A Course Work Project Master of Philosophy (M. Phil.)-Organizational Conflict Management-703

A Course Work Project of
Master of Philosophy (M. Phil.)
Uneven Distribution Of Resources:
A Conflict Between Federation And Federating Units
(Provinces) in Pakistan
Submitted To:
Dr. Ghazal Khawaja Hummayun Akhtar
Department of Public Administration (DPA),
University of Karachi

Introduction
Name: Muhammad Asif Khan
Attendance ID: 10
Semester: Semester I (Aug-Dec 2018)
Major Department: Public Administration
Course Work Title: Organizational Conflict
Management
Course Work ID: 704

Part I
This part of the course work project provides the
brief history of the federalism and the resource
distribution and their effects.

Federalism
Federalism As Tekena Tamuno Observed:
“Federalism is a form of government where the
component units of a political organization participate
in sharing powers and functions in a cooperative
manner, though the combined forces of ethnic
pluralism and cultural diversity, among others, tend
to pull their people apart
(Tamuno, 1998, pp.13).”

Modes of Federalism
Under this modality the constitution is designed to create two
separate and independent tiers of government.
The relationships are mediated and spheres are defined by
clearly demarcated areas of responsibility.
This modality takes various parts of the government as part of
the single government system.
It works through cooperation between various levels of
government.
The various levels of governments are characterized more by
cooperation and shared functions than by conflict and
competition.

Federalism and Consociationalism
Federalism is the mixed or compound mode
of Government combining a general government
(the central or 'federal' government) with regional
governments (provincial, state, cantonal, territorial
or other sub-unit governments) in a single political
system.
 Political Scientist define a consociational state as
a state which major internal divisions along ethnic,
religious, or linguistic lines, with none of the
divisions large enough to form a majority group,
yet nonetheless manages to remain stable, due to
consultation among the elites of each of its major
social groups. Consociational states are often
contrasted with states with Majoritarian Electoral
Systems.

Federalism and Consociationalism Similarities
The similarities between federal and consociational polities are
enormous.
 Both federal and consociational involve the systemic building of more
substantial consensus than in simple majority systems.
 Under the consociational regime majority rules but the system is
designed to generate broader consensus than possible in simple
majority systems.
 However, a federal structure can be majoritarion and non-
consociational which makes federalism becoming less accommodative
than needed.
Pakistan is an example of Non-Consociational Federalism

Federalism and Conflicts Around The Globe
 The role of federalism in containing conflicts and generating viable structures
which can accommodate political and economic interests of territorially
concentrated ethnic groups requires deeper investigation. The results are at
best mixed.
o The collapse of Soviet Union, Czechoslovakia, and Yugoslavia has
created a situation in which the effectiveness of constitutional federal
structures has been questioned.
o Some scholars have argued that democratic deficit in Communist
countries as well as federal systems, which were organized around
national groups, promoted nationalist movements to their eventual fall
as federations.
o On the contrary, some scholars while anatomizing the pathology of
federations argue, it is not so much because they are federations that
countries have been difficult to govern but that it is because they were
difficult to govern in the first place that they adopted federation as a
form of government.
 However, there are research studies which argue that federal systems of
government have been better than unitary systems at eliminating violent conflict.
 With this background, the federalism and conflict in some countries and whether it
was successful in “holding together” of the federal states despite the diversity
along religious and ethnic lines (Stephen, 2004).

Resource Distribution
 Resources are materials found in the environment that
humans use for food, fuel, clothing, and shelter. These
include water, soil, minerals, vegetation, animals, air, and
sunlight.
 Resource distribution refers to the geographic occurrence
or spatial arrangement of resources on earth. In a country
where resources are located at any particular place may
be rich in the resources people desire and poor in others.
Human Migration
Economic Activities
Trade
Conquest, Conflict, And War
Wealth And Quality Of Life

Federalism In Pakistan
“The theory of Pakistan guarantees that federal units of the
National Government would have all the autonomy that you
will find in the constitution of the United States of America,
Canada and Australia.
But certain vital powers will remain vested in the Central
Government such as monetary system, national defence and
federal responsibilities.”
M. A. Jinnah (Quaid-e Azam), November, 1945

Pakistan has faced varying degrees of religious, ethnic,
linguistic, economic and political problems that are often
in conflict with our national interests.
Having inherited a complex nature of multi-ethnic and
multi-linguistic population in its national entity, with
different sociocultural backgrounds, the danger of regional
fragmentation is always there.
In these ways, the achievement of national integration in
Pakistan presents its own set of dilemma. So national
integration in Pakistan can only mean establishing a
common citizenry, common political and social structures,
a common state, and a common sense of identity. It means
building a common national community on top of the
existing diversity.

After the creation of Pakistan the idea of national
integration proved a drive towards a federal structure
though having unitary-type characteristics.
To begin with, the Government of India Act 1935 was
adopted as a working constitution with some amendments
while the first constitution was introduced in 1956 which
worked for two years. This constitution like that of 1962
was federal in nature.
While constitutional arrangements have been federal, the
ethno-linguistic fissures surfaced with full force in 1971
which ended in separation of East Pakistan in 1971
forming a new country – Bangladesh.
It is thought that had there been consociational regime in
place which could accommodate minority concerns in
army and bureaucracy led institutional arrangements, the
federal system could hold together the two wings i.e.,
East and West Pakistan.
The 1973 constitution envisages a federal system with
provinces having more financial and administrative powers
as compared to the previous constitutions.

Part II
This Part Of The Course Work Project Reveals The Key
Resource Sharing Conflicts Between The Federation And
Federating Units (Provinces) of Pakistan And Their
Respective Causes And Consequences.

Federalism and Conflicts in Pakistan
 The issue of the center-province relationship has always
been one of the most intractable questions of Pakistan politics.
 The power of the provinces looks impressive when confined
to the distribution of legislative powers, but when one
examines the administrative and financial aspects, federal
dominance of the provinces is clearly visible.
As per 1973 constitution, it is supposed to be the federal form
of government where the provinces have full autonomy.
Unfortunately, this constitutional right has been denied to the
provinces.
 Pakistan's smaller provinces resent political exclusion and are
unhappy with the inadequate sharing of power and resources
within the Country.' This is a fundamental issue in the case of
Pakistan because of the fragility of a state marked by a high
degree of diversity and centrifugal forces.

Federalism and Conflicts in Pakistan
Political Intolerance
There has been a continuous tussle during the period
when different parties ruled in the center and provinces.
Consequently, all energies, resources, and strategies are
being directed towards each other's removal with scant
regard to the verdict of the electorate.
This bipolar conflict is detrimental to the progress and
economy of the country, as well as a source of
divisiveness.
Implementation of Constitution
Centralizing Development Projects.

Fiscal Federalism: A Conflict of Allocation & Distribution
Of Financial Resources
“To make this great State of Pakistan happy and prosperous,
we should wholly and solely concentrate on the well-being of
the people, and especially of the masses and the poor.
If you will work in cooperation in a spirit that we are all
citizens and equal citizens of one state with equal rights,
privileges, and obligations, there will be no end to the
progress you will make.”
(Muhammad Ali Jinnah-The Founder of Pakistan)

 Provincial autonomy was being promised in all the three
Constitutions (!956, 1962 & 1973 existing), but it is yet to be
delivered. So the Federating units remained absent from
exercising authority over their own resources.
 On the other hand the Federal Government held everything in
hand, despite its continued failure to maintain even economic
developments in all the provinces. This proved a major factor
which created mistrust among provinces.
 Also, it could not provide them with sufficient exploration
mechanism. The ratio of revenue generation capabilities by
provinces were ignored by the Federal Government and remained
reluctant to pay the royalty they deserve.
 Unequal distribution of resources, employment opportunity,
infrastructural development and industrial growth provided a
space for the uneven socioeconomic development in provinces.
 This created disparity in economic well being of people living in
different provinces and boosted up poverty. In these ways,
provinces like Balochistan and Sindh lacked behind in every
sphere of life.

