, with political parties began meeting leaders of provincial parties. After reaching concession with the four provinces and the federal government, the seventh NFC award was enacted by the program and ultimately, the seventh award produced the conclusive results. The seventh NFC award has allotted 82.98% of financial grants to four provinces to weight to population, in which approximately 10.3% of financial grants shares were asked to be spent on reduction of poverty in the country. Under the new formula, approximately 51.74% of revenue shares were directed to Punjab; ~24.55% to Sindh; ~14.62% to

Khyber Pakhtunkhwa Khyber Pakhtunkhwa (; ps, خېبر پښتونخوا; Urdu, Hindko: خیبر پختونخوا) commonly abbreviated as KP or KPK, is one of the four provinces of Pakistan. Located in the northwestern region of the country, Khyber Pakhtunkhwa ...

; and ~9.09% to Balochistan Province; all shares were distributed based upon their performances. Finally in 2009,

President President most commonly refers to: *President (corporate title) * President (education), a leader of a college or university * President (government title) President may also refer to: Automobiles * Nissan President, a 1966–2010 Japanese ...

Asif Ali Zardari Asif Ali Zardari ( ur, ; sd, ; born 26 July 1955) is a Pakistani politician who is the president of Pakistan Peoples Party Parliamentarians and was the co-chairperson of Pakistan People's Party. He served as the 11th president of Pakist ...

signed the final release papers and enacted the 7th NFC Award under the NFC program. The seventh award under the NFC program showed the multiplication and divisional factors and the functions in respect to following listed issues: ** Inverse population decay and exponential rate ** The derivative change of

poverty Poverty is the state of having few material possessions or little income. Poverty can have diverse

and societal backwardness ** Provincial GDP growth and revenue collection **

Urban density Urban density is a term used in urban planning and urban design to refer to the number of people inhabiting a given urbanized area. As such it is to be distinguished from other measures of population density. Urban density is considered an import ...

factor

Previous awards under NFC program

Since 1951, there had been three awards enacted during the fiscal year of 1951, 1961 and 1970 under the undisclosed circumstances and its results remained inconclusive. Before 1951, the sales tax was in exclusive domain of provincial governments and it was partly federalized to the extent of 50%t in 1951 under the Raisman Program of

Liaquat Ali Khan. However, it was in 1974 when all sales tax was completely federalized and

Prime minister A prime minister, premier or chief of cabinet is the head of the cabinet and the leader of the ministers in the executive branch of government, often in a parliamentary or semi-presidential system. Under those systems, a prime minister is ...

declared population as the only criterion for distribution of revenue. The first official NFC award was enacted under this program in 1974 by the government of

, which produced a conclusive results. However, the two NFC Awards enacted during the fiscal period of 1979 and 1984 remained inconclusive as

Zia-ul-Haq failed to reach consensus and ended in a deadlock. The first award was enacted as setting the population as the only criterion for revenue distribution among the provinces. Custom duties, the main revenue earner was kept out of the divisible pool and the sales tax was completely federalized. The fourth NFC award was declared in 1991 by the PML government after successfully reaching the concession with the four provinces. For the first time in the short history of Pakistan, the fourth NFC Award had recognized the rights of the provinces on natural resources and the provinces were given royalty and gas development surcharge on oil and gas. The first fifth NFC Award was announced in 1995 by

Benazir Bhutto Benazir Bhutto ( ur, بینظیر بُھٹو; sd, بينظير ڀُٽو; Urdu ; 21 June 1953 – 27 December 2007) was a Pakistani politician who served as the 11th and 13th prime minister of Pakistan from 1988 to 1990 and again from 1993 t ...

. The first fifth award remained highly controversial and debatable at the country's

news channels News broadcasting is the medium of broadcasting various news events and other information via television, radio, or the internet in the field of broadcast journalism. The content is usually either produced locally in a radio studio or televis ...

. Soon, the second fifth award was announced by

in 1997 after his rival, Benazir Bhutto, was dismissed. Although it remains conclusive on many parts, but the opposition targeted the implementation of the program. In July 2000,

presided the convection of National Finance Commission (NFC) to finalize the sixth award, due to constitutional termination of fifth awards program. In 2001, the commission was constituted under

to supervise the work on sixth award. Finally in 2002, the sixth NFC award under the NFC program was enacted by President Pervez Musharraf but failed to reach a consensus decision. Although it was enacted but the sixth award's results remained inconclusive. In 2010, the seventh NFC award was successfully enacted by

Asif Zardari after reaching a united concessions with the four provinces.

References

External links

Government of Pakistan
{{DEFAULTSORT:Nfc Award 1951 in Pakistan Economy of Pakistan Government finances in Pakistan Economic planning in Pakistan Economic policy in Asia