Course work project ocm-703

A Course Work Project of
Master of Philosophy (M. Phil.)
Of
Organizational Conflict Management (703)
Uneven Distribution Of Resources:
A Conflict Between Federation And
Federating Units (Provinces) in
Pakistan
Submitted To:
Dr. Ghazal Khawaja Hummayun Akhter
University of Karachi
This research project the has been done by Muhammad Asif Khan for his course work
of Organizational Conflict Management (703) in his Semester I (August-December,
2018). He is an enthusiastic researcher and the student of Master of Philosophy (M.
Phil.) from Board of Advance Studies & Research (BASR), Department of Public
Administration (DPA), University of Karachi, with Attendance ID-10.
The author has done his Master in Administrative Sciences (After PGDPA) from
Department of Public Administration (DAP), University of Karachi in the academic year
2014-15 with a research paper “Impact of Quality Human Resource on the Performance
of Health Care Providing Organizations”. He has completed his Post Graduate Diploma

in Public Administration (PGDPA) in the academic year 2013-14 with a pilot research
study on the topic “Impact of Quality Gross Domestic Product (GDP) on Country’s
Economy” from the same institution.
Researcher has also completed his most part of Master of Business Administration
(MBA) in Production in Operations Management (P&OM) from College Of Management
Sciences (CoMS), PAF-Karachi Institute if Economics & Technology (KIET)-City
Campus, at present the study has been postponed.
He has also done Psot Graduate Diploma in Labour Administration & Industrial Welfare
(PGDP-LA&IW), in 2000, from National Institute of Labour Administration Training
(NILAT), Karachi. He has done his Bachelor Of Business Administration(BBA) in 2000,
from Allama Iqbal Open University (AIOU), Islamabad, Karachi Region and Bachelor of
Commerce (B.Com.) in 1999 from Saint Patrick’s Government College, Karachi in
affiliation with University of Karachi.
Preface
This report, on the topic Uneve Distribution of Resources: A Conflict between
Federation And Federating Units (Provinces), has been carried out to fulfill the project
requirement of the course of Master of Philosophy (M. Phil.), Managing Conflict in
Organizations (704).
Federation of Pakistan has been facing many challenges from its inception, the
federation and provincial autonomy are always a controversial issue and mostly
exploited by the political elites. No doubt it is key concern which directly relates to the
well being of the People of Pakisan, which are living in the different parts of its
federating units. Immature politicians and lack of Leadership has resulted in the
separation of East Pakistan because at that time they were unable to address these
issues as per its severity and the seriousness. The ruling class always tries to dominate
the situation and resulted in the kiosk, unrest and militancy within the federating units.
These situations always be exploited by our neighboring country and always tried to
declare the Pakistan as a failed state at every Global Forum.
This project report consists of Five Parts and completely enumerates the facts
pertaining to the prominent conflicts existing in the Federation of Pakistan from its
independence.

The first part of the project report discusses the concept of federalism, its historical
perspective and its existence in the Globe. It further discusses the resource distribution
and different aspects of unequal distribution of resources. At last it describes the
federalism in Pakistan.
The second part of the project report describes the conflicts in existing in the federation
of Pakistan. Further emphasize of this part is to enumerate the three prominent conflicts
inheriting in Pakistan their causes and their respective consequences.
The Third part of the project comprises of the information regarding the measures
taken by the Federal Government of Pakistan, in different ruling eras, to resolve these
issues.
The fourth part of the project report discusses the frameworks that can apply to resolve
the conflicts and its further describe that the strategies applied by the past Federal
Governments to resolve these issues.
The Last and the fifth part of this project report, analyze the different aspects of these
conflicts and describe the way forward not only to resolve these issues, but to manage
these in a manner that all the development objectives should be achieved. Furthermore,
it suggests a policy guideline namely “It’s not a matter of Choice, It’s a matter of Right”,
that can help the Federal Government of Pakistan to address these conflicts in a manner
that inter federation harmony will be maintained.
Table of Contents

 Introduction
Part I
1.0 Federalism
_______________________________________________________________________________________________13
1.1 Concept of Federalism ----------------------------------------------------
--------------------------13
1.2 Philosophy of Federalism --------------------------------------------------
-------------------------14
1.3 Modes of Federalism -----------------------------------------------------
---------------------------15
1.4 Evolution of Federalism ---------------------------------------------------
--------------------------15
1.5 Federalism and Consociationalism -------------------------------------------
----------------------16
1.6 Federalism And Conflicts Around The Globe -------------------------------------
---------------- 17
2.0 Resource Dis tribution
__________________________________________________________________________________17
2.1 What Are Resources? ------------------------------------------------------
-------------------------17
2.2 How are Resources Distributed and Why?---------------------------------------
------------------17
2.3 What Are The Consequences of Uneven Resource Distribution -----------------------
-----------18
2.3.1 Human Migration ------------------------------------------------------
-------------------18
2.3.2 Economic Activities ------------------------------------------------
-----------------------18
2.3.3 Trade -----------------------------------------------------------
---------------------------18
2.3.4 Conquest, Conflict, And War ------------------------------------------
-------------------18
2.3.5 Wealth And Quality Of Life -------------------------------------------
-------------------18
2.4 How had Industrialization Led to a Redistribution of Resources and Wealth? ----------- --
------19
3.0 Federalism In Pakistan
____________________________________________________________ ______________________19
4.0 Federalism and Conflicts in Pakistan
__________________________________________________________________24
4.1 Center-Provinces Conflicting Relationship -------------------------------------
--------------------24
4.1.1 Political Intolerance ------------------------------------------------
----------------------25

4.1.2 Implementation of Constitution ----------------------------------------
-----------------25
4.1.3 Centralizing Development Projects -------------------------------------
-----------------25
Part II
5.0 Fiscal Federalism: A Conflict of Allocation & Distribution Of Financial Resources:
___________________26
5.1 Consequences -----------------------------------------------------------
-----------------------------28
6.0 Conflict of Explored Natural Resources
_________________________________________________________________28
6.1 Available Natural Resources In Pakistan ----------------------------------------
--------------------28
6.2 Inequitable Distribution of Natural Resources ------------------------------------
------------------30
6.3 Conflicts Over Right On Natural Recourses --------------------------------------
-------------------30
6.4 Consequences -----------------------------------------------------------
-----------------------------32
7.0 Conflict of Water Resources Dis tribution
_______________________________________________________________32
7.1 Water Resources of Pakistan ------------------------------------------------
------------------------33
7.1.1 Rainfall ----------------------------------------------------------
-=------------------------33
7.1.2 Glaciers ---------------------------------------------------------
---------------------------34
7.1.3 Surface Water ----------------------------------------------------
-------------------------34
7.1.4 Ground Water -----------------------------------------------------
------------------------35
7.2 Water Conflicts in Pakistan --------------------------------------------------
-----------------------35
7.2.1 Inter Provincial Arguments Over Water Discharges ------------------------
------------37
7.2.2 Sindh-Punjab Water Dispute ------------------------------------------
------------------37
7.3 Consequences -----------------------------------------------------------
---------------------------37
7.3.1 Political Impacts Of Water Scarcity -------------------------------------
----------------38
7.3.2 Demographic Factors -----------------------------------------------
---------------------38
7.3.3 Economic Impacts --------------------------------------------------
---------------------38

