ISLAMABAD: Punjab government has urged the federal government to take corrective measures for the centre’s fiscal policies that seemed to have started hurting provincial finances.
Punjab Finance Minister Dr Ayesha Ghaus Pasha demanded from Federal Finance Minister Ishaq Dar to increase Punjab’s share on account of profit from hydel power generation, in line with the treatment that the federal government gave to Khyber Pakhtunkhwa (KP).
She also raised concerns over the recent increase in property valuation rates, which Punjab says are counterproductive for provincial finances. Dr Pasha met with federal finance minister at his office, seeking provincial role in matters that have direct bearing on the federating units, according to Ministry of Finance officials.
The Pakistan Muslim League-Nawaz (PML-N) has the majority at the province as well as the federal level. The provincial government’s complaint about ignoring it in fiscal matters suggests that the Finance Ministry has not taken even Punjab onboard.
The constitutional experts accuse the federal government of undermining the role of National Finance Commission (NFC) by not holding its meetings timely. The NFC used to be an important platform to resolve centre-provinces fiscal disputes.
The officials who attended the meeting said that Dr Pasha urged Dar to give equal treatment to the federating units. In February this year, the federal and KP governments had reached an agreement, which resolved decades-old issue of profits from electricity generation through water sources.
According to the agreement, the hydel tariff was increased from Rs 1.74 per unit to Rs 2.10 per unit, which gave roughly Rs 12 billion additional monetary benefits to the provincial government. The federal government also agreed to pay Rs 70 billion arrears through recoveries from electricity consumers.
The Punjab government is seeking a similar treatment. There are about a dozen hydropower projects located in Punjab but the 1,450MW Ghazi-Barotha hydropower project is the main source of NHP generation for the provincial government.
All provinces should be meted out equal treatment in payments of net hydel profit, said Dr Pasha while talking to the journalists. She said that the meeting with the finance minister was productive and it was decided that the NHP issue would be resolved in consultation with ministry of water and power.
There is already a precedent on the issue of NHP and Punjab should be given the similar treatment, said Pasha while responding to a question whether the federal government would accept the demand. The Punjab government also raised the issue of the recent increase in property valuation rates and its implications for the provincial government with Dar, officials said.
The officials said that the provincial Minister asked Dar to review the decision of increasing the property valuation rates. Under an agreement with the realty sector, the government notified new property valuation rates for taxation purposes for 21 major cities across the country. The move was aimed at increasing capital gains tax collection, which was earlier based on deputy collector rates.
However, the federal government did not include the province in negotiations, although immovable property is constitutionally a provincial subject and an important source of revenue generation for the federating units.
The recent changes in federal taxation policies have proven counterproductive for the provincial governments and increase in property valuation rates have created distortions, said the provincial finance minister.
The provincial governments are collecting stamp duties and the federal government is instead urging the provinces to reduce the stamp duties rates. The provincial governments are not agreeing to the proposal, the officials said.
Dr Pasha urged the finance minister that in future the provincial governments should be taken into confidence before bringing changes in policies that have direct bearing on them. She also raised the issue of adverse implications of the federal government’s decision to disallow input tax adjustments to taxpayers registered with the provincial revenue authorities. The federal government has called a meeting of all the stakeholders by mid of this week to resolve the dispute.
