Economist Advocates for NFC Award Reforms

Dr. Ashfaque Hassan Khan, a distinguished economist, has suggested that the federal government should remove political influence from the National Finance Commission (NFC) award. He recommends the appointment of experts instead of politicians and a revision of the distribution formula.

These recommendations were detailed in his report, titled “NFC Award and Population: Has It Distorted Pakistan’s Population?”

The report indicates that, as per Article 180 of the Constitution, the President of Pakistan currently establishes a Finance Commission every five years. It suggests that the President could form a commission comprising individuals who are not involved in politics.

The suggested Commission would include a secretariat staffed with professional and administrative personnel to assist the chairperson and members with research and secretarial duties.

Weightage of Population in NFC

The report states, “Once the Commission is established by the President, the government may provide the Terms of Reference (TOR) to the Finance Commission at the beginning, based on government priorities.”

Furthermore, the Commission would have the authority to modify the parameters and their respective weights for distributing resources between the federal and provincial governments, as well as among the provinces, to fulfill their responsibilities according to the TOR provided by the government.

Dr. Ashfaque’s report identifies several shortcomings in the present NFC structure, with a particular focus on the excessive reliance on population as the primary factor for allocating resources.

The report highlights that population was the only criterion used to allocate funds among provinces from 1974 to 2009, accounting for 100% of the distribution.

However, the 7th NFC Award in 2010 brought in other criteria, such as poverty/backwardness, revenue collection, and inverse population density, but population still held the majority share at 82%.

Proposed Changes to NFC Award Criteria

The report suggests decreasing the weight of population to 25%, allocating 15% to the population figures from the 1998 census and 10% to those from the 2023 census for each province.

Dr. Ashfaque advised that the income disparity be used as the main indicator for the NFC award, carrying a weight of 30%.

“The greater the income gap between a province and the wealthiest province, the more resources should be allocated to that province to minimize the disparity,” he stated.