7.3.4 Health Impacts ----------------------------------------------------
----------------------38
Part III
8.0 Fiscal Federalism: A Conflict of Allocation & Distribution Of Financial Resources _________________40
8.1 Evolution of Allocation of Financial Resoruces Distribution in Pakistan -----------------
--------40
8.1.1 Historical Perspective ----------------------------------------------
----------------------40
8.2 Financial Arrangements Under the 1973 Constitution ------------------------------
-------------42
8.2.1 Revenue Distribution Through NFC Awards ------------------------------
--------------42
8.2.2 The Divisible Pool -------------------------------------------------
----------------------43
8.3 The Differences Among the Federation and Provinces -----------------------------
-------------46
_______________________________________________________________48
9.1 Contested Explored Natural Resources – Access and Benefit Sharing ------------------
---------48
9.2 The Conflict of Natural Gas in Balochistan --------------------------------------
------------------48
9.3 Government of Pakistan Towards Conflict Resolution ------------------------------
--------------49
9.3.1 PPP Led Government (Prime Minister Zulfiqar Ali Bhutto) -------------------
-------------49
9.3.2 Evolution of National Finance Commission (NFC) Under Constitution 1973 -------
------50
9.3.3 Under the Regime of Martial Administrator (General Perviz Musharraf ----------
--------53
9.3.4 PPP Led Government (President Asif Ali Zardari) --------------------------
----------------56
9.4 The Conflict of Hydroelectricity in NWFP (KPK) ----------------------------------
--------------------56
9.5 Conclusion --------------------------------------------------------------
-------------------------------61
10.0 Conflict of Water Resources Dis tribution
_______________________________________________________________62
10.1 Historical Perspective -----------------------------------------------------
----------------------------62
10.2 Akhtar Hussain Committee (1968) --------------------------------------------
-----------------------64
10.3 Fazle Akbar Committee (1970) ----------------------------------------------
-------------------------64
10.4 Indus Water Commission (Anwar-ul-Haq Commission) ----------------------------
-----------------65

10.5 Haleem Committee (1983) --------------------------------------------------
-------------------------65
10.6 Water Apportionment Accord (1991) ------------------------------------------
----------------------65
10.7 Differences Over The Interpretation Of Water Accord ----------------------------
------------------66
10.8 Conclusion -------------------------------------------------------------
-------------------------------68
Part IV
11.0 Conflict Mode Ins trument
_______________________________________________________________________________70
11.1 What is The Thomas Kilmann Conflict Mode Instrument? --------------------------
---------------70
11.1.1 Assertiveness ----------------------------------------------------
---------------------------71
11.1.2 Cooperativeness --------------------------------------------------
-------------------------71
11.2 The Competing Conflict-Handling Mode ---------------------------------------
--------------------73
11.2.1 Benefits of Competing ---------------------------------------------
-----------------------73
11.2.2 Costs of Competing -----------------------------------------------
-----------------------73
11.2.3 Competing is Effective ---------------------------------------------
-----------------------73
11.3 The Collaborating Conflict-Handling Mode -------------------------------------
-------------------74
11.3.1 Benefits of Collaborating -------------------------------------------
----------------------74
11.3.2 Costs of Collaborating ---------------------------------------------
-----------------------74
11.3.3 Collaborating Is Effective -------------------------------------------
----------------------74
11.4 The Compromising Conflict-Handling Mode ------------------------------------
--------------------75
11.4.1 Benefits of Compromising -------------------------------------------
----------------------75
11.4.3 Compromising is Effective ------------------------------------------
-----------------------75
11.5 The Avoiding Conflict-Handling Mode ----------------------------------------
----------------------76
11.5.1 Benefits of Avoiding -----------------------------------------------
------------------------76
11.5.2 Costs of Avoiding -------------------------------------------------
-------------------------76
11.5.3 Avoiding is Effective ----------------------------------------------
-------------------------76

11.6 The Accommodating Conflict-Handling Mode -----------------------------------
-------------------77
11.6.1 Benefits of Accommodating -----------------------------------------
----------------------77
11.6.2 Costs of Accommodating -------------------------------------------
-----------------------77
11.6.3 Accommodating Is Effective -----------------------------------------
----------------------77
11.7 Analyzing The Strategies of Federal Governments of Pakistan in Accordance with the
Conlfict Manaegment Theories ----------------------------------------------
-------------------------------78
11.7.1 Fiscal Federalism: A Conclict of Allocation And Distribution Of Financial Resources
---78
11.7.2 A Competing Strategy Over Distirbution of Natural Resource ----------------
----------82
11.7.3 Avoiding Strategies For Sindh-Punjab Water Dispute ----------------------
-------------83
Part V
12.0 Dis cussion Sheet
________________________________________________________ _________________________________86
12.1 Overall Scenario of Federation of Pakistan -------------------------------------
--------------------86
12.2 Present Fiscal Desging of Pakistan ------------------------------------------
------------------------87
12.1.2 Future Perspectives -----------------------------------------------
-------------------------88
12.2 Conflict Resolution For Fiscal Federalism--------------------------------------
----------------------89
12.3 Conflict Resolution For Natural Resources -------------------------------------
---------------------90
12.4 Conflict Management For Water Disputes --------------------------------------
--------------------90
12.4.1 Water Trading – Provides The Answer ------------------------------
----------------93
13.0 Policy Recommendation
________________________________________________________________________________94
 References

Introduction
Human beings are dependent on one another for living despite being independent as individuals. To live
a more meaningful and comfortable living they require social ensembles such as associations and
community organizations. Such organizations provide political power, legitimacy and a separate sphere
relative to other associations for pursuits of collective goals and mutual benevolence. This fact forms
the building block of federal political arrangements in which decisions regarding each member could be
taken.
The history of federalism can perhaps be traced to the days of the Holy Prophet (PBUH) when he
established the first Islamic state in Madina in which the Muhajrin, Ansar and Yahud communities lived
together, enjoying equal rights and respecting each other’s rights. This perhaps could be seen as the
loosest form of what later came to be defined as Federalism.
Federalism as a political system is primarily concerned with the idea of developing a manageable system
of governance thus establishing an orderly arrangement among different tiers of government in a nation.
Establishing a manageable and accommodative system is the real test of federalism which should ensure
that the general and regional governments coordinate with each other while remaining independent. In a
way, federalism is about division of power in a well-structured way
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. 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.
A country, if it is to survive, must have national unity, cohesion and integration. Integration literally
means the fitting together of parts to make one whole. Parts, of course, cannot be fitted together unless
they are compatible. This is the first prerequisite of integration. National integration is a process of
achieving national cohesion, stability, prosperity, strength and feelings of being united as a nation.
Pakistan has faced varying degrees of religious, ethnic, linguistic, economic and political problems that
are often in conflict with our national interests. To guard against all challenges to the solidarity and
security of Pakistan, a well knitted and integrated nation is a must. 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.
Pakistan is the first ideological based country which appeared on the map of the world. It was
established on the basis of ‘two-nation theory’ which is then embodied in the constitutional structure
of Pakistan, through the famous ‘Objectives Resolution’. This resolution of 1940 is said to be the
backbone of our constitutional composition and provided the yardstick for the constitutional
development of Pakistan. Notwithstanding, the unremitting and unnecessary delay in the making of the