A simple example of the existing NFC criteria is that:
 ‘Province of Sindh was contributing 65 percent but
getting 23.71 percent of revenue share from the Federal
Government that has weakened the financial position of
the province.
 Previously the provinces had been getting 80 percent
share from the NFC Award but in 1996 the then caretaker
government reversed the formula of NFC Award and the
share of the provinces was reduced from 80 percent to
37.5 percent’.
 Same is the case with N.W.F.P (KP) and Balochistan
 Nevertheless, this criterion seemed to be an unjustified one
and intensely needed a revision.
Quite recently, the Centre and the provinces realized this fact
in the 7th NFC Award and have agreed on a Formula Based On
Multiple Factors Rather Than Population Factor Alone.
 At this point in time, it becomes quite relevant to say that the
much taunted single factor formula of NFC Award has been

Boosting Extreme Poverty in Less Populated Provinces
Lacking of Infrastructural Development in the Less
Populated Provinces
 Increasing Unemployment in Less Populated Provinces
 Slow Industrial Growth in Less Populated Provinces
 Socio -Economic Disparity among Low and Middle Income
Classes of Less Populated Provinces

Conflict of Explored Natural Resources
 The total area of the country is 796,095 square kilometers.
 Pakistan is divided into four provinces are:
 Sindh
 Punjab
 North West Frontier Province (NWFP) now the Khyber-
Pukhtoonkhawa (KP)
 Baluchistan
 Other affiliated Federating Units are:
 Azad Jammu & Kashmir
 Gilgit Baltistan
 FATA
 The major natural resources of Pakistan are:
 Land,
 Water
 Forests
 Natural Gas & Oil
 Minerals

Agriculture which accounts for nearly 21 percent of
Pakistan’s national income (GDP) and employs 44 percent
of its work force, depends solely on the natural resources
(land and water as direct resources of production, and
natural gas for producing fertilizer as well as for
transportation).
About 28% of country’s land area is arable and is irrigated
by one of the largest irrigation systems of the world i.e.,
Indus River System.
 Baluchistan is the largest province but most of the
cultivable land is located in the provinces of Punjab and
Sindh.
 All the rivers flow form KP which produce Hydel-
Electricity which is the major source of energy in Pakistan
and the Water is used to irrigate the cultivable land of the
country.
 The average production of natural gas per day stood at

 There are certain disagreements on sharing the national
resources and there is also a need of addressing regional
economic disparities to strengthen the Federation.
 Electricity is produced in NWFP and gas from Baluchistan,
but these have not been widely distributed in these very
provinces. Even the royalty promised to the provinces has
not been paid, especially to Baluchistan.
 According to the constitution, all wealth, minerals etc.
under the land belongs to the state, therefore no share
could be legally paid to the people. This legislation has
been counterproductive and has brought in the element of
blackmailing and corruption.
 Differences among provinces persist when it comes to the
ownership of natural resources and royalty distribution.
Natural resources, of course, are a blessing for the people
living in those areas. But, unfortunately, this has not been

 Baluchistan and Sindh feel deprived and discriminated in
the ownership of natural resources.
For example:
 Sindh contributes 71% to the total gas production
in Pakistan, whereas the share of Baluchistan,
Punjab and K-P is 22%, 5% and 2%, respectively.
 The share of Sindh, Baluchistan, Punjab and K-P in
oil production is 56%, 25%, 1% and 18%,
respectively.
 The center had been taking away 88.5% of the royalty on
natural resources before the 18th Amendment. The
provinces used to receive only 11.5%, which was further
affected by red tape and corruption.
 After the amendment, the subject of natural resources was
devolved to the provinces and the share of royalty on
natural resources increased from 11.5% to 50%.
However, it still awaits implementation.

Oil and gas is a federal subject while these precious resources
are found in the provinces, mostly in Sindh and Balochistan.
The decision making remains with the Federal Ministry Of
Petroleum And Natural Resources, while the Directorate
General of Petroleum Concessions issues exploration licenses
under the Petroleum Concession Agreements. The provinces
are not consulted at any stage.
The federal government collects all revenues earned from the
business and the provinces get 12.5 per cent royalty.
 However, the petroleum policy does not provide for any
share of the royalties going directly to the tahseels /
union councils from where these resources are being
drilled out.
Baluchistan has been catering to the country’s energy needs
over five decades, getting very little in return.
 Today, after 56 years of the Sui gas discovery, the
province has only 3.4 per cent gas users.

 Baluchis also remain deprived of their share of adequate
employment in the areas of gas production and distribution.
 The Pakistan Petroleum Limited now operating the Sui Gas
field has only 9.7 and 6.7 per cent Baloch employees in
management and non-management cadres, respectively.
 Similarly, the gas distribution agency, namely the Sui
Southern Gas Company (SSGC) has only 5.8 and 8.2 per cent
employees from Baluchistan in management and non-
management cadres, respectively.
 The organization responsible for developing oil and gas
reserves—the OGDC—has poor representation from
Baluchistan —only 3 and 10.5 per cent Baluch employees in
both the cadres.
The denial of benefits to them of their resources has sustained
widespread poverty in the province.
 According a search of the Social Policy and Development Centre,
88 per cent the population of the province was under the high
deprivation category. If they don’t get the rights over their own
natural resources and their only port, how can poverty be
removed in the province.

Sindh has also some of the richest oil and gas deposits on its
eastern as well as western sandy and hilly strips.
 The provinces have several productive oil, and coal and gas fields.
In 2005, Sindh produced 65 per cent oil, 70 percent gas and
43 per cent coal of the total domestic production.
 Similarly, in 2006, the province produced 20,369,549 million cubic
feet (MCFT) of gas, which was 70 per cent of the of the local
production.
Sindh consumed only 10,192,560 MCFT which is barely 50 per
cent of its gas production.
In 2002-2003, Sindh produced 15.33 million barrels of oil,
which amounted to about Rs60 billion. However, these rich
resources have benefited the province very little.
 The former minister for petroleum, Amanullah Jadoon told the
National Assembly, that in OGDC, SSGC and SNGPL, Sindh’s share in
jobs was only 3,613 (including 1,940 from urban areas) while
Balochistan got 353 jobs and Punjab 5,454 jobs. Worse than that, oil
and gas producing areas remain completely under-developed.

The Human Development Index of the UNDP placed
Badeen, a major oil-producing district of the country at
60th out of 91 districts.
 Likewise, only three districts of Sindh (including
Karachi and Hyderabad) found place in top thirty
districts of country on HDI.
 The same report placed Rural Sindh lowest among all
urban and rural areas of all provinces ranked on HD
Index; even lower than Rural Balochistan.
SPDC’s annual report of 2001 “Social Development in
Pakistan-Growth, Inequity and Poverty” mentions that 50
per cent of districts of Sindh (all from rural Sindh) were in
high deprivation category and 49 per cent of rural
population was under high deprivation.
 It is high time that the federation recognizes rights of
provinces and the communities over their natural
resources in their respective provinces and to make
them a major beneficiary of the wealth they generate.

 Some Analysts maintained that alienation among the
Baluchistan was wide spread and most of the alienated people
did not owe their allegiance to the these tribes.
There are many who resented the autocratic behavior of tribal
leaders but at the same time they also resented the
dominating role of Federal Authorities in the provincial affairs,
they perceived the current mega projects initiated by the
central government as the “Colonization of the Balochistan”.

Conflict of Water Resources Distribution
 Water resources of Pakistan are classified as primary
and secondary sources.
 Primary Sources of Water
Rainfall
Glaciers
 Secondary Sources Of Water
Surface Water
Ground Water

Another conflict pertaining to the distribution water resources
among provinces in the shortage of water accentuates the
problem.
Sindh has been very active in this regard, it accused that it
had been denied its due share of river waters by the Punjab, a
charge that has been vehemently denied by the Punjab.
The unresolved water crisis caused much bitterness among
the provinces in smaller provinces; the federal government is
viewed as the supporter of the Punjab. It has been exploited
by various political elements against the Musharraf regime.
The Council of Common Interest an institution for inter-
provincial coordination and conflict management has not met
for years. These issues pose serious challenges to the
federation of Pakistan.

There are reports of ‘discrepancies’ in water discharges and
their measurement at key inter-provincial distribution sites.
 Sindh has complained about incorrect measurements
between the Chashma and Taunsa barrages and Taunsa
and Guddu barrages.
 Balochistan has charged that Sindh is not allowing it to
have its full share of water in accordance with the
agreement.
 Sindh, Balochistan and Punjab have similar complaints
against KP and have protested over huge water losses
between Besham and Tarbela and inaccurate
measurements at the Chashma barrage.
 The disputes involving all the four provinces can lead to a
serious discord if not resolved at the earliest. What makes
the issue serious is that those involved in disputes are
now flouting the authority of IRSA.

