The PPP-led federal government, which claims to be a champion of provincial autonomy, had to face an embarrassing situation in a review meeting of the National Finance Commission (NFC) on Thursday. During the meeting, the provinces lodged a strong protest over delays in the transfer of their rightful shares of funds.

Under the 7th NFC Award, provinces’ share in the divisible pool has been increased to 57.5% of actual collection. Besides that, Balochistan’s share has been guaranteed on the basis of budgetary projections instead of actual collection.

During the first eight months (July-February) of the current fiscal year, the federal government transferred Rs1.123 trillion to the four provinces on account of their share in federal taxes, as against the actual due amount of Rs1.65 trillion, The provinces also complained about the reduction of over Rs100 billion in their separate shares due to a downward revision of the tax collection target assigned to the Federal Board of Revenue (FBR).

As against the budgetary target of Rs2.381 trillion, the federal government has revised the target to Rs2.193 trillion –a reduction of Rs188 billion. 57.5% of the cut will be borne by the three provinces, since Balochistan’s share is guaranteed.

Representatives of the provincial governments informed the NFC meeting, which was chaired by Finance Minister Saleem Mandviwalla, that their fiscal operations have been adversely affected due to delays in the release of Rs42 billion outstanding for the period from July 2012 till February 2013. The four federating units formally complained to the NFC chairman in the biannual review meeting, officials of the finance ministry told The Express Tribune.

An official of the Punjab Finance Department told The Express Tribune that delays in the release of funds was adversely affecting provincial fiscal operations. He claimed that about Rs10 billion in dues were outstanding against the federal government.

These outstanding dues are separate from the billions of rupees withheld from budgetary allocations due to the shortfall in federal tax revenue collection. However, the federal government has promised to release the withheld amounts by this weekend, they added.

Separately, the government of Khyber-Pakhtunkhwa also lodged a protest over the non-transfer of net hydel profits to the province. The Water and Power Development Authority (Wapda) owes over Rs6 billion to the province, including Rs2.4 billion in liabilities carried forth from the previous fiscal year, according to an official of the provincial finance department.

While sharing the details of releases to the provinces in the first half, the finance ministry said the provincial share in the divisible pool was worked out to be Rs485.63 billion, as against the Rs865.1 billion collected by the FBR.

Additionally, Rs12.97 billion were released to Balochistan in order to match the budgeted figure of Rs114.21 billion. Similarly Rs8.53 billion (1% of net proceeds) were paid to Khyber-Pakhtunkhwa on account of the war on terror. As such, a total sum of Rs507.13 billion was distributed among the provinces during the first half.

The meeting was informed that the province of Sindh is entitled to receive a grant-in-aid, equivalent to 0.6% of the provincial share in the divisible pool, in lieu of losses on the abolition of the Octroi and Zila taxes. Compensation against the abolition of Octroi and Zila taxes amounting to Rs3.5 billion has been paid to the Government of Sindh.