constitution could result in failure to establish a viable democratic system, a prerequisite for the Federal
system. The concept of autonomy was automatically suppressed by such unhealthy developments which
created misunderstanding among the provinces.
Pakistan inherited federalism from the British colonial rule, however, its true spirit was lost for trivial
vested interests. A vicious circle of mistrust and lack of coordination resulted in creating a chasm of
political differences between the center (federation) and the provinces (federating units) and among
(within the) provinces that led to political instability in the country. The real spirit of federalism was
not achieved because of this distrust. A perpetual infight was going on between the center and provinces
concerning distribution of resources and powers that further restrain the center-province relationship.
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. It is also argued that the 18th Amendment to the
constitution in 2010 will go a long way in making democratic federation hold together the units as well
as unleash the economic development potential of the state. A good way could be to implement the
promises made in the 18th Amendment Act 2010 and try to establish consociational regime so that the
shortcoming of majoritarian decisionmaking does not adversely affect the ethnolinguistic and religious
cohesion. Exploring the issues related to fiscal, political, and policy autonomy in Pakistan’s federalism,
this research explores the question of federation and conflict in Pakistan.
Pakistan has a chequered constitutional history. It took us nine years after independence to present the
first constitution in the Constituent Assembly. In 1954 the assembly was dissolved by the Governor
General without any constitutional mandate leading to instability in the political system. The constitutions
of 1956 and 1962 were abrogated while the Constitution of 1962 violated the democratic principles of
oneman onevote as well as adult franchise and formulated a flawed federal s tructure through a centralized
federation with a unicameral legislature.
The over centralization of the Pakistani federation resulted in the largest province seceding from the
federation. As a nation, we failed to learn from history. Although provinces were revived and One Unit
was abolished, yet provinces were denied their political, economic and cultural rights resulting in
polarization between the federation and provinces on the one hand and amongst the provinces on the
other.
It was in this backdrop that the 1973 Constitution came into existence with consensus amongst all political
forces within parliament and provinces. The constitution promised a federal parliamentary system with
provincial autonomy in which fundamental rights and the independence of judiciary would be ensured.
Unfortunately the Constitution of 1973 was not implemented in letter and spirit and military dictatorships
led to further centralization.

This imbalance in the federal structure has been corrected through the Constitution Eighteenth
(Amendment) Act, 2010. Pakistan is now a participatory federation with joint ownership of natural
resources.
It is a paradox that with the exception of the Constitution of 1962, all constitutional arrangements ,
including the Government of India Act, 1935, Constitution of 1956 and the Constitution of 1973 are
essentially federal in character though in practice a centralized form of government prevailed in the
country. Repeated derailment of the democratic and constitutional process heightened tensions on issues
of fiscal federalism, provincial autonomy and discretionary powers, particularly those vested in the office
of the President of Pakistan.
The Eighteenth Amendment has tried to address these issues keeping in view Pakistan’s historical
context, its polity and its objective conditions. In other words the Eighteenth Amendment, throws up a
Pakistani federalism that learns from the ex-periences of others but is rooted in the Pakistani reality.
The present study is interesting as it traces the history of federalism and shows the diversity of the
federal arrangements. It also discusses the issues of ethnic representation and managing diversity in a
state. It also examines the 18th Amendment in the light of devolution and reviews the implementation
process which has devolved many ministries and functions to the provinces. This has been made possible
as the Concurrent List has been repealed. The Amendment has provided ownership and particip ation in
policy and management of natural resources, increased the legislative powers of the provincial
assemblies including those on taxation.
In conclusion, civil society organizations, journalists, politicians and other interest groups have a role to
play in managing conflicts and creating a home grown federalism that is rooted in local polity and ensures
unity in diversity.

of 83
Part I
This part of the course work project provides
the brief history of the federalism and the
resource distribution and their effects.
1.0 Federalism

of 83
The history of federalism can perhaps be traced to the days of the Holy Prophet (PBUH) when he
established the first Islamic state in Madina in which the Muhajrin, Ansar and Yahud communities lived
together, enjoying equal rights and respecting each other’s rights. This perhaps could be seen as the
loosest form of what later came to be defined as Federalism.
Today 28 countries across the world practice federalism; no less than 40 percent of the wo rld’s
population resides in these federal states. Some of the countries that practice federalism are:
 Argentina,
 Aus tralia,
 Aus tria,
 Brazil,
 Canada,
 Ethiopia,
 Germany,
 India,
 Iraq,
 Pakis tan,
 Spain,
 South Africa,
 United States of America and
 Venezuela.
1.1 Concept of Federalism
Federalism as Tekena Tamuno observed:
“Federalism is a form of government where the component units of a political organization participate in
s haring powers and functions in a cooperative manner, though the combined forces of ethnic pluralis m
and cultural divers ity, among others , tend to pull their people apart (Tamuno, 1998, pp.13).”
To accommodate diversity and ensure political and social participation, federalism offers a broad range
of institutional arrangements that can help strive for autonomy to exercise political action and accrue
benefits while maintaining identity for political groups (Naseer, 2007). Some political scientists argue
that federalism is the most suitable term for the processes in which separate political organizations create
agreements for ironing out differences and disputes, developing solutions, and establishing platforms for
joint policy actions to solve joint problems (Ariyo, 2003).
Under federalism, the participating units must show an urge to cooperate (as coming together) for mutual
advantage along with a strong penchant to preserve socio-political, ethnic and regional identity and some
space for political action. These are intricate propositions which can make segments of society cohesive
as well as divergent enough to pave the way for secessionist tendencies. Pakistan has actually
experienced secession in 1971 (Naseer, 2007).
1.2 Philosophy of Federalism
Federalism as a political system is primarily concerned with the idea of developing a manageable system
of governance thus establishing an orderly arrangement among different tiers of government in a nation.
Establishing a manageable and accommodative system is the real test of federalism which should ensure

of 83
that the general and regional governments coordinate with each other while remaining independent. In
a way, federalism is about division of power in a well-structured way (Ariyo, 2003).
Another body of knowledge argues that a federal political order is the genus of political organization
that is marked by the combination of shared rule and self rule. Therefore, federalism is the theory which
discusses the principles of dividing authority and power amongst the participating groups, be those
states or associations or common institutions. In this sense, a federation is composed of a common
government, along with a territorial division of power between constituent units called provinces,
cantons or states.
Representation of states in central government policy making is part of the essence of federalism.
However, there are exceptions in rules in theory and in practice. For example, in Canada, the provinces
do not carry the veto power to strike down policies, but the federal and provincial governments are
locked in a system in which the federal government has to sign formal, contractual agreements with the
provinces passing through a lengthy process of striking bargains. Likewise, in Russia, Spain, Germany
and Australia formal policy specific multilateral bargaining bodies, including the states and the central
government has evolved, this is especially true of Germany and Australia (Rodden, 2004).
Rodden (2004), states that federalism is rooted in the Latin word foedus, which means covenant. Foedus
used to describe cooperative and contractual agreements between states usually for defence purposes.
It connotes maturity under which the parties had to fulfil obligations to one another.
Federalism has various definitions as discussed above. However, authority and legitimacy lie at the
helm of understanding the concept of federalism. It is a process through which authority is distributed
and redistributed, structured by a set of institutions. It seeks cooperation from the subunits such as
provinces and states to create and implement decisions and activities (Rodden, 2004, p. 489).
1.3 Modes of Federalism
There are two major modes of federalism in which the concept is put into practice.
The first mode is called Dual Federalism. Under this modality the constitution is de-signed to create
two separate and independent tiers of government. The relationships are mediated and spheres are
defined by clearly demarcated areas of responsibility.
The second is the Cooperative Federalis m. This modality takes various parts of the government as part
of the single government system. It works through cooperation between various levels of government
(Ariyo, 2003). The various levels of governments are characterized more by cooperation and shared
functions than by conflict and competition (Ariyo, 2003)
1.4 Evolution of Federalism
Human beings are dependent on one another for living despite being independent as individuals. To live
a more meaningful and comfortable living they require social ensembles such as associations and
community organizations. Such organizations provide political power, legitimacy and a separate sphere
relative to other associations for pursuits of collective goals and mutual benevolence. This fact forms
the building block of federal political arrangements in which decisions regarding each member could be
taken.