The water dispute between the two provinces exists since
pre-partition, setting a fairly good example of upstream-
downstream or upper riparian-lower riparian rivalry.
The Sindhi authorities have serious reservations that the
construction of Kalabagh and other dams have negative
impacts on Sindh irrigation.
In this case, Sindh has rivalry with Punjab as the former
receives water from lower riparian and accused Punjab of
receiving larger share of water as being enjoying the position
of upstream;
Furthermore, Sindh also blames Punjab as a cause of
desertification, water logging, salinity, famine, certain kind of
diseases, and moreover electricity load shedding in Sindh is
also because the Punjab bodies being an upper riparian
controls the water of Sindh and therefore less crops are
grown in Sindh due to diversion of Indus river.

Another charge by Sindh is that Punjab is wasting water by
generating electricity from Mangla and Tarbela dams and
consequently depriving Sindh of water.
The certain moves and initiative taken for several times by
Punjab for building an irrigation infrastructure on Indus River
was challenged and simply opposed every time by Sindhis.

Political Uncertainty
Urbanization
Economic Instability
Health Impacts

Part III
This Part Of The Course Work Project Describes And Analyze
The Resource Sharing Strategies Devise By The Different
Governments’ Of Pakistan To Resolve The Conflicts Between
The Federation And The Federating Units (Provinces).

Chronology of Fiscal Distribution
Name of Award
Date Of
Constitution
Date Of Effect Status Under the era of
Pre Independence
Niemeyer Award
under the 1935 Act
1937 -
Distribute the resources
between federal and provincial
governments of the British India.
British Rule
Post Independence
Pre 1973 Constitution
Raisman Award December, 1947 April 1, 1952.
In that formula, to overcome the poor
financial situation arising out from
partition federal government was given
50 percent ad-hoc share of sales tax to
cope with its financial crises under
Raisman award
Prime Minister Liaquat Ali
Khan (Pakistan Muslim
League)
1961 Award - -
Divisible pool (70 percent of sales tax plus
other taxes),. East Pakistan and West
Pakistan got 54 and a 46 percent share,
respectively.
General Ayub Khan (Chief
Martial Law Administrator)
1964 Award - -
The respective share out of divisible pool
between Centre and provinces were
35:65 percent. The share of East Pakistan
and West Pakistan remained unchanged
at 54 percent and 46 percent.
General Ayub Khan (Chief
Martial Law Administrator)
The divisible pool remained unchanged,
however the share of the federal and
provincial governments in the divisible
pool was considered to be 20:80 percent
General Yahya Khan (Chief

Name of Award
Date Of
Constitution
Post Independence
Post 1973 constitution
NFC, 1974
(1st NFC)
9th Feb, 1974 1st July, 1975 Conclusive
Prime Minister Mr. Zulfiqar Ali
Bhutto Pakistan Peoples Party
(PPP)
NFC, 1979
(2nd NFC)
11th Feb, 1979 - Remained inconclusive
Under the Regime of General Zia-
Ul- Haq (Chief Martial
Administrator)
NFC, 1985
(3rd NFC)
25th July, 1985 - Remained inconclusive
General Zia-Ul- Haq (Chief Martial
Administrator)
Prime Minister Muhammad Khan
Junejo (Non Partisanism
Democracy)
NFC, 1989
(4th NFC)
23rd July, 1990 1st July, 1991 Conclusive
Prime Minister Nawaz Sharif
(Islami Jamhori Ittehad -IJI)
NFC, 1995
(5th NFC)
23rd July, 1995 - Conclusive
Prime Minister Benazir Bhutto
(Pakistan Peoples Party-PPP)
NFC. 1997
(5th NFC)
Reconstituted on
10th Dec, 1996
1st July, 1997 Inconclusive
Prime Minister. Nawaz Sharif ,
(Pakistan Muslim League-PMLL-N)
NFC, 2000 Remained inconclusive
General Pervaiz Musharraf

Name
Date Of
Constitution
Post Independence
Post 1973 constitution
NFC, 2000
(6th NFC)
Distribution
Order 2006
Reconstituted on
13th Nov, 2003
Award issued an
Article 160 (6) as
Presidential Order
No. 1 of 2006
revising Vertical
and Horizontal
distribution of
divisible pool.
-
General Pervaiz Musharraf
(Chief Martial Administrator)
Prime Minister Mir Zafarullah
Khan Jamali(Pakistan Muslim
League-PML-Q)
NFC, 2005 /
NFC Award 2009
(7th NFC)
21st July, 2005,
amended on 26th
August 2008
The Commission
has been
constituted and
the Award is
expected in near
future.
Conclusive
President Asif Ali Zardari
(Pakistan Peoples Party-PPP)
NFC, 2015
(8th NFC)
Distribution of
Revenues and
Grants-in-Aid
(Amendment)
Order 2015
-
Prime Minister Nawaz Sharif
(Pakistan Muslim League-
PML-N)

Financial Arrangements Under the 1973
Constitution
The distribution of revenues between the federation and
the provinces is governed by Part-VI Chapter-1 of the
1973 Constitution. It provides the basic framework for the
revenues distribution between the federation and the
provinces.
Article 160 of the Constitution provides for the setting up
of a National Finance Commission (NFC) to periodically
make recommendations to the President as to:-
 The distribution between the Federation and the
Provinces of the net proceeds of the taxes mentioned
in clause (3);
 The making of Grants-in-aid by the Federal
Government to the Provincial Governments;
 The exercise by the Federal Government and the
Provincial Governments of the borrowing powers,
conferred by the Constitution; and
 Any other matter relating to finance referred to the
Commission by the President.

Constitution
 Taxes referred-to above include:-
 Taxes on income, including corporation tax, but not
including taxes on income consisting of remuneration
paid out of the Federal Consolidated Fund;
 Taxes on the sales and purchases of goods imported,
exported, produced, manufactured or consumed;
 Export duties on cotton, and such other export duties
as may be specified by the President;
 Such duties of excise as may be specified by the
President, and
 Such other taxes as may be specified by the
President.

Constitution
 Under the 1973 Constitution, the federation and the provinces
had, in addition to their exclusive sources of revenues, a divisible
pool comprising the net proceeds of specified taxes which is
shared by all the provinces.
 The federal government meets the additional requirement of the
provinces through various special transfers such as grants-in-
aid, subsidies subvention, assistance, emergency relief and
federalization of functions.
 The composition of divisible pool is not fixed and the Constitution
gives powers to the President to amend it. Under Article 160 of
the Constitution of Pakistan, the taxes that may contribute to
divisible pool include:
 Taxes on income, including corporation tax, but not including
taxes on income consisting of remuneration paid out of the
Federal Consolidated Fund;
 Taxes on the sales and purchases of goods imported, exported,
produced, manufactured or consumed;
 Export duties on cotton, and such other export duties as may
be specified by the President;
 Such duties of exercise as may be specified by the President;
and

Constitution
Share of Provinces in the Divisible Pool is elaborated as follows:
Share Of Provinces In The Divisible Pool
S. No. Financial Year % Share
1 2006-07 41.50
2 2007-08 42.50
3 2008-09 43.75
4 2009-10 45.00
5 2010-11 & onward 46.25
Province
% Share in the
(Population Based)
% Share in the Special % Share in the1/6th of Sales Tax
Punjab 57.36 11 50
Sindh 23.71 21 34.85
NWFP 13.82 35 9.93
Baluchistan 5.11 33 5.22
Total 100 100 100

