ISLAMABAD: Pakistan on Friday constituted the 11th National Finance Commission (NFC) to determine how federally collected revenues are divided between the Center and the provinces, amid renewed calls to revisit the resource-sharing formula that has remained unchanged for 15 years.

The 7th NFC Award, introduced in 2010, has continued far beyond its original tenure, with successive governments extending it annually due to disagreements between Islamabad and the provinces over a new arrangement.

According to a Finance Division notification, the commission will be chaired by Federal Minister for Finance and Revenue Muhammad Aurangzeb and include the four provincial finance chiefs. It will also include one expert member from all four provinces.

In pursuance of Clause (1) of Article 160 of the Constitution of the Islamic Republic of Pakistan, and in supersession of its Notification No. S.R.O. 635(1)/ 2020 dated the 21st July, 2020, the President of Islamic Republic of Pakistan is pleased to constitute the 11th National Finance Commission (NFC) with immediate effect,” the notification said.

Specifying the terms of reference, it said the commission will make recommendations to the president on how to distribute the net proceeds of specific taxes between the federation and the provinces.

The commission is also mandated to advise on grants-in-aid to provinces, borrowing powers of the Center and provinces and cost-sharing of financial expenses for projects of national or trans-provincial scope.

Successive commissions after the 7th Award failed to produce a new formula because of disagreements between the Center and the provinces. The 10th NFC, constituted in 2020, was formally dissolved with immediate effect following Friday’s order.

Officials and political leaders have floated proposals in recent years to base transfers not only on population but also on new criteria such as education, health and climate resilience, pointing out this would better reflect development needs and incentivize performance.

The 18th constitutional amendment in April 2010 stipulates no province’s allocation in a future award can be less than what it received in the previous one, a protection that has previously made it difficult to reach consensus on resource distribution.