Daily Times

The 9th National Finance Commission Award is set to start its proceedings.

At the same time, a debate has surfaced regarding the efficacy of 18th Constitutional amendment, with posturing by its detractors and supporters.

The word amendment in the specific context is a misnomer as the whole package had amended many articles of the constitution with wider implications for the federation and the provinces. In its sweep, the 18th amendment was indeed a cleansing exercise, weeding out self-centric provisions introduced by two military rulers, marring the character of 1973 constitution. The amendment at the same time moved in a big way in devolving administrative and political powers, and ensuring robust fiscal transfers to the federating units.

The co-equal responsibility of the provinces in fields like major ports, census, national planning and coordination, debt management , federal regulatory authorities, standards of higher institutions, research and scientific pursuits, electricity and other professions figured in so prominently. The part two of the federal list was redesigned accordingly. Expanded domain of the provinces could further be gauged from the fact that with the deletion of the concurrent list of 47 items, a vast array of 41 items were passed onto provinces. These included key areas of education and health.

Protagonists of 18th amendment are, however, weary at the pace of implementation of devolution of functions and responsibilities from the federal to provincial level, particularly in the areas of health and education.

The 9th National Finance Commission Award is set to start its proceedings. At the same time, a debate has surfaced regarding the efficacy of 18th Constitutional amendment, with posturing by its detractors and supporters.

The higher courts, including the Supreme Court of Pakistan, has, as of now, finally settled the respective roles of the federal and provincial governments in the light of the devolution plan. To quote an example, Shaikh Zayed Medical complex in Lahore and Jinnah Post Graduate Medical Centre, National Institute of Child Health, and National Institute of Cardiovascular Diseases in Karachi had been federal entities, rendering commendable services in patient care and specialised training; their transfer to the provinces had not only involved some administrative impediments but it also involved a set of legal issues at the same time. The courts have ruled that the 18th amendment nowhere bars the federal government in running these institutions. These institutions were also responsible for imparting specialised training to fellows in medicine and surgery after they underwent a rigorous regime spanned over six years including the house job.

The item 16 in the part 1 of the Federal list evidently provides a distinct window to the federal government to manage and promote such like facilities. There is no constitutional bar on the federal and the provincial governments for interventions in this regard. The provinces can always devise a range of filter hospitals which could take the load of primary and secondary diseases from such like federal outfits. No one indeed is seeking the reversal of a historic constitutional amendment which has in so many ways assuaged the genuine concerns of the federating units. That should not, however, stop anyone from the debate when it comes to interpretation and implementation of amended clauses.

The provinces, while seeking transfers, need to answer some key questions. The preambles of local government acts, for instance, mandate the devolution of administrative and financial powers to elected institutions for effective service delivery. Local government acts at the same time signify core areas like provision of water supply and sanitation, land use planning, urban development, and master planning. The provincial governments, whereas, have arrogated all these critical roles through overriding legislations. We find building control authorities and water and sewerage boards virtually taken over by the provincial governments. Thus, decentralisation is being negated through a process of re-centralisation at the provincial level.

18th amendment has indeed far reaching implications on the fiscal management framework as well. The seventh Finance Commission Award fixed the provincial share at 57.5 % of the divisible. The 18th amendment at the same time underscores that the share of the provinces shall not be less than the share given in the previous award. This provision has worked as a disincentive both for the federation and the provinces in broadening the tax base and widening the net. Federation has very little incentive as if it was to part away with nearly 60 per cent of revenue flows, while its prime responsibilities of debt servicing, defence and subsidy to sick public sector enterprises were facing the crunch, and space for development outlays was being squeezed. Fiscal transfers jacked up the revenue flows to the provinces ranging from 42 percent in the case of Punjab to 152 percent in the case of Balochistan, as a result there has been little incentive to extract the provincial revenue resource base. In Punjab, to give an example, agriculture income tax, despite manifold increase in agrarian disposable income, has regressed during the past one decade. Flow of easy money to provinces has over a period distorted fiscal allocations and sense of priorities. Over capitalisation of steel and concrete structures in the name of development has been at the expense of human resource development and key areas in the social sector. More visibility and speedier passing of money has been the driving force.

The next NFC would hopefully not work as a post office, but will instead work as a proactive body, taking care of all areas of prudent fiscal management. It should include a nexus in revenue generation between the federation and constituent units. Revenue flows to the provinces need to be benchmarked with their efforts to widen their own source revenues as well. In short, there is a need to improve the quality of spending and cater to the long term needs than to sheer populism.

The writer is an author, former civil servant. He is Adjunct Faculty at LUMS and a visiting Faculty at Civil services Academy

Published in Daily Times, January 29^th 2019.