Fiscal Resources Allocation & Distribution Under
Different NFC Awards
Revenue Sharing Arrangement Under Various Awards (Provincial share in %age)
Divisible
Pool
Raisman
Award (%
Share)
NFC
Award
1961
(% Share)
NFC
Award
1964
(% Share)
NFC
Award
1970
(% Share)
NFC
Award
1974
(% Share)
NFC
Award
1979
(% Share)
NFC
Award
1985
(% Share)
NFC
Award
1991
(% Share)
NFC
Award
1997
(% Share)
NFC
Award
2002
(% Share)
NFC
Award
2006
(% Share)
NFC Award
2009 (%
Share)
Income
Tax And
Corporati
on Tax
50 50 65 80 80 80 80 80 37.5 37.5
41.5 -
46.25
65 - 57.5
Other
Direct
Taxes
37.5 37.5
41.5 -
46.25
65 - 57.5
Sales Tax 50 60 65 80 80 80 80 80 37.5 37.5
41.5 -
46.25
65 -57.5
Excise
Duty
80
Tea 50 60 65
41.5 -
46.25
65 -57.5
Tobacco 50 60 65 80 80
41.5 -
46.25
65 -57.5
Revenue Sharing Arrangement Under Various Awards (Provincial share in %age)
Divisible
Pool
Raisman
Award
(% Share)
NFC
Award
1961
(%
Share)
NFC
Award
1964
(%
Share)
NFC
Award
1970
(% Share)
NFC
Award
1974
(% Share)
NFC
Award
1979
(%
Share)
NFC
Award
1985
(% Share)
NFC
Award
1991
(%
Share)
NFC
Award
1997
(%
Share)
NFC
Award
2002
(%
Share)
NFC
Award
2006
(%
Share)
NFC
Award
2009
(% Share)
Income
Tax And
Corporat
ion Tax
50 50 65 80 80 80 80 80 37.5 37.5
41.5 -
46.25
65 -
57.5
Other
Direct
Taxes
37.5 37.5
41.5 -
46.25
65 -
57.5
Sales
Tax
50 60 65 80 80 80 80 80 37.5 37.5
41.5 -
46.25
65 -57.5
Excise
Duty
80
Tea 50 60 65
41.5 -
46.25
65 -57.5
Tobacco 50 60 65 80 80
41.5 -
46.25
65 -57.5

Constitution
 The NFC Award is formed to support the provincial
government financially in order to enable them to meet their
expenditure liabilities and also to alleviate horizontal
imbalances.
 The Award plays a key role in enhancing the financial status
and working ability of the state machinery at the provincial
as well as federal level.
 However, due to inter-provincial disparities in income
distribution, capabilities in tax collection and expenditure
disbursement, there was a strong need for the fiscal
arrangement between the federal and the provincial
governments.
 The allocation of means and responsibilities among different
tiers of government is a critical issue as its misappropriation
may lead to:
Political,
Economical and
Social Unrest

Constitution
 There are different perspectives of the provinces and the
Federal Govt., about the vertical distribution of the revenues.
 Provinces are demanding 50% of the divisible pool excluding
2.5% GST.
There is also a difference of opinion about the horizontal
distribution amongst the provinces,
like Punjab is advocating population based
distribution,
Sindh wants the distribution on the basis of
Population, Backwardness and Revenue Collection in
the ratio of 77.5%, 12.0% and 10.5% respectively.
Baluchistan pleads that the revenues may be
distributed as 80%, 10% and 5% for Population,
Inverse Population Density and Revenue Collection
Respectively.
KP wants the revenues to be distributed like 80%,
19% and 1% on the basis of Population,
Backwardness and Inverse Population Density
respectively.

Constitution
According to the Presidential Order for the financial
year 2006-07, the revenue transfer to the provincial
governments will increase from 45% to 50% over a
period of five years.
During 2006-07, provincial governments received
45%, which increased to 46.1% and 47.3% during the
financial year 2007-08 and 2008-09 respectively. The
share has risen to about 49%.
Comparative position of the percentage share of the
provinces in the total transfers through the above
mentioned three channels, during 2006-07, 2007-08,
2008-09 and 2009-10 as compared to the transfers
during 1996-97 under the 1996 NFC Award is as
follows:

Constitution
Provinces
NFC Award
1974-75 %
NFC Award
1979-80 %
NFC Award
1990-91 %
NFC Award
1996-97 %
NFC Award
2006-07 %
NFC Award
2007-08 %
NFC Award
2008-09 %
NFC Award
2009-10 %
Punjab 60.25 57.97 57.88 53.9 52.54 52.77 52.87 53.2
Sindh 22.5 23.34 23.28 21.68 25.2 24.99 25.01 24.96
NWFP (KP) 13.39 13.39 13.54 15.69 14.91 14.95 14.89 14.78
Baluchistan 3.86 5.3 5.3 8.73 7.35 7.29 7.23 7.05
% Share Of Provinces Under The NFC Awards
0
10
20
30
40
50
60
70
NFC Award
1974-75
NFC Award
1979-80
NFC Award
1990-91
NFC Award
1996-97
NFC Award
2006-07
NFC Award
2007-08
NFC Award
2008-09
NFC Award
2009-10
%ShareofProvince
NFC Awarding Year
% Share Of Provinces Under The NFC Awards
Punjab
Sindh
NWFP (KPK)
Baluchistan

Due to fiscal constraints, Pakistan is not able to
make the most of its thermal energy potential. It
can be easily understand that, the importance of
natural gas and hydroelectric power in
Pakistan’s economy and bulk of these two key
resources are located in Baluchistan and NWFP
(KP).
However, both these provinces have an
underdeveloped industrial base; thus the usage
of gas and hydro electricity is the highest in
Punjab and Sindh provinces.
The conflicts over these resources particularly
on benefit sharing mechanism (for example
distribution of royalty) will be discussed.

Natural gas is a lifeline for Pakistan and the country is
among the most gas dependent economies of the world.
The energy consumption of the country stood at 39.4
million tones with gas’s share in energy consumption at
40.3%.
The major users of natural gas are the electric power
units, industry, domestic consumption, and the transport
sector.
Out of the total (53 trillion cubic feet) discovered natural
gas reserves in the country, as much as 19.3 trillion cubic
feet are in Baluchistan.
23.37% of the natural gas reserves of Pakistan are located
in the Sui, Baluchistan.
But Baluchistan’s domestic consumption is only 4.02 of
the total domestic natural gas consumption of Pakistan,
whereas its total natural gas consumption makes only
6.72% of the total gas consumption in Pakistan.

Nevertheless, despite being rich in natural resources it is
the poorest province of the country.
Immediately after the discovery of natural gas in Sui in
1953, the disputes between the Baluchs and State of
Pakistan started.
The supply of gas to the major cities of Pakistan was
started in 1964, but the capital of Baluchistan Quetta did
not receive gas until 1986 (and that too was supplied to
meet the demands of the military cantonment).
The largest share of natural gas comes from the Bugti
tribal areas which are most seriously afflicted by Baluch
militancy.
Incidentally, according to a World Food Program-SDPI’s
report in 2003, District Dera Bugti was the second worst
food insecure district of Pakistan out of the 120 districts
(the worst food insecure district was Tharparker which is
Pakistan’s largest desert, hence for all practical reasons,
Dera Bugti can be termed as the worst food insecure
district of Pakistan).

According to Baluch nationalists, ever since natural gas
has been discovered the attitude of the federal
government towards the provinces’ indigenous population
has been one of indifference.
The jobs of well-paid managers are filled from outside the
province, local Baluch are usually employed in low end
jobs as day laborers and the government funding of
technical training institutes has never seriously been
considered.
A major issue between Baluchistan and the Federal
Government is royalty on natural gas produced in the
province.
Baluchistan was the first province in which natural gas
was discovered.
The royalty of the natural gas paid by the central
government to the provinces is based on wellhead
production costs.
These costs, since Baluchistan’s gas fields were

In the end, Baluchistan, the largest supplier of natural gas
receives only one-fifth in royalty payments as compared
to the aforementioned provinces and thus Baluchistan –
the poorest province – in effect becomes a subsidizer to
the richer provinces.
To make matters worse, none of the huge earnings of the
Central Government have been returned to the province in
the form of development expenditures.
Aware of the fact that Baluchistan is energy rich (gas and
coal), the most persistent and enduring grievance of
Baluchis has been that these resources have been
exploited by the Central Government without adequate
compensation to the province.
After the discovery of gas reserves in Baluchistan, two
public limited companies (Sui Northern and Sui Southern
Gas Companies) were given the responsibility for the
distribution of gas throughout the country.
The federal government also holds majority shares in
Pakistan Petroleum Limited (PPL).

