NFC AWARDS, ITS HISTORY AND 1ST, AND 2ND NFC AWARDS

1. ASIF HUSSAIN
INTRODUCTION:
NFC stands for National Finance Commission and its function is the distribution of
among the provinces of Pakistan by the federal govt. This award has been
conducted after five years each .in this collection of taxes and its distribution among
the provinces are decided according to the NFC formula.
Roll No. BECF17E121
NFC AWARDS

2. The taxes include are
 Income taxes
 General sales tax
 Wealth tax (1 to 2.5% on total wealth)
 Capital gains (investment gain) (Rs .5 million has 5%)
 Custom duties (taxes on import and on exports also called tariffs)(17%)
The mostly tax collection revenue is from Punjab and Sindh and all duty collection are mostly from the
port of Karachi

3.  Background of NFC Awards
 Before independence Niemeyer Award was established to deal the distribution of resources
between British Govt. and sub –continent
 In this sales tax revenue was the exclusive right of provincial govt. but
 50% of Revenue of income tax went in hands of federal govt. and remaining goes to the
provincials govts.
 After the independence the Raisman Award was established in 1952 which performed the
same functions as Niemeyer .
 In which 50% revenue held by federal to control massive influx of refugees in Karachi .

4.  And remaining resources are allocated to the provincial govt. but the major shares of
resources gone to west Pakistan.
 Then after 1952 two more awards of 1961 and 1964 was conducted with almost same
procedures considering two units which were east and west Pakistan .
 Then Why NFC Awards established ?
 IN 1971 we all knew that EAST Pakistan cut from Pakistan and became Separate entity
called Bangladesh (now a days ).There are many other reasons of participation but the
major reason was improper distribution of resources between east and west Pakistan .

5.  Because east Pakistan was more populous and had more contribution to the output
production of whole country but distribution of resources was discriminated by west
Pakistan (40:60)because of federal govt. support .this thing infuriated east peoples and
they started revoltation against govt.
 Then in the constitution of 1973 a article (160) was passed for equal distribution of
resources .
 According to this article NFC awards will be held after each 5 years.

6.  Its members are Federal Finance Minister (Chairman), Provincial Finance Ministers and
other concerning experts which the President may appoint after consultation with
provincial Governors [Constitution of Pakistan (1973)]. The main charter of NFC is to
recommend on the
 (1) The distribution of specified taxes, duties between federation and provinces.
 (2) The disbursement of grants to provincial governments .
 (3) The borrowing powers exercised by federal and provincial
 governments.
 (4) Any other financial matter referred to commission.

7.  1st NFC Award of 1974
 This NFC awards was given in the govt. Of late Z.A Bhutto
 Major key indicators of this award are
 The sources pf revenue was income taxes ,sales taxes and others
 But the major contributor of revenue custom duties was left out .
 This award comprises vertical distribution of 20:80 of resources fed. And provinces .
And horizontal distribution (distributions among provinces) of resources was

8.  In the above distribution major shares of distribution goes to Punjab and this
distribution was according to population and this distribution disappointed
Sindh and NWFP
 In this award annual grants of Rs.150 Million were also allocated for
Balochistan and NWFP.

9. 2ND NFC Award 1979
This award was given in govt. of late Zia –ul-Haq in 1979 but no proposal was given and this award was
adjusted with consensus of 1981 and in this award
 Vertical distribution of resources between fed.govt and provinces remain 20:80 and in this custom
duties were also added in revenue collections.
 And the horizontal distribution was
 In this share of distribution of Punjab decreases and of Sindh and
Punjab Sindh NWFP Balochistan
57.9% 23.34% 13.39% 5.30%

10.  Of Balochistan increased and NWFP remains unchanged .
 Drawback of NFC awards
 if we see the history of NFC awards ,only population was considered the essential tool of
distribution of resources which may not be a justifiable and equitable distribution if we
ignore other demographic factors like infrastructure ,poverty ,revenue generation and
environment etc.