of 83
For example, David Hume (1711–1776) in Idea of a Perfect Commonwealth has been in favour of a
federal arrangement. He wanted member units to enjoy multiple powers and partake in central decisions,
but their laws and court judgments could always be overruled by the central bodies. Though not federal
in the strict sense of the term, he held that a large system would do better than small cities in preventing
decisions based on intrigue, prejudice or passion against the public interest.
It has been argued by researchers such as William Riker that modern federalism has been the result of
two main factors. One is defence and the other is voluntary bargains. However, despite the complexities
of colonial rules and conquests, the modern federal system remains distinct from the unitary system in
which the units are not required to cede authority to the centre without safeguards. The credibility and
legitimacy of a federal arrangement appears to be based in the constitution which protects the autonomy
of the units and presence of constitutional court (Rod-den, 2004; Ward and Ward, 2009).
The fact is that federalism is largely a product of institutional incentives arising from bargains and
safeguards. It has been argued that Germany, Brazil and the United States, carry qualities of a strong
federal system. However, there are some countries whose credentials are challenged owing to the
authority of the centre to dismiss provincial government. For example, in India, the central government
can unseat a government, but this power has been used with diminishing frequency over time without
constitutional change (Rodden, 2004).
However, it must be noted that there emerge issues in which the small states insist on representation
schemes based on territory to affect decision-making processes while large states argue for
population-based representation. The safeguard of interest especially if the social groups are divided
on ethnic lines, may result in the solution finding capacity of strict federal systems becoming
compromised. This specially happens under the majority based democratic regimes. This aspect takes
us to another domain where federalism and consociationalism3 can be contrasted and compared.
1.5 Federalism and Consociationalism
Interest of political scientists increased during the late 1950s and 1970s, around the concept of “non-
majoritarian democracy” which was either thought of as federalism as distinct from consociationalis m
or being part of the same streak of thinking which tries to stabilize states while accommodating minority
interests (Lijphart, 1985; Ward and Ward, 2009).
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. (Elazar, 1991; Lijphart, 1985). However, a federal
structure can be majoritarion and nonconsociational which makes federalism becoming less
accommodative than needed.
Pakistan is an example of non-consociational federalism (Adeney, 2009). In another sense, both federal
and consociational regimes can be undemocratic. Lebanon is one example of such a system. While
before the civil war the consociational regime was working, its constituents were governed by
oligarchies of traditional notables drawn from a handful of ruling families (Elazar, 1991).
As far as a legal-structural approach to federalism is concerned, is replete with the concepts like
arenas, planes, spheres, tiers or levels of government, each endowed with independent legitimacy and
a constitutionally guaranteed place in the overall system. However, consociational regime is thought to

of 83
be more informal which acknowledges the presence of multiple social identities and groups around
ethnic, cultural and religious lines (Elazar, 1985; Elazar, 1991). Having discussed the basic ideas of
federalism, and consociationalism, the next will discuss federalism and conflict.
1.6 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.
The collapse of Soviet Union, Czechoslovakia, and Yugoslavia has created a situation in which the
effectiveness of constitutional federal structures has been questioned. 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 (Bunce, 2004).
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 (Watts, 1999,
pp. 110–11).
However, there are research studies which argue that federal systems of government have been better
than unitary systems at eliminating violent conflict (Amoretti and Bermeo, 2004, pp. 475–7). 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).
2.0 Resource Distribution
2.1 What Are Resources?
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. People require resources to
survive and thrive.
2.2 How are Resources Distributed and Why?
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.
2.3 What Are The Consequences of Uneven Resource Distribution?
2.3.1 Human Migration.
Large groups of people often migrate (move) to a place that has the resources they need or want and
migrate away from a place that lacks the resources they need.
2.3.2 Economic Activities

of 83
Economic ativities in a region related to the resources in that region. Economic activities that are directly
related to resources include farming, fishing, ranching, timber processing, oil and gas production, mining,
and tourism.
2.3.3 Trade
Areas may not have the resources that are important to them, but trade enables them to acquire those
resources from places that do.
2.3.4 Conquest, Conflict, And War
Many historical and present-day conflicts involve nations trying to control resource-rich territories. For
example, the desire for diamond and oil resources has been the root of many armed conflicts in Africa.
2.3.5 Wealth And Quality Of Life
The well-being and wealth of a place are determined by the quality and quantity of goods and services
available to people in that place. This measure is known as the standard of living. Because natural
resources are a key component of goods and services, the standard of living also gives us an idea how
many resources the people in a place have.
It is important to understand that while resources are VERY important, it is not the presence of or lack
of natural resources within a country that makes a country prosperous. In fact, some of the wealthier
countries lack natural resources, while many poorer countries have abundant natural resources!
So what do wealth and prosperity depend on? Wealth and prosperity depend on:
(1) What resources a country has access to (what resources they can get or end up with) and
(2) What the country does with them (the efforts and skills of workers and the technology available for
making the most of those resources).
2.4 How had Industrialization Led to a Redistribution of Resources and Wealth?
As nations began to industrialize in the late 19th century, their demand for resources increased and
imperialism was the way they got them. Imperialism involved a stronger nation taking complete control
of a weaker nation. Imperialists exploited and profited from the abundant natural resources of the
acquired territories. Imperialism led to a major redistribution of world resources from Latin America,
Africa and Asia to Europe, Japan, and the United States.
This is how industrialized nations came to control and profit from most of the world's resources. Since,
citizens of the industrialized nations of Europe, Japan, and the United States have access to so many
goods and services, that means they consume more of the world's resources (about 70%) and enjoy a
higher standard of living and most of the world's wealth (about 80%). Citizens of non-industrialized
countries in Africa, Latin America, and Asia control and consume far fewer of the resources they need
for survival and well-being. As a result, their lives are characterized by poverty and a low standard of
living.

of 83
This unequal distribution of resources, the legacy of imperialism, is the result of human rather than
natural conditions.
3.0 Federalism In Pakistan
The All India Muslim League along with other significant political actors demanded a federal structure in
India to run the affairs of the state (Sayeed, 2009). Many demands from the Muslim League to solve
communal issues was to compensate for the inadequacy of an evolving majority form of democratic
system. Such demands were for a consociational regime which could accommodate minority concerns in
a democratic federal system. The Government of India Act 1935 had provisions of a federal structure
with provinces having a List of Subjects to deal with. It was an improvement on the earlier system of
“diarchy” which was introduced in the Government of India Act 1919. The resolution of 1940 adopted by
the All India Muslim League had also argued for a greater role of provinces in systems of governance.
“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 is the first ideological based country which appeared on the map of the world. It was
established on the basis of ‘two-nation theory’ which is then embodied in the constitutional structure
of Pakistan, through the famous ‘Objectives Resolution’. This resolution of 1940 is said to be the
backbone of our constitutional composition and provided the yardstick for the constitutional
development of Pakistan. Notwithstanding, the unremitting and unnecessary delay in the making of the
constitution could result in failure to establish a viable democratic system, a prerequisite for the Federal
system. The concept of autonomy was automatically suppressed by such unhealthy developments which
created misunderstanding among the provinces.
Pakistan inherited federalism from the British colonial rule, however, its true spirit was lost for trivial
vested interests. A vicious circle of mistrust and lack of coordination resulted in creating a chasm of
political differences between the center (federation) and the provinces (federating units) and among
(within the) provinces that led to political instability in the country. The real spirit of federalism was
not achieved because of this distrust. A perpetual infight was going on between the center and provinces
concerning distribution of resources and powers that further restrain the center-province relationship.
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.