One of the objections of Baluch nationalists
is that the ownership and top and middle
level employment of Baluchis in these
companies and allied projects is negligible.
Even today, Baluchistan is seeking a share
of the province in the state-owned energy
firms.

Government of Pakistan Towards Conflict Resolution
The conflict has been burnout first time, that led to
armed insurgency in 1972 when the National Awami
Party (NAP) after winning the elections formed the
provincial government and started raising the issue of
state rights, especially share of economic benefits
accruing from natural gas.
The Zulfiqar Ali Bhutto led PPP government dissolved
the provincial assembly and imposed governor rule in
Baluchistan in 1972.
This led to an all out military resistance and a large
number of Baluch rebels and soldiers of Pakistani
Army were killed during the period of 1973-1976.
This, despite the fact that the Constitution of Pakistan
(promulgated in 1973) provided that the province
where natural gas is situated would have priority in
receiving supplies of that gas. Similarly, article 161.2
of the Constitution provides the provision regarding
the payment of royalty to the concerned province
where the reservoir of natural gas is situated. It

It emphatically states that:
“The proceeds of the Federal excise duty on natural gas
levied at the wellhead and collected by the Federal
Government, and of the royalty collected by the Federal
Government, shall not form part of the Federal
Government Consolidated Fund and shall be paid to the
Province in which the wellhead of natural gas is
situated.”
 The resource transfer paradigm has been a major
bone of contention among the federation and the
federating units (provinces).
 The National Finance Commission (NFC) was
established as a mechanism to distribute federally
collected financial resources between the federation
and federating units.
The central purpose of the NFC was to provide the
framework for amicable distribution of resources
between the federal and the provincial governments
Evolution of National
Finance Commission
(NFC) Under
Constitution 1973

But in practice, the NFC award has emerged as a
source of dispute between federal and provincial
government, as well as of interprovincial disputes.
 It was only in 1991, when the NFC award recognized,
for the first time, the rights of the provinces on
natural resources and the provinces were given
royalty and gas development surcharge on oil and gas
as well as Net Hydel Profit and amounts were
relocated in the shape of straight transfers to the
provinces.
This award was a move forward towards fiscal
decentralization by extending more financial autonomy
to the provinces.
Here it is pertinent to mention that the provinces kept
on disagreeing over resource distribution, and making
demands for a higher share of the divisible pool (50
percent) as well as a diversification of the distribution
criteria.
Finance Commission
(NFC) Under
Constitution 1973

The new NFC constituted in 2005, could reach no
consensus among the members for the judicious
distribution of resources. This led to a deadlock and
finally the President under Article 160 (6) of the
Constitution of the Islamic Republic of Pakistan,
through Ordinance No.1 of 2006, made amendment in
the “Distribution of Revenues and Grants-in-Aid
Order, 1997.”
According to the 2006 NFC, “the provincial share was
revised to be 45 percent (share in total divisible pool
and grants) for the first financial year that would reach
50 percent with subsequent increase of 1 percent per
annum.”
 There are vertical imbalances in Pakistan, due to the
assignment of taxes, and though under the 1973
constitution, there are significant revenue raising
options for provincial governments, those are not fully
utilized due to weak tax and use charge collection.
Finance Commission
(NFC) Under
Constitution 1973

 The NFC award was supposed to make sure that
provincial autonomy was enforced by making fiscal
transfers formula-based and predictable. However,
provincial dependence on federal transfers reduces
provincial autonomy.
This gives the Federal Government the power to hold
back release of funds and exert influence on the way
that they are spent. This also aggravates political
divide between federating units and the federal
capital.
 Article 161 of the 1973 Constitution makes explicit
provisions for the allocation of royalties from natural
gas production and generation of hydroelectric power.
It stipulates that the net proceeds from excise duties
and royalties on natural gas collected by the federal
government shall be paid to the province where the
wellhead of the gas is situated. It is similar for
hydroelectric power.
Finance Commission
(NFC) Under
Constitution 1973

 Hence it is felt by the Baluchis, since the creation of
Pakistan in 1947, that they have neither received
adequate political representation in the military-
bureaucratic complex nor compensation for their
natural resources which have been, in the view of
some, appropriated by the capital elite in Islamabad
and distributed to other provinces without much ado.
The unequal access and benefit sharing has led to
political instability and sense of deprivation in the
province of Baluchistan which is the major energy
provider for Pakistan.
The dynamics of Baluch nationalist movement took a
new twist after 11 September, with American claims
that the nationalists had alleged linkages with Al
Qaeda and Taliban. However, the movement mainly
revolved around demand for a fair share from gas
royalty.
Finance Commission
(NFC) Under
Constitution 1973

When General Musharraf decided to install a
democratic setup in Pakistan in 2002, Zafar Ullah
Jamali became the first Baluch Prime Minister of
Pakistan. It was expected that he would readdress the
deprivation in his native province. However, no
serious attempt was made to address the gas royalty
issue even in the tenure of a Baluch Prime Minister.
It was only after his resignation in June 2004, that a
“Parliamentary Committee on Baluchistan” was
formulated after the speech of his successor the
Prime Minister from Punjab, Chaudry Shujat Hussain
in September 2004.
 The recommendations of this Committee were that
the District or Agency from which gas is being
produced should be given at least 15% of the revenue
received by the provincial government in this regard.
The Committee also recommended that Baluchistan
should be given maximum representation on the
Boards of Pakistan Petroleum Limited (PPL), Oil and

Five percent of the expenditure, of the exploration
company awarded concession in the area, should be
spent on social welfare projects and on the other hand
companies successful in striking gas or oil should be
bound to spend five percent of their pre-tax profit on
social sector projects.
The Committee approved a formula regarding royalty and Gas
Development Surcharge (GDS).
Province
Production
(MMBTU)
Royalty GDS Total
Current
Rs.
Per
MMBTU
Royalty GDS Total
Proposed
Rs.
Per
MMBTU
Baluchistan 303, 433 1,008 5,871 6,879 22.67 1,008 7,182 8, 190 26.99
Sindh 693, 687 7,974
11,59
5 19,569 28.21 7,974
10,75
0 18, 724 26.99
Punjab 57,464 1,019 999 2,018 35.12 1,019 532 1,551 26.99
Total
1,054,
584 10,001
18,46
5 28,466 26.99 10,001
18,46
5 28,466 26.99

Though this can be called a step in the right direction,
strong political will is required to implement the
recommendations of the committee and that has been
lacking due to the rough transition from dictatorship
to democracy and the war on terror.
It has been witnessed that due to the political turmoil
at the Centre, and in the north, the Baluchistan
insurgency has been put on the back burner by policy
makers at the federal capital.
The dispute in the words of Nawab Akbar Khan Bugti
is about “…the natural rights of the Baluch…and if the
government accepted these rights there would be no
dispute.”
With the assassination of the Nawab amidst
controversy the core-periphery tensions have been
exacerbated and the assault on the Nawab has been
taken by most as a blow to Baluch nationalism.

It can be said infact that the killing of the Nawab
added an ominous dimension to the Baluchistan
conflict.
The killing also sent out the signal that the army and
not the civilian leadership were talking all the
decisions regarding Baluchistan.
Although the Nawab had been disowned by a
government-sponsored council of feudal lords, yet the
reaction to his killing showed that he hadn’t lost his
aura or his authority.
Bansal analyses that the tactics of the Pakistani
establishment in dealing with the Baluchistan
insurgency indicate that the army is confident it can
solve the issue with mere brute force.
On the other hand, many analysts have seen Bugti’s killing as a threat to the
federation and have foreseen a reoccurrence of the events that led to the creation of
Bangladesh in 1971.

 Over the years, the perception of exploitation
has grown in Baluchistan and the people feel
completely marginalized from the center that
takes Sui gas, does not pay adequate royalty
with not enough development in the region.
The sense of marginalization can be understood
from the statement of Baluchistan Chief Minister,
Aslam Raisani, who while addressing a press
conference said,
“The agitation engulfing Baluchistan is the result of
years of alienation and not backwardness. Problem
of Baluchistan is not (lack of) development, rather
it is a political one.”

