Meeting of 11th NFC postponed on Sindh’s request

The much-anticipated meeting of the 11th National Finance Commission (NFC), scheduled to take place on August 29, has been postponed, according to an official notification issued on Thursday.

The decision was taken on the request of the Sindh government due to the ongoing flood situation in parts of the country, the Finance Ministry said in its notification.

“The date and time of the rescheduled meeting will be communicated subsequently,” it added.

The meeting of the NFC, which divides resources among the provinces, was much anticipated amid reports of possible changes in the distribution formula.

What is NFC?

The NFC is a constitutional body established under Article 160 of the Constitution of Pakistan. It is tasked with formulating a framework for financial resource distribution between the federation and the provinces.

The NFC convenes periodically, ideally every five years, to determine how revenues collected by the federal government, particularly from the divisible pool of taxes, are to be shared with the provinces. These taxes include:

• Income tax

• Sales tax

• Customs duties

• Federal excise duties

The most recent effective formula for revenue distribution is the 7th NFC Award, agreed in 2009, which moved away from a population-only basis to a multi-factor approach. Under this award, 57.5% of the divisible pool of taxes was allocated to the provinces, leaving the rest for the federal government to fund its operations.

The inclusion of poverty, backwardness, and revenue generation was aimed at creating a more equitable distribution of national resources, benefiting less developed provinces such as Balochistan and Khyber Pakhtunkhwa.

A new NFC Award has long been due, as the 7th NFC Award was meant to be revisited every five years. However, political disagreements and administrative delays have hindered progress. The now-postponed meeting was expected to be a step forward in initiating discussions on the potential 8th NFC Award.