of 83
The 1973 constitution envisages a federal system with provinces having more financial and administrative
powers as compared to the previous constitutions. It is also argued that the 18th Amendment to the
constitution in 2010 will go a long way in making democratic federation hold together the units as well
as unleash the economic development potential of the state. A good way could be to implement the
promises made in the 18th Amendment Act 2010 and try to establish consociational regime so that the
shortcoming of majoritarian decisionmaking does not adversely affect the ethnolinguistic and religious
cohesion. Exploring the issues related to fiscal, political, and policy autonomy in Pakistan’s federalism,
this research explores the question of federation and conflict in Pakistan.
Pakistan has a chequered constitutional history. It took us nine years after independence to present the
first constitution in the Constituent Assembly. In 1954 the assembly was dissolved by the Governor
General without any constitutional mandate leading to instability in the political sys tem. The constitutions
of 1956 and 1962 were abrogated while the Constitution of 1962 violated the democratic principles of
oneman onevote as well as adult franchise and formulated a flawed federal structure through a centralized
federation with a unicameral legislature.
The over centralization of the Pakistani federation resulted in the largest province seceding from the
federation. As a nation, we failed to learn from history. Although provinces were revived and One Unit
was abolished, yet provinces were denied their political, economic and cultural rights resulting in
polarization between the federation and provinces on the one hand and amongst the provinces on the
other.
It was in this backdrop that the 1973 Constitution came into existence with consensus amongst all political
forces within parliament and provinces. The constitution promised a federal parliamentary system with
provincial autonomy in which fundamental rights and the independence of judiciary would be ensured.
Unfortunately the Constitution of 1973 was not implemented in letter and spirit and military dictatorships
led to further centralization.
This imbalance in the federal structure has been corrected through the Constitution Eighteenth
(Amendment) Act, 2010. Pakistan is now a participatory federation with joint ownership of natural
resources.
It is a paradox that with the exception of the Constitution of 1962, all constitutional arrangements ,
including the Government of India Act, 1935, Constitution of 1956 and the Constitution of 1973 are
essentially federal in character though in practice a centralized form of government prevailed in the
country. Repeated derailment of the democratic and constitutional process heightened tensions on issues
of fiscal federalism, provincial autonomy and discretionary powers, particularly those vested in the offic e
of the President of Pakistan.
The Eighteenth Amendment has tried to address these issues keeping in view Pakistan’s historical
context, its polity and its objective conditions. In other words the Eighteenth Amendment, throws up a
Pakistani federalism that learns from the ex-periences of others but is rooted in the Pakistani reality.
The present study is interesting as it traces the history of federalism and shows the diversity of the
federal arrangements. It also discusses the issues of ethnic representation and managing diversity in a
state. It also examines the 18th Amendment in the light of devolution and reviews the implementation
process which has devolved many ministries and functions to the provinces. This has been made possible
as the Concurrent List has been repealed. The Amendment has provided ownership and participation in

of 83
policy and management of natural resources, increased the legislative powers of the provincial
assemblies including those on taxation.
In conclusion, civil society organizations, journalists, politicians and other interest groups have a role to
play in managing conflicts and creating a home grown federalism that is rooted in local polity and ensures
unity in diversity.
Part II
This Part Of The Course Work Project Reveals
The Key Resource Sharing Conflicts Between

of 83
The Federation And Federating Units
(Provinces) of Pakistan And Their Respective
Causes And Consequences.
4.0 Federalism and Conflicts in Pakistan
A country, if it is to survive, must have national unity, cohesion and integration. Integration literally
means the fitting together of parts to make one whole. Parts, of course, cannot be fitted together unless
they are compatible. This is the first prerequisite of integration. National integration is a process of
achieving national cohesion, stability, prosperity, strength and feelings of being united as a nation.
Pakistan has faced varying degrees of religious, ethnic, linguistic, economic and political problems that
are often in conflict with our national interests. To guard against all challenges to the solidarity and
security of Pakistan, a well knitted and integrated nation is a must. 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.
4.1 Center-Provinces Conflicting Relationship

of 83
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 adminis trative 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.
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.
The Main causes are as under: -
4.1.1 Political Intolerance
Lack of tolerance, which is the essence of democracy. Irrespective of the government policies, the
opposition confronts ruling party for the sake of assuming power.
4.1.2 Implementation of Constitution.
The Centre remains reluctant in granting quantum of autonomy guaranteed in the constitution to the
provinces.
4.1.3 Centralizing Development Projects.
Central governments have been initiating and supervising works programmed through the federal budget
in the provinces, thus circumventing provincial governments.
Several other root causes of resource related conflicts have been documented in the literature. Some of
these are for example:
 Scarcity of natural res ources
 Acces s to, and entitlements for thes e res ources
 Ques t for s us taining national energy needs of the s tate
 Unclear and inequitable policy
 Population growth
 Ves ted political interes ts
 Dis trus t between different actors
 Unequal power relations , and
 Unjus t res ource s haring/ dis tribution paradigm

of 83
5.0 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 s pirit that we are all citizens and equal citizens of one s tate with equal rights , privileges , and
obligations , there will be no end to the pro gres s you will make.”
(Muhammad Ali Jinnah-The Founder of Pakis tan)
The vision of the founder was shaped in nothing by the successors, rather poor governance,
mismanagement and political instability continuously contributed weakening the economic system since
the very beginning. Inequality, unfairness, corruption and nepotism instead of equality, impartiality, fair
play and justice were roughly exercised throughout history. Theoretical assumptions and promises could
not transform into practical form.
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. These, along with frequent failure of CCI and NFC, disputed water
distribution and energy resources and the right to royalty endangered the prosperity and integrity of the
country. In addition, the current economic system has further widened the already existing gap between
the riches and the poor.
The equitable distribution of resources is the only solution to the confronting socioeconomic problems
and development of the provinces. 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 replaced by
multiple factors, which is considered to be a landmark consensus. To achieve this, not only the Centre

of 83
sacrificed its share under the vertical arrangement in an endeavour to give additional financial incentives
to the provinces but also the Punjab showed flexibility on contentious issues under the horizontal inter-
provincial sharing of resources. The provincial share of the divisible pool would increase from the present
47.5 per cent to 56 per cent in the first year of NFC (2010-2011) and 57.5 per cent in the remaining
years of the award under the vertical distribution of resources. This share would virtually be over 60 per
cent. The Centre has also agreed to cut tax collection charges from five percent to one percent and this
amount would also be added to the divisible pool. The NFC recognised sales tax on services as a
provincial subject and it might be collected by the respective provinces.
About the horizontal distribution among the provinces:
 Punjab would now get 51.74 percent,
 Sindh’s s hare will be 24.55 percent,
 NWFP (KP) will receive 14.62 percent, and
 Baluchis tan will get 9.09 percent.
Besides, the break-up of unprecedented multiple indicators and their weightages under 7th NFC Award
are following:-
 Population - 82.0%
 Poverty and Backwardnes s - 10.3%
 Revenue Collection / Generation - 5.0%
 Invers e Population Dens ity - 2.7%.
The federation and the provinces agreed to provide Balochistan Rs 83 billion of the provincial pool in the
first year of the Award, and to give one percent of the total divisible pool to NWFP as an additional
resource. In this way, Sindh would receive an additional transfer of Rs 6 billion from the federal
government, which is equivalent to 0.66 percent of the provincial pool. This development will immensely
enhance financial autonomy to the provinces and the federation will become stronger if the provinces
achieve the financial autonomy and become more powerful.
5.1 Consequences
Federal Government held everything in hand, despite its failure to maintain even economic developments
in all the provinces. This proved a major factor which created mistrust and unrest among provinces.
Unequal distribution of resources, employment opportunity, infrastructural development and industrial
growth provided a space for the uneven socioeconomic development in provinces.
This created a disparity in the economic wellbeing 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. The
frequent failure of NFC has endangered the prosperity and integrity of the country. In addition, the
current economic system has further widened the already existing gap between the riches and the poor.
Such unequal distribution of income is creating restlessness among the less income class.In fact, the
non-adoption of Islamic economic system and the capitalistic system are responsible for such an unfair
division of wealth.The equitable distribution of resources is the only solution to the confronting
socioeconomic problems and development of the provinces.