He said the cause of unrest in the insurgency hit
province was the sense of deprivation among
people in making decision about their own
resources.
We don’t want development at the cost of
exploitation of our resources” he said, adding that
“we want development as we want it.”
 The PPP Led Government in 2008-09 although
realized the importance of the Balushistan issue
and in the 7th NFC Award and they have
increased the overall share of the Balushistan
Province (under the Aghaze Haqooq-e-Balushistan Muhim)
and revised the allocated budget under the NFC
formula.

The PPP Led Government in 2008-09 although
realized the importance of the Balushistan issue
and in the 7th NFC Award and they have
increased the overall share of the Balushistan
Province (under the Aghaze Haqooq-e-Balushistan Muhim) and
revised the allocated budget under the NFC
formula.
 But they were unable to address the
route cause of the actual problem or
unrest among the Baluch residents
regarding the proper distribution of
royalty of the natural resources and the
availability of theses resources to the
local residents on priority at low cost.

The Conflict of Hydroelectricity in NWFP (KP)
 This section discusses hydropower (energy) policy and political
confrontation in Pakistan. Most of the hydel power is generated in
NWFP (KP).
 Hydroelectricity is one of the major sources of energy in Pakistan and
most of the hydroelectric power is generated in Tarbela dam located
in NWFP (KP).
 Until 1991, NWFP (KP) did not receive any royalty for the hydel
power generated in the province. In 1991-92, the NWFP (KP)
government received Rs. 5.99 billion as net profit for hydro power
royalty from the federal government.
 Later on, the federal government imposed an annual cap of Rs.6 billion
on this payment.
 Now there is a dispute on the interpretation of net profit and on the
amount of arrears. More recently an attempt to resolve the dispute
between the NWFP (KP) government and WAPDA through an

 As a consequence, the NWFP (KP) government is not able to claim
and subsequently spend on public development, what is termed in the
constitution as provincial origin revenue.
 The institutional weaknesses and political disadvantages of NWFP
(KP) exacerbate the sense of unjust and unequal distribution of
benefits.
 In the context of the war on terror and the perilous security situation
in the NWFP (KP) this sense of injustice contributes to political
alienation and therefore instability.
 The Constitution of Pakistan recognizes the allocation of hydel power
revenues (royalty) to the provinces. In the year 1991-92, NWFP (KP)
received a royalty but the provincial government also demanded the
backdated dues and this issue has remained unresolved even today.
 The province is also constantly demanding a substantial increase in
the royalty because the electricity price has been increased

 Royalty issue for the power generated at the Tarbela Dam is a source
of political difference between the NWFP (KP) government and the
central government.
 The royalty issue of Ghazi Barotha Project is another source of
political confrontation between NWFP (KP) and the central
government.
 “NWFP (KP) has a genuine right to claim major portion of royalty
from the Ghazi Barotha Hydel Project (GBHP) as its major
components consisting of Tarbela reservoir.
 Ghazi barrage, its 7 mile long pond on the upstream and about 20
km of power channel are all located in NWFP. These vital
components form the Head Works Complex of the project to
produce hydropower.
 The entire power generation of 1450 MW from GBHP depends on
the regulation, operation and basic support of Tarbela reservoir and

 The Indus water is drawn from the 7 mile long and 2 mile wide pond
created by Ghazi barrage and supported by Tarbela reservoir. It is
then diverted by the barrage into the world’s largest hydel power
canal with a colossal discharge of 56500 cusecs.
 Punjab has no contribution except that powerhouse and portion of
canal is located there and for that it gets the whole royalty from
GBHP.
 NWFP is therefore severely affected and feels deprived of its inherent rights by the
inequitable, unjust and one sided constitutional provision to grant royalty to the
province (Punjab) only for the powerhouse location, ignoring the ‘Head Works
Complex’ in NWFP (KP).
 In one case the interests of the inhabitants of NWFP (KP) are affected in water
from the natural sources supply, i.e., the Indus River and in another case, NWFP
(KP) demands its just share in royalty for the location of the ‘Head Works’.”

The mechanism for allocation of hydel power
revenues is provided in Article 161 of the Constitution
(as seen in the case of Baluchistan above).
The Article clearly states that “net profits” will be
computed by deducing from the revenues accruing
from the bulk supply of power from the bus-bars of a
hydroelectric station at a rate to be determined by the
Council of Common Interests (CCI).
The operating expenses of the station are to include
any sums payable as taxes, duties, interests or return
of investment, and depreciations and element of
obsolescence, and over-heads, and provisions for
reserves.
“The CCI did not meet until 1991, and it was actually
the NFC which agreed on a formula for allocation of
hydel profits.

When A. G. N. Qazi was chairman (1986) the
NFC constituted a committee to determine the
“Rate Of Net Profits On Hydel Power”.
The committee was made up of members of
WAPDA, the federal and NWFP governments.
 The formula it came up with is oft referred to as
the A.G. N. Qazi formula which was endorsed by
the CCI in 1991.
Until 1991 NWFP (KP) did not receive any
royalties for the hydel power generated in the
province. Keeping in mind this fact, the NWFP
(KP) government insisted that the President
should become guarantor for WAPDA to ensure
that regular payments of net profits as well as
backdated dues took place (this happened when

The President at the time, i.e. Ghulam Ishaq
Khan agreed and issued a Presidential Order
stating that in case of default by WAPDA or any
other authority making bulk purchases of
electricity from the provinces, the federal
government would guarantee for payments. In
1991-1992, the NWFP (KP) government
received Rs. 5.99 billion as net profits.
This figure increased in subsequent years, but
then the federal government imposed a cap of
Rs. 6 billion on annual payments.
Successive provincial governments attempted to
recover the arrears from WAPDA and failing that from
the federal government which under the agreed
formula was guarantor for hydel profit payments.

Little progress was made, not helped by frequent
changes of government (and Presidents) in the 1990s.
In 1996, the federal government agreed to the NFC
Award, which stipulated that in the event of
consensus on arrears not being reached, payments to
NWFP would increase by 11% each year.”
However, once again the government was dismissed
and Nawaz Sharif won the elections and formed
government in 1997. “The NWFP (KP) government
formed a committee to pursue the recovery of net
profits on hydel power.
The military coup of October 1999 dissolved both
houses of Parliament and suspended the Constitution
so the matter was dropped yet again.” With the
elections of 2002 once again the matter of recovering
dues from WAPDA were debated.

“An Arbitration Tribunal was set up to resolve the
dispute between the NWFP (KP) government WAPDA
over payment of net profits from hydel power.
The MMA government agreed that pre- 1991 dues
and could be decided later, so the Tribunal decided
just on the dues owed from 1991- 1992 to 2004-5.
The Tribunal heard arguments from both sides from
March 2005 to September 2006.
It was unable to arrive at a ‘satisfactory calculation of
NHP’ and therefore used the formula originally
suggested by the NFC, i.e. calculating a 10% annual
increase from 1990 onwards.
Significantly, the Tribunal interpreted Constitutional
provisions for ‘net profits’ as being counted after
WAPDA had taken its profits.

Other parts of the Tribunal’s judgment suggested the
CCI’s role was limited to setting the rate of hydel
power, and not to determine net profits.
In sum, while the Arbitration Tribunal ordered that
dues had to be paid by WAPDA to the NWFP
government, it considerably slashed the amount that
had been claimed by the latter. As new dams are built,
some in NWFP (KP), outstanding issues of payment
must be resolved and clearer guidelines made for
future allocation of hydel power revenue.”
This is not just the need of the hour but also the
demand of all the nationalist parties, including
renaming the NWFP province to Pukhtoonthwa.

