KP seeks Rs220 billion increase in NFC share, demands rise to 19.64% in Dec 4 meeting

Khyber Pakhtunkhwa (KP) will argue at the December 4 National Finance Commission (NFC) meeting that its NFC share should rise from 14.63% to 19.64% following the merger of Fata, claiming an annual shortfall of Rs 213 to Rs 220 billion, supported by evidence showing increases in the province’s share across various indicators including population, poverty, and density factors.

According to a report by The News, the official working paper reveals how the merger of Fata would alter KP’s NFC share under various indicators. The population indicator increases KP’s share from 11.33% to 14.16%, amounting to Rs 119.91 billion. Under the poverty indicator, the share rises from 2.87% to 4.71%, adding Rs 78.2 billion. 

The inverse population density indicator raises KP’s share from 0.18% to 0.52%, contributing Rs 14.65 billion. The revenue collection indicator remains unchanged at 0.25%. Together, these adjustments would raise KP’s share from 14.63% to 19.64%, resulting in a total financial impact of Rs 213 billion annually.

Further bolstering KP’s case, the working paper also calculates Fata’s financial impact separately. Fata accounts for 1.99% under the population indicator (Rs 84.67 billion), 2.82% under the poverty indicator (Rs 119.63 billion), and 0.36% under the inverse density factor (Rs 15.29 billion). The total financial impact of Fata is Rs 219.59 billion per year.

The federal government had promised, under the 25th Constitutional Amendment, an annual allocation of Rs 100 billion for the former Fata regions. However, documents show that KP has only received Rs 160 billion in seven years, leaving a shortfall of Rs 540 billion. This gap has severely affected development and rehabilitation efforts in the merged districts.

Muzzamil Aslam, Adviser to the Chief Minister on Finance, stated that KP’s security, policing, infrastructure, and development responsibilities have significantly increased post-merger, but the federation has withheld the additional Rs 200 to Rs 220 billion that the NFC formula legally allocates to the province. 

He emphasized that KP will not accept any NFC share without the inclusion of former Fata, citing ongoing reductions in the province’s resources for the past seven years, which have pushed KP towards a growing financial crisis.

The December 4 meeting will center on four key points: updated population, poverty, and backwardness indicators; formal inclusion of Fata’s weight in the NFC; possible adjustments in the vertical share of provinces; and the issue of outstanding dues and financial commitments. The KP delegation is fully prepared with documented evidence and numerical support to back their claims.

Aslam stressed that this NFC meeting is more than just a fiscal exercise for KP, calling it a critical moment for the province. Despite the Fata merger, KP has been deprived of its rightful share, both in the NFC and in the promised annual funds for the merged districts.

Failure to correct KP’s NFC share to 19.64% and release the annual Rs 213 to Rs 220 billion, along with the promised Rs 100 billion for Fata, could strain federal-provincial relations further. 

At the federal level, rising debt, defense spending, and subsidies are already creating financial pressure, and it is expected that discussions at the meeting could include proposals to reconsider the provinces’ collective 57.5% share or shift more expenditure responsibilities to the provinces.