of 83
6.1 Available Natural Resources In Pakistan
Pakistan, which emerged as a sovereign state on 14 August 1947 as a result of the division of the former
British India, is situated in South Asia. The total area of the country is 796,095 square kilometers .
Pakistan is divided into four provinces viz. Sindh, Punjab, North West Frontier Province (NWFP) now the
Khyberpukhtoonkhwa (KPK) and Balochistan. Kashmir is a disputed territory between Pakistan and India.
Both of the countries are administrating parts of Kashmir.
The major natural resources of Pakistan are land, water, forests, natural gas and 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.
Most of the cultivable land is located in the provinces of Punjab and Sindh.
Punjab with maximum cultivable land is perceived as the bread basket for other federating units; Sindh
with Pakistan’s largest sea port Karachi is perceived as the industrial capital of Pakistan; Balochistan is
the major supplier of natural gas used to produce power, run industry and private transport and meet the
growing demands of domestic consumers; whereas NWFP (KPK) is the major supplier of hydro-electric
power.
More than two third of country’s population that lives in the rural areas is directly or indirectly dependent
on agriculture for their livelihoods. The principal crops include wheat, rice, sugar cane, maize and cotton.
Agriculture also supplies raw material to Pakistan’s industries, notably the textile industry, the larges t
industrial sub-sector of the economy. Other main industries include sugar, cement and chemicals. These
industries depend mostly on hydroelectric power or natural gas to meet their energy requirements. The
main rivers of Pakistan are Indus and its tributaries, Jhelum, Ravi, Sutluj and Chenab. Nevertheless,
Pakistan is a water deficient country as during 2007-08 total surface water available was 98.7 million
acre feet as against the average usage of 103.5 million acre feet.
Most of the people living in the rural areas have little or no access to the basic assets essential for decent
livelihoods. The Human Development Index (HDI) for Pakistan is 0.562, which gives the country a rank
of 139th
out of 179 countries with data. Within the country, there is great disparity between different
provinces, as well as rural versus urban areas, in terms of HDI. The rural areas of Balochistan, Sindh
and NWFP are at the bottom of HDI ranking.
The average production of natural gas per day stood at 4,100.9 million cubic feet during July March
2008-09 as compared to 3, 965.4 million cubic feet over the same period in 2007-08, showing an increase
of 3.3 percent.
On average, the power sector consumed 36.8 percent of gas, followed by fertilizer (20.7 percent),
industrial sector (19.8 percent), household (17.4 percent), commercial sector (2.7 percent), and cement
(1.1 percent) during last 10 years i.e. 1997- 1998 to 2006-07.

of 83
Pakistan’s commercial energy needs are substantially greater than the domestic supplies, and one third
of energy requirements are met through imports. Oil and gas form the bulk of primary commercial energy
supply mix of Pakistan, contributing 79% (oil: 30.5%, gas: 47.5%, LPG 0.7%).
The other sources include--coal: 9.2%, hydro electricity: 10.9% and nuclear and imported electricity:
1.3%. Pakistan’s demand for natural gas, as well as hydro-electricity, is expected to rise substantially in
the next few years. This will obviously necessitate a sharp rise in the supply of both resources. To meet
this requirement the Parliament of Pakistan has already approved the import of 750,000-1,000,000 Mcf/d
of gas from Iran under the Iran-Pakistan-India pipeline project to tap cheaper energy sources and reduce
its oil import bill. The Government of Pakistan (GoP) is also trying to develop new gas fields with foreign
investors. Similarly, plans are also underway to expand the country’s hydro-capacity.
6.2 Inequitable Distribution of Natural Resources
All the four Provinces are rich in cultural, geographical, and economic diversity. This includes the coastal
wealth, minerals, petroleum, gas and vast areas of Baluchistan; mountains, hydroelectric opportunities ,
forests, tourism and marble of NWFP; agriculture, industry, technology, and human resources of Punjab;
coastal wealth, agricultural, petroleum, coal, commerce and technological resources of Sind.
However, there are certain disagreements on sharing the national resources and there is also a need o f
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 the case in Pakistan. 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.
6.3 Conflicts Over Right On Natural Recourses
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.

of 83
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.
It is not clear if the share as promised by the prime minister will come out of 12.5 per cent provincial
royalty or the federation will give this paltry share from its own oil income. The denial of a fair deal to
communities of the wealth generating areas brews unrest and conflicts. Dera Bugti is an example.
Communities living in the oil and gas producing areas of Sindh and Balochistan are facing the same socio-
environmental injustice.
Balochistan 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.
Balochis 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 Balochistan in management and non-management cadres, respectively. The
organisation responsible for developing oil and gas reserves —the OGDC—has poor representation from
Balochistan —only three and 10.5 per cent Baloch employees in both the cadres. The denial of benefits
to them of their resources has sustained widespread poverty. 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.
6.4 Consequences

of 83
These issues cannot be resolved without making considerate and persistent efforts on the part of the
Centre because the situation in Balochistan is becoming increasingly complex. There is a sense of grave
alienation among the Baloch people. It demands more understanding and sympathetic attitude from the
central authorities, but the federal government views the problem in the law and order context and
applied force against the Baloch elements who challenged the state authority, disrupting government’s
policies and plans, since December 2004. They viewed these elements “a few” troublemakers who were
the opponents of development in the province and wanted to maintain the status quo to safeguard their
vested interests. The federal authorities strongly asserted that there were only three tribal chiefs who
were against federal policies.
However, certain analysts maintained that alienation among the Balochistan 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 Balochis tan”.
In these circumstances, the killing of Sardar Akbar Bugti (a political activist) in military operation
conducted by the federal authorities and arrest of the Sardar Mengal (political activist), increased
opposition in the province against the federal policies.
7.0 Conflict of Water Resources Distribution
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. Both
governments have been engaged in bitter conflict which strained their relations. The construction of new
water reservoirs, including the Kalabagh Dam (KBD) is another aspect of this problem. Punjab supported
the construction of the Dam whereas other provinces are against the construction for different reasons.
Their respective assemblies passed the resolution against the construction of this Dam. The construction
of greater that canal was also opposed by Sindh and Balochistan.
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.
7.1 Water Resources of Pakistan
Water resources of Pakistan are classified as primary and secondary sources. An Important primary
resources are rainfall and glacier’s melt and secondary resources are surface water and ground water.
7.1.1 Rainfall
Rainfall is not equally distributed throughout Pakistan. The maximum rainfall recorded in this period is
125 millimeters in the extreme north of the country and minimum is less than 25 millimeters in most of
the Sindh and Balochistan (Kureshy, 1993).