Pakistan’s economy largely depends on
agriculture. Its 35 million acres land is irrigated
by canals and tube wells.
Water availability for canal withdrawals has
progressively increased from 67 to 106 million
acre feet (MAF) from 1947 to 1976 to meet the
ever growing demand.
This increase was achieved by the construction
of water reservoir at Chashma, Mangla and
Tarbela.
After the completion of the Tarbela reservoir in
1976, there has not been further increase in
canal withdrawals although population has
continued to grow at the rate of 3.00 percent.
On the other hand, gross capacity of Tarbela,
Mangla has depleted by 4.89 MAF by the year

The major user of water for irrigation is Indus Basin
Irrigation System.
To this system total canal supplies were 85 MAF
during 1960-61 and irrigated area was about 25.7
million acres.
The construction of storage reservoirs enables
Pakistan to acquire sufficient capability of river flow
regulations.
At present the irrigation system of Pakistan is
utilizing annually 106 MAF of water.
About 22.6 million acres of cultivable land is still
available for further irrigated agriculture

Land Use In Pakistan
With a large cultivable land base of 77.1 million acres of
which only 54.5 million acres are cultivated, Pakistan still
has the potential of 22.6 million acres of barren land under
cultivation. In post Tarbela 24 years (1976-2000), an
additional average of 37.85 MAF escaped below Kotri
Barrage.
This surplus water in the river system is available only in
the months of July to August. No crop can be sown and
taken to maturity in this short span of time. So it is dire
Sr. No. CATEGORY AREA (Million Acres)
1 Geographical Area (Total Area) 196.00
2 Cultivable Land (Area suitable for Agriculture) 77.1
3 Cultivable Area (Irrigated + Barani) 54.5
4 Irrigated Area (By all sources) 44.5
5 Additional Area that could be irrigated (2-4) 22.6

With depleting storage capacity and increasing
population, Pakistan is running fast towards the
situation of water shortage and threat of famine.
In 1951, per capita availability of surface water for
irrigation was 5650 cubic meters per year. It had
reduced to 1350 cubic meter in 2002.
The minimum requirement to avoid being a “water
short country” is 1000 cubic meter per capita per
year and unfortunately, Pakistan is facing the threat
of ‘water short country’ in now.
In this critical situation, the conflicts over the water
sharing are not un-expected in the diverse society
of Pakistan.
Distribution of resources among the federating units
of Pakistan has always been remained problematic.

It is due to lack of trust. This phenomenon is
developed partly due to the uneven development
in the country and partly because of the
variation in the size of population of the
constituent units and overrepresentation of
dominant group, Punjabis, in the state apparatus.
The relatively poorer and marginalized groups
based in smaller provinces have certain
community concerns and territorial grievances.
The province of Punjab has been perceived by
smaller provinces as a dominant contender. It
has been argued that this relative advantageous
position of the Punjabis has annoyed the people
of deprived regions and the marginalized
communities.

 The grievances of “ethnic minorities and/or
smaller units include the pre-dominance of
Punjabis in the civil-military bureaucracy, the
comparative development level of Punjab, the
‘contentious’ formula that regulates the
distribution of funds to provinces, and distribution
of water between Punjab and the Federating
Units”. (Mushtaq, 2010)
 The Federation of Pakistan has been
trying to solve the issue of water
apportionment among the federating
units for last 65 years and six significant
attempts have been made to solve the
problem but unfortunately consensus

Akhtar Hussain Committee (1968)
Fazle Akbar Committee (1970)
Indus Water Commission
(Anwar-ul-Haq Commission)-1981
Haleem Committee (1983)
 Water Apportionment Accord (1991)

Indus Water Treaty of 1960 between India and
Pakistan came into effect on April 1, 1970 and
this made the issue of water apportionment more
complex among the four provinces of Pakistan.
Since the enforcement of Indus Water Treaty, ad
hoc arrangements were being made for the
every season/period.
Permanent settlement of the issue was a
growing need of the time.
So the provinces highly showed mutual goodwill
and accommodation in resolving the long
standing dispute of water apportionment and the
Water Apportionment Accord was signed by the
Chief Ministers and other representatives of the
four provinces on 16th of March 1991 at Karachi.
It was approved by the Council of Common
Interests on March 21, 1991.

According to the Water Apportionment Accord share
of the each province, both for Rabi and Kharif and
allocation of balance supplies was allocated in MAF as
under:
*Including flood flows and future storages.
**Including already sanctioned urban and industrial uses for Metropolitan Karachi.
Provinces Kharif Rabi Total Balance Supply
Shares* (%)
Punjab 37.07 18.87 55.94 37
Sindh** 33.94 14.82 48.76 37
Khyber Pakhtunkha (a) 3.48 2.30 5.78 14
(b) Civil Canals*** 1.80 1.20 3.00
Balochistan 2.85 1.02 3.87 12
Total 77.34 37.01 114.35 100

According to a provision of the Water Accord, an
independent body of Indus River System Authority (IRSA) was
established by an act of Parliament in 1991.
It comprised of five members, one from each province
and one from Federal Government.
Chairmanship of the Authority was for the tenure of
one year by rotation.
Its main function is to implement the Accord.
IRSA determines the shares of the available supplies
for each province for each period/season, according
to the Water Apportionment Accord and WAPDA
releases supplies accordingly from the reservoirs.
IRSA operated fairly and satisfactorily for a decade,
but in the last decade releases from Mangla and
Tarbela reservoirs fell short of requirements due to
the conditions of droughts and sedimentation of the
reservoirs.

In this critical situation, it was very difficult for IRSA
to satisfy the demands of the all counterparts and it
faced severe criticism.
Regional politics of water came into play and even
Accord itself had been objected particularly by the
province of Sindh.
First Objection raised by the Sindh is that Accord has
deviated from the internationally and historically
accepted criteria of water distribution on the basis of
equitable apportionment and allocation.
It allocated 7.61 MAF more water to Punjab and to
Sindh nothing, when it is compared to the allocations
under the Draft Sindh-Punjab Agreement of 1945.


Second Difference is over the section 6 of the Water Accord
which reads:
“The need for storages, wherever feasible on the Indus
and other rivers was admitted and recognized by the
participants for planned future agricultural development”.
(Khan S. A., 1991)
This is most important and serious water related issue
which Pakistan has been facing for last three decades.
The Federal government and government of the
Punjab are of the opinion that this section amounts an
agreement to construct new dams on the Indus
System like Kalabagh and Bhasha.
Since the feasibility and detailed engineering studies
of the Kalabagh Dam has already been completed, so
construction should be started without any further
delay.

On the other side provinces of Sindh and Khyber
Pakhtunkha have serious objections to this project and
there assemblies have passed several resolutions
against its construction.
 Thirdly, clause 7 of the Accord recognizes the need of
fresh water to flow into the sea to maintain the
ecological balance of the mangroves forests but does
not establish the quantum of fresh water needed, nor
does it binds the signatories to a time schedules to
find out such quantum.
Fourth Difference is on the section 14(b) which reads: “The
record of actual average system uses for the period
1977-82 would form the guide line for developing a
future regulation pattern.

 These ten daily uses would be adjusted pro-rata
to correspond to the indicated seasonal
allocations of the different canal systems and
would form the basis for sharing storages and
surpluses on all Pakistan basis”.(Khan S. A.,
1991).
Fifth, another offending element for Sindh is clause 12
which allocates surplus flood water for LBOD rather
than a specific allocation.
 Sindh greatly suffers from water logging and
salinity. LBOD is a major project for drainage of
effected lands. Sindh was promised additional
water that was not released (Kazi, 1998)

Part IV
This part of the course work project correlates the
past government Resource Sharing Strategies in
accordance with the Conflict Management Theories
& Practices.

Conflict Management Strategies
The Thomas-Kilmann Conflict Mode Instrument,
or TKI Test for short, was originally developed
as a research tool by Kenneth W. Thomas and
Ralph H. Kilmann in the early 1970s.
Its development was based off of a model of
managerial conflict styles proposed by Robert
Blake and Jane Mouton in the 1960s.
Pairs of statements were carefully chosen and
matched for desirability in order to reduce
response bias; the goal was to make no conflict-
handling mode appear better or worse than
others.

Strategies For Conflict of Allocation And Distribution Of Financial
Resources
3rd NFC
Award
4th NFC
Award
5th NFC
Award
6th NFC
Award
7th NFC
Award

Strategies Over Distribution of Natural Resources
Zulfiqar Ali
Bhutto Led
Government
General
Musharraf Led
Government
General
Musharraf
Led
Government

Strategies For Water Dispute Of Resources
Water
Accord
1991
Musharraf
Led
Government

Part V
This part of the course work project suggests
a policy that provides a guideline for the
future strategies to resolve the ongoing
conflicts and issues between Federation And
Different Federating Units (Provinces).

