KP challenges extension of 7th NFC Award

The Pakistan Tehreek-e-Insaf-led (PTI) Khyber Pakhtunkhwa government has challenged the extension of 7th National Finance Commission (NFC) Award in the Federal Constitutional Court (FCC) following the merger of the erstwhile Fata in KP, The News reported. 

Adviser to KP CM on Finance, Muzammil Aslam severely criticised the federal government over the looming wheat and energy crisis, arguing that the inefficient government plunged the country into crisis-like situation, and there was no other solution but to import wheat to avert a food crisis.

Addressing a news conference here at KP House, Aslam claimed that the KP financial share of Rs964 billion was distributed among three other provinces, including Punjab, Sindh, and Balochistan.

The FCC admitted the petition filed by the KP government, in which the province argued that it has regularly maintained its position at every NFC forum that the 7th NFC extension after 2018 is ultra vires, which must be corrected.

The province is asking the court to determine whether its share under the NFC should be increased to reflect its expanded size and responsibilities following the 25th Constitutional Amendment.

The adviser to KP CM on Finance also revealed that the province never committed any share in the grant to the Centre on the occasion of the National Economic Council (NEC) meeting out of Rs1100 billion, so it was not reflected in the allocation in its provincial budget.

He was of the view that although 88% grant commitment was made by Punjab and Sindh, as a matter of record, the KP province did not allocate such a grant. He also stated that this grant commitment was not part of the minutes of the NEC, which were now issued.

He said that the minutes issued by the NEC clearly read out that the PM made commitment to incorporate revised NFC share for KP in six months by December 2026 and then President of Pakistan would promulgate an ordinance to this effect for jacking up share of the province after merger of Fata areas.

The petition filed by KP argues that the province’s population, territory and development needs have significantly increased after the merger of Fata in the province through the 25th constitutional amendment in 2018.

KP argues that despite this major constitutional change, its share under the NFC formula has not been updated to include the merged districts. This violates the global principle of “finance follows functions,” which resulted in an under-allocation of resources to the added population of the merged KP districts.

For the first time, a province is seeking a living NFC and questioning the way it has been stalled. If decided, it may nullify the criticism about the 18th Amendment to a large degree. This petition goes beyond a provincial fiscal claim, and asks the Federal Constitutional Court to clarify whether, in light of Article 160, the federal claim of a logjam is appropriate or a refusal to pay its role.

At stake is not only Pakhtunkhwa’s share, but the integrity of Article 160 itself: whether the NFC remains a periodic, evidence-based and responsive constitutional mechanism, or whether national resource distribution can continue on outdated assumptions after a province’s population, territory and responsibilities have been transformed. By seeking clarity on the duties of the Federation, the President and the NFC framework, the petition aims to restore constitutional discipline, fairness and good-faith implementation to one of the central mechanisms of Pakistan’s federal compact.”

The government of Khyber Pakhtunkhwa maintains that the existing NFC formula agreed under the 7th NFC Award does not need to be reopened or altered for its present claim. Rather, the province’s case is that the formula must be applied to the province as it constitutionally exists after the 25th Amendment.

The formula continues to be used, but the values inserted into that formula still reflect the pre-merger Khyber Pakhtunkhwa. This means that the population, geography, and development indicators of the merged districts have not been included in the share of Khyber Pakhtunkhwa, even though they became part of the province by constitutional amendment on 31 May 2018.

Aslam said that the wheat crisis was looming as Punjab and Sindh failed to procure the targeted wheat despite permission by the IMF. Now the PASSCO possessed only 1.7 million tonnes of wheat, out of which the KP government gave an order, so there was no other option but to import wheat available at a rate of Rs90 per kg in the international market.

He also criticised the fixing of petroleum prices on a daily basis, arguing that the federal government miserably failed to devise any workable plan to fix the petroleum prices.