of 83
Source: (Alam, 2006).
A nnua l A v era ge Ra infa ll In Different Prov inces (Millimeters)
Period Punja b Khyber P. K Sindh Ba lochista n Pa kista n
A pril-September 254 308 131 72 158
October-Ma rch 79 228 16 63 80
July-September 202 279 109 50 118
A nnua l A v era ge 333 536 147135 238
7.1.2 Glaciers
Pakistan is blessed with large amount water in the form of glaciers. The glaciers originating in this region
are characterized with high flow rate, ranging from 100 meters to 1000 meters per year. Due to the great
altitude, there are many glaciers found in this region and at least ten of them have considerable le ngth.
Selected G la ciers Of Pa kista n
GLACIER LENGTH (KM) MOUNTAIN RANGE RIVER
Siachen 72 Karakorum Shyok
Biafo 62.5 Karakorum Braldo
Hispar 61 Karakorum Hunza
Batura 59 Karakorum Hunza
Sakiz Jarab 30.4 Hindu Kush Kunhar
Tirich Mir 22.4 Hindu Kush Kunhar
Rupal (S) 17.6 Himalayas Astor
Rupal (N) 16 Himalayas Indus
Rich 16 Hindu Kush Kunhar
Phangatori 15.5 Himalayas Indus
Source: (Khan, 2004).
7.1.3 Surface Water
The rainfall and the glacier’s melt develop water channels (Rivers) on the surface of the earth. Rivers
receive water during the all of their passage and discharge it into adjacent ocean or sea. In case of
Pakistan, Indus River System originates in the northern highlands due to the heavy rainfall and snow melt
and after passing through the Indus plains discharges it’s run off into the Arabian Sea near Karachi (The
largest city, sea port of Pakistan and the capital of Sindh province).
It is estimated that the Indus River System was created some fifty millions years ago when the Indian
plate (Gondwanaland) first collided with Eurasian plate (Angara land). The Tethys Sea was located
between the two plates which was shallow and sandy. It was up-folded to form the great Himalayan
Mountains in the Mesozoic era (It is a period of geological time from about 245 to 65 million years ago).
The unbroken snow of the great Himalayas became primary source of water to the Indus River System.

of 83
River Indus is the largest river of Pakistan. It runs through the hub of the country. Mostly Pakistan is
located in the basin of the Indus River System. River Indus itself occupies a key position in the entire
system. After crossing Himalayan Mountain range at Bunji it turns south-west and enters Pakistan. Its
important eastern tributaries (the Jhelum, the Chenab, the Ravi, the Sutlej and the Bias) join it at Punjnad
and become the part of its course. On the western side River Kabul is its prominent tributary which drops
into it near Attock Bridge (a city of Punjab province).
7.1.4 Ground Water
The ground water aquifer in the sweet zone of the Indus Basin is a reliable and rechargeable secondary
source. It plays a major role in providing fresh water for irrigation. It has been used for centuries for
animal and domestic purposes but for the last two decades, it has been being extensively used with the
help of the shallow tube wells operated by the electric, diesel and mechanical power. More than 0.6
million tube wells are operating in the Indus Basin (Brisco & Qamar, 2007).
7.2 Water Conflicts in Pakistan
Pakistan is mostly located in the arid and semi-arid climatic regions. Only 10 percent of the country is
situated in humid zone. Although Pakistan does not enjoy heavy rainfall but this rainfall is also
characterized by the variation from season to season and region to region. It is also very important to
note that Pakistan is an agricultural country and its economy heavily depends on this sector.
Agriculture is playing a multifaceted role in the economy. It generates 23 % of the Pakistan’s national
income, accommodates 42 % of the total workforce and responsible about 60-70 percent exports. About
68 % of population living in the rural areas is directly or indirectly depends on agriculture for their
livelihood. But agricultural practices cannot be done without the sufficient availability of fresh water.
In Pakistan, large part of the agriculture is supplied with irrigation water through the Indus River System,
which has the largest canal network in the world (Khan, 2004). Indus River System on average brings
about 154.3 MAF (Million Acres Feet) of water annually. About 104.5 MAF is diverted for irrigation
purposes. About 29 million acres land is irrigated by the Indus River System in Pakistan, which is 58 %
of the total cultivated area of 50 million acres. Indus Basin Irrigation System comprises of a large network
of reservoirs, barrages, canals and water courses. Detail is given as under:
Large Reservoirs 2 (Mangla and Tarbela)
Small Dams 2 (Warsak and Simli)
Other small water projects 81
Barrages 19
Inter-river link canals 12
Canals 44 23 in Punjab,
14 in Sindh,
5 in Khyber Pakhtunkha and
2 in Balochistan)
Total length of the canals 56073 Km

of 83
Water Courses Total 107,000 (55,000 in Punjab,
40,000 in Sindh,
10,000 in Khyber Pakhtunkha and
2000 in Balochistan) (Khan, 1995)
Source: (Bhatti, 2011)
7.2.1 Inter Provincial Arguments Over Water Discharges
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.
7.2.2 Sindh-Punjab Water Dispute
The water dispute between the two provinces exists since pre-partition, setting a fairly good example
of upstream-downstream or upper riparian-lower riparian rivalry20.
Moreover, the conflict between Sindh and Punjab regarding distribution of Indus River water is said to
be very complicated issue as both provinces have rivalry on allocation of water resources before partition
and the dispute is still not settled. The Sindhi authorities have serious reservations that the construction
of Kalabagh and other dams have negative impacts on Sindh irrigation21.

of 83
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.
When the president Musharaff government however in 2005, gave the approval of constructing Kalabagh
and Bhasha dams, the decision was challenged by Sindh bodies in court in which they put forth their
doubts and fears regarding the suffering from water deprivation. However the work on Bhasha dam
started but as far as the issue of building of Kalabagh dam, its construction is still controversial.
The recent decision by LHC (Lahore High Court) is again opposed by Sindh assembly in which they have
raised the issue of survivability of the province of Sindh.
7.3 Consequences
7.3.1 Political Uncertainty
Due to irregularities in river flows & politics involved in water sharing between the two provinces, and
scarcity of water, the agriculture in Pakistan has been worse affected. Because the country is falling
short of water resources, Punjab and Sindh in contemporary are confronting with the problems of low
productivity of certain crops, resultantly there are serious problems of food shortage, availability of
drinking water in Sindh and certain areas of Punjab. The construction of KBD also involves some sort of
politics; while on the other hand Sindh also has resentments regarding damming of Indus River as they
consider the construction of dams an offensive and illegitimate action by Punjab37. Another important
political impact of water scarcity is that the lower riparian Sindh would caught in drought and
environmental losses such as desertification, soil erosion etc38.If such patterns continue, then it would
pose a serious challenge on the part of federal government to control the situation as Sindhis grievances
and vulnerabilities are increasing.
7.3.2 Urbanization
The migration in Sindh, population movements and rising population in Sindh is causing burden on the
economy and population movements giving rise to ethnic and group identity conflicts. The available water
resources are not enough to meet the demands of rising populations.
7.3.3 Economic Ins tability
Agriculture sector is the backbone of Pakistan economy, but due to increasing shortfall in water
resources for past several years, the country export level is declining and currently Pakistan is facing a
deficit in balance of payments as imports are more than exports. As far as agriculture is concerned, the
estimated 2.5 million acres of land is under the threat of becoming infertile due to scarcity of water,
therefore leaving adverse effects on the economy of Pakistan.
7.3.4 Health Impacts