Title:
It’s not a matter of Choice, it’s a matter of Right
Purpose:
 This policy provides a comprehensive guideline, to the existing and
the future Governments of Pakistan, to elaborate the strategies not
only to resolve the ongoing conflicts, but will also develop their
strategies to manage the anticipated or potential conflicts of their
future course of actions.
Conflict Management Strategy & Practices:
 The Only strategy that can serve the purpose of inter Federation
harmony will be the Collaborating Strategy.
 As mentioned the IMF Report that problem resolution is not up to the
allocation of resources in collaborating manner, but to allocate the
responsibilities in accordance with the resource allocation among
Policy Recommendation

Conflict Management Strategy & Practices:
 The Only strategy that can serve the purpose of inter Federation
harmony will be the Collaborating Strategy. As mentioned in the IMF
Report, that problem resolution is not up to the allocation of
resources in collaborating manner, but to allocate the responsibilities
in accordance with the resource allocation among federation and
Federating Units.
Formation OF Parliamentary Commission:
 A permanent Parliamentary Commission should be form to redress the
grievances of Federating Units (Provinces) with Federation (Central
Government) and in between federating units. This Parliamentary
Commission should consists on Members of Senate, Members National
Assembly and Members of Provincial Assemblies of Each Provinces.

Formation OF Parliamentary Commission:
 The number of the Members from Senate and National Assembly
should in reverse to the population of the Provinces:
Commission Preside By: President of Pakistan
Members: Chairman Senate
Six From Baluchistan, Two Members each
from Senate, National & Provincial
Assemblies
Six From KP, Two Members each from
Senate, National & Provincial Assemblies
Three From Sindh, One Member each from
Senate, National & Provincial Assemblies
Three From Punjab, One Member each

Formation of Permanent Judicial Commission:
 An Arbitrary Judicial Commission should be formed to provide an
opportunity to the Federation & Federating Units to redress & resolve
their grievances and to enhance intra state harmony among all the
stakeholders. This Judicial must comprises on the following:
Chairman: Chief Justice Of Pakistan
Members: Two Senior Justices Of Supreme Court
Chief Justice of Sindh
Chief Justice Punjab
Chief Justice of KP
Chief Justice Of Baluchistan
 The decisions made by these Commissions can be review by
Parliament as per need or as per the request of the any aggrieved
party. If necessary they can request the Commission to review their
decision under the available facts and figures or in the larger interest

Recommendations To Anticipate Conflicts:
 Political modernization requires to strengthen the democracy, which
can be enhanced by:
 Ensuring regular elections and that extra constitutional measures
are not taken to invalidate those elections.
 Providing incentives for political parties to move from identity
politics characterized by religious and ethnic distinctions to issue
politics relating to economic, administrative, environmental, health,
educational, gender, and minority problems.
 Shielding the parliament against pressures from the other branches
of the government.
 Strengthening political parties organizationally, beyond the donor-
driven managerial approach to a political approach based on
institutional links with various sectors of society.
 Investing in the “political class,” and not just the educated middle
class.

 There should be a genuine effort to “Federalize” the state to make the smaller
provinces equal stakeholders in the political system.
 Federal system of government is indispensable for Pakistan, as entrusted in the
1973 constitution.
 For it reconciles the national unity and will help keep the units satisfied, narrowing
the gap of trust deficit, increase inter-provinces and center-province relations and
reduce separatist tendencies.
 So, decentralization and deliverance of provincial autonomy is a concrete step to
satisfy the nation.
 In addition, it has also been argued that if the democratic process is permitted to
continue, after a few years there is a possibility that extremism in the nationalist
movement may give rise to saner politics.
 To establish a viable political system for the uninterrupted growth of the
political process, a strong democratic culture is a must.
 Political entities must ensure supremacy of institutions through a carefully
conceived strategic planning with consensus among various pillars of the state.
 None of the political parties should extend their support to the absolute and
despotic governments.
 All the stakeholders should work for nation-building and ensure their respect for
the constitution, and should jointly address the problems faced by the nation.
 This will keep the nation satisfied, which is one of the prerequisites for integration.

 We should try to remove all social ills hindering the social and political
integration of the country.
 These include intolerance, corruption, social injustices, ethnic
discrimination, illiteracy, poverty, frustration, tribalism etc.
 We have to seek national consensus on every issue of strategic importance to
form a unifying front.
 Political parties need to rise above purely party interest and look for the
best interest of the nation.
 This will help resolving the problems in a much smooth and convenient
manner thereby injecting mutual confidence and find combined solutions to
the common problems.
 It is not the time to outwit all the others, but it is time to use wits of all to
outwit the enemies of state and to counter their designs by finding true
solutions to our problems.
 The 18th amendment gives reason to hope that the provinces will strengthen
their own mechanisms for recruitment and trainings for officers in police and
provincial top level bureaucracy.
 Such more laws and amendments should be developed and executed.

 To address the problems of Federalism, Provincial Autonomy, Identity
And Conflict, Pakistan needs to rethink the patterns of decision-
making be that Political, Economic, or Social Arena.
 Such patterns are embedded in the institutional arrangements which form
structure of the state such as the political and permanent executive i.e.,
parliament and the bureaucracy.
 To promote equity and harmony, necessary for national unity and
integrity, we should treat equally all ethnic groups, and ensure the
protection and promotion of their languages and cultures.
 Just economic developments in all the provinces need to be ensured.
 So far we have achieved nothing through violence, thus we have to adopt
diplomatic approach to meet national agendas.
 Practically, the state of Pakistan needs to evolve an agenda of social
uplift and economic inclusion of all groups and individuals moving
beyond some regions and social groups.

 The wrong priorities of deliberately creating ‘Functional Inequalities’ be that
incomes or social opportunities need to be corrected.
 There are some regions in Pakistan like central Punjab and urban Sindh
which have fared relatively well in terms of income and social mobility
during the past sixty years.
 At the same time, there are pockets of isolation, disempowerment, and
poverty such as in Baluchistan, Southern Punjab, Khyber-Pakhtunkhwa and
rural Sindh.
 This situation of inequality amongst the ethnic groups and region presents
a case of horizontal inequalities and its link with conflicts.
 To address such questions, the egalitarian role of the state must be invoked
which should resist the accumulation of politico-economic power in a few
hands – land reforms should not get out of fashion and the public finance must
tax the rich to undertake equality-enhancing programs.

 We have to extend our support to national institutions and national political
parties while discouraging the regional ones.
 Unlike history, we have to ensure the political participation of every
citizen so that no one felt excluded and the common national identity could
develop.
 A conscious effort for establishing a consociational form of government
which tries to build policy and planning not by majority decision but by
consensus and inclusion of minority ethnic groups in the processes cab be
made.
 The state must go for restructuring of democratic polity in the direction of
social and economic harmony. For example, the Sindhis and Baluchis are
worst off in terms of their representation in military and civil bureaucracy
which requires serious action on generating alternative platforms for
cooperation in national institutions.
 We have to redress the situation in FATA sincerely in a planned,
systematic and scientific manner instead of the perfunctory and ad-hoc
approaches. The government should follow the multi-pronged strategy of
political, military and socio-economic development to counter the

 It is also advisable that provinces seriously work on building their capacity to
develop strong systems of bureaucracy so that they do not have to look
towards the center for supply of higher level officers for ensuring quality of
government.
 Local / International civil society actors can enhance the potential of their
Pakistani counterparts in defining the national agenda in liberal, democratic,
and pluralist terms and monitoring the violation of law, the Constitution, and
human rights. International actors should partner with liberals in Pakistan,
instead of seeking a role for self-styled “Secular” allies who may not have
enough public support.
 Institutional links between lawyers, judges, academics, journalists, artists,
human rights activists, feminists, and other social activists should be forged
between Pakistani and international civil society.
 Media can play an effective role in resolving the issues pressing the nation at
the moment.
 It has to be utilized for regaining the lost image of the nation in the
international arena, and the government should consider it a convenient
tool to win the hearts and minds of the people, necessary for the integrity

 Through it one can easily narrow the differences among different factions
of society and various political parties through open debates and patriot
Intellectuals’ writings.
 Must keep away the donor community from local developmental projects to
consortium-based megaprojects dealing with governance-related issues such
as access to medical aid, justice, public transport, clean water, and good
education.

A Course Work Project Master of Philosophy (M. Phil.)-Organizational Conflict Management-703

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