of 83
Water scarcity has serious and adverse impacts on health in Pakistan. Many dangerous diseases like
cholera, typhoid, malaria, and skin diseases , etc. spreading among children are due to drinking dirty
water, which results in the death of children and hence raising the rate of infant death. And further it has
been revealed that in hospitals about more than 40% patients are suffering from waterborne diseases.
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).
8.0 Fiscal Federalism: A Conflict of Allocation & Distribution Of Financial
Resources
8.1 Evolution of Allocation of Financial Resoruces Distribution in Pakistan

of 83
8.1.1 Historical Perspective
Historically, the system of revenue distribution has evolved from the pre-Independence arrangement
that prevailed under the framework of the Government of India Act, 1935. The constitutional
responsibilities of the federal government and the constituent units as well as the distribution of revenues
between various component units were specifically laid down in the Act.
The first revenue sharing award under the 1935 Act was the Niemer Award of 1937. After independence,
the financial relations between the Centre (Federal) and the Provinces continued to be governed by the
Government of India Act of 1935.
However, the first NFC Award in independent Pakistan was the Rais man Award, which was notified on
April 1, 1952. It was named after a civil servant, Sir Jeremy Raisman, who presented his recommendations
to the Prime Minister Liaquat Ali Khan’s government in 1947.
The Raisman Award was followed by 1961-62, 1964, 1970, 1974, 1991 and 1997 Awards. Two NFC
Awards were appointed in 1979 and 1985, but no award was announced due to lack of consensus among
the members of the Commission.
Chronology Of The Financial Reosurces Distribution in Pakistan
Name
Da t e O f
Co n st i t u t i o n
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
Pos t Independence
Pre 1973 Cons titution
Ra isma n A wa rd 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 A wa rd - -
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)

of 83
1964 A wa rd - -
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
1970 A wa rd Apr-70 -
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 respectively. Out
of the provincial share 54
percent was given to East
Pakistan, while the remaining
46 percent was distributed
among the rest of the provinces
General Yahya Khan (Chief
Pos t 1973 cons titution
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
(6th NFC)
22nd July, 2000 -
Remained inconclusive
(However,the population ratio
was changed from 1.7.2002).
General Pervaiz Musharraf
(Chief Martial Administrator)
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)

of 83
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)
NFC, -----
(9th NFC) In Progress - -
Prime Minister Imran Khan
(Pakistan Tehreek-e-Insaf-
PTI)
Note: The 6th
NFC was constituted on 22nd
July 2000, re-constituted on 13th
November 2003 by the President of Pakistan which could
not reach at a consensus decision and thus the matter referred to the President of Pakistan for exercising his powers under Article
160 (6) of the Constitution, who passed an order called “Distribution of Revenues and Grants-in-Aid (Amendment) Order, 2006”,
President Order No.1 of 2006.
8.2 Financial Arrangements Under the 1973 Constitution
8.2.1 Revenue Dis tribution Through NFC Awards
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.
Distribution of the net proceeds of federal taxes (as may comprise the divisible pool) under Article
160(2)(a) read with clause (3) and Grants-in-aid to the provincial governments under Article 160(2)(b)
read with clause (7) which provides for the making of grants -in-aid to provinces in need of assistance
and such grants are to be charged to the Federal Consolidated Fund.
8.2.2 The Divis ible Pool
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.

of 83
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:
1. Taxes on income, including corporation tax, but not including taxes on income consisting of
remuneration paid out of the Federal Consolidated Fund;
2. Taxes on the sales and purchases of goods imported, exported, produced, manufactured or
consumed;
3. Export duties on cotton, and such other export duties as may be specified by the President;
4. Such duties of exercise as may be specified by the President; and
5. Such other taxes as may be specified by the President.
Share of Provinces in the Divisible Pool is elaborated as follows:-
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
In addition to the share in the divisible pool, Provinces are given grant-in-aid out of the Federal
Consolidated Fund. The base amount during the first year of the award, 2006-07 was Rs.27.750 billion
which increases in line with the growth in net proceeds of divisible taxes every year. Out of the sum
assigned to the provinces, as indicated above, an amount equal to the net proceeds of 1/6th
of Sales Tax
(2.5% GST) is distributed amongst the provinces in the ratio, based on the actual realization of Octroi
and Zilla Tax during the base year 1997-98, when the OZT was abolished. This amount of 2.5% GST is
directly transferred to the District Governments and TMAs/Cantonment Boards. This allocation is on
account of abolition of the Octroi and Zilla Tax by the Provincial Governments. The Ratio of the resource
transferred from the federal divisible pool and straight transfers is as under:-
Share Of Provinces In The Divis ible Pool
Province
% Share in the
Divis ible Pool
(Population Bas ed)
% Share in the
Special Grant
% 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

of 83
Total 100 100 100
Through the 1973 constitution, it was made obligatory for the government to compose NFC at an interval
extending not more than 5 years for the amicable resource distribution among the federation and their
respective units. This was the period when the West Pakistan (existing Pakistan) started its journey after
the separation of East Pakistan. The following sections briefly overview the developments after the 1973
constitution:
Revenue Sharing Arrangement Under Various Awards (Provincial share in %age)
Divisible
Pool
Raisma
n
A wa rd
(% Share)
NFC
A wa rd
1961
(% Shar e )
NFC
Award
1964
(%
Sh ar e )
NFC
A wa rd
1970
(% Sh ar e )
NFC
A wa rd
1974
(% Sh ar e )
NFC
A ward
1979
(% Share)
NFC
A wa rd
1985
(% Sh ar e )
NFC
A ward
1991
(% Share)
NFC
A ward
1997
(% Share)
NFC
A ward
2002
(% Share)
NFC
A ward
2006
(% Share)
NFC
A wa rd
2009
(% Sh ar e )
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
57%24%
14%
5%
% Share in the DivisiblePool
(Population Based)
Punjab Sindh
NWFP Baluchistan
11%
21%
35%
33%
% Share in the Special Grant
Punjab Sindh
NWFP Baluchistan
50%
35%
10% 5%
% Share in the1/6th ofSales Tax
Punjab Sindh
NWFP Baluchistan

of 83
Tea 50 60 65
41.5 -
46.25
65 -57.5
Tobacco 50 60 65 80 80
41.5 -
46.25
65 -57.5
8.3 The Differences Between the Federation and Provinces
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.
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. Whereas NWFP wants the revenues to be distributed like
80%, 19% and 1% on the basis of population, backwardness and inverse population density respectively.
The economic condition of NWFP (KP) is evident from the low vital socioeconomic indicators of the province
vis-à-vis other provinces and country average. Population density in NWFP is 238, which is second highest
in the country, but it is the highest if the inaccessible and barren areas of Chitral and Kohsitan are excluded.
Population growth in NWFP (KPK) is the highest (2.6%) household size is the highest (7.5 persons), incidence
of poverty or people living below the poverty line is 46%, which is the highest and which has further increased
due to the recent economic recession, per capita income is the lowest i.e Rs.746 (SPDC 2000). The Majority
of the industrial units are closed or operating below capacity, daily wages are lowest, unemployment is the
highest, female literacy is the lowest (22%) & dependence on remittances is the highest.
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. This share has been 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:
% Share Of Provinces Under The NFC Awards

of 83
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
Baluchista
n
3.86 5.3 5.3 8.73 7.35 7.29 7.23 7.05
9.1 Contested Explored Natural Resources – Access and Benefit Sharing
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 Balochistan and NWFP.
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) are discussed in the upcoming paras.
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

Course work project ocm-703

Recommended

Recommended

More Related Content

Similar to Course work project ocm-703

Similar to Course work project ocm-703 (20)

More from Muhammad Asif Khan

More from Muhammad Asif Khan (20)

Recently uploaded

Recently uploaded (17)

Course work project ocm-703