Born in the name of the return, propagated as the rights of people and held as a victory for the private ones, the seventh prize of the National Finance Commission has not been any of that.
His birth in 2010 coincided with the approval of the 18th constitutional amendment, which also created ambiguity about the role of local governments (LGS), racing the way for the recent recent powers by provincial governments.
Instead of bringing the government closer to the people, the seventh NFC award and the 18th amendment eliminated any return of the resources and powers that existed with the LGS at that time.
In 1999, when the Federal Government abolished the collection of the Octroi and Zila Tax (OZT) by the LGS, it introduced a 2.5 percent increase in the GST over goods. A transparent mechanism for direct transfers to LGS to compensate for its income losses was introduced. Later, the distribution of income and order of the 2006 subsidies set these direct transfers in a sixth part of the GST collections.
If that system had continued, Karachi would have received RS190 billion in 2024-25 as a direct transfer of GST Solo (as compensation for the OZT). Other district governments in Sindh, such as those of Ghotki, Hyderabad and Thatta, would also have received direct transfers from RS4,456 million, RS4,486m and RS3,618m respectively.
This right of the LGS was usurped through the seventh NFC and merged with the Federal Divisible Group. The provinces were allowed to use the participation of LGS as they wanted. Karachi, being the largest collector in Ozt, was the most affected, receiving more meager amounts for a total of less than RS200 billion 2010-11 to 2024-25, against his proper participation of RS1,236.7 billion. Karachi suffered a colossal loss of more than RS1,000 billion, or a billion rupees, after the seventh NFC under the head of Ozt alone.
The seventh NFC award and amendment 18 eliminated any return of resources and powers that existed with the LGS.
‘Democracy’, ‘return of power’ under amendment 18 and ‘equitable distribution of resources’ under the seventh NFC only for those with political power in the provinces. After becoming a rich Mega in the seventh NFC, the provinces were not obliged to give equitable actions to cities or districts.
Sindh spent 3,871 billion in development funds from 2010-11 to 2024-25. Composed of 37pc of the population of Sindh, Karachi was entitled to RS1,416.6bn, but received only RS472B (a deficit of RS944.6bn). The PSDP of the Federal Government from 2010-11 to 2024-25 amounted to RS8,967 billion.
Constituting 8.4pc of the country’s population, Karachi should have received RS756.8bn. However, he received only RS340BN (a RS416.2bn deficit). The total development deficit was RS1,360.9 billion (almost a billion rupees) from 2010-11 to 2024-25.
Due to such failures in the 18th amendment, the Provincial Finance Commission (PFC) has been dead since 2009. LGS subjects have been removed by the provincial government, including water, sewerage, solid waste management, the master plan, construction control, development agencies, mass transport/ transportation, earth control, education, health, health, social indicators, including education, including education and health. canceled since then.
The infrastructure development CESS has been collected since 1994 in goods in the Karachi ports for the development and maintenance of the infrastructure used by carriers when they enter Karachi through national roads. Instead of creating a Karachi infrastructure fund, the entire collection under the IDC merges illegally in the provincial account. Last year, it was RS170bn. The Total IDC collection, since the beginning of CESS, is estimated at around RS1,000bn or RS1TR.
All these amounts, that is, the direct transfers of GST eliminated by the seventh NFC, the deficit in the development funds and the improper appropriation of IDC reach RS3,360bn or more than RS3TR. It is approximately three times the amount of the infrastructure financing gap identified by the World Bank: “Karachi requires an estimated $ 9-10 billion [around Rs 1,050bn in 2017] To close your services and infrastructure provision gaps. Without this, the habitability and competitiveness of the city will continue to deteriorate, limiting their ability to boost the growth of Pakistan “(transforming Karachi into a habitable and competitive megacitic, 2017, World Bank).
In all these years, we believed that: “All Karachi problems, including water supply, drainage, wastewater, public transport and solid waste, will be addressed immediately” as the then Prime Minister Imran Khan said, announcing RS1,100 billion for the Karachi transformation plan in September 2020.
In a similar line, Prime Minister Shehbaz Sharif declared in April 2022 that he had “asked the relevant authorities to complete the K-IV project by 2024. We cannot compromise water supply projects.” A year later, Bilawal Bhutto-Zardari said in June 2023: “I will take a personal interest in the development of the city.” Previously, in April 2019, Khalid Maqbool Siddiqui de MQM had said: “We are taking this case to the public … we have had enough.”
If Karachi obtains only one year of due time in provincial ADP (RS372.7bn), Federal PSDP (RS84.4bn), IDC (RS200BN) and an action in GST against Ozt based on formula 2006 (RS222.7bn), the total would reach RS879.8bn this year. It would mean complete financing for the K-IV water project (RS73BN), the Karachi circular railway (RS300BN), the two blue and non-financed brot (RS180bn), the wastewater treatment plants at all discharge points (RS270bn) and the complete rehabilitation of all the roads of Karachi.
If they are provided and spent honestly every year, these funds can bring Karachi to be a habitable city in a few years, and Pakistan can recover its growth potential, which has been lost since the seventh NFC.
The Nation expects the 11th NFC participants to work sincerely to: (i) undo the injustice of the seventh NFC and restore the sixth part of GST as direct transfers to LGS based on Formula 2006; (ii) provide safeguards to guarantee the equitable distribution of development funds in all regions; (iii) make provincial actions conditional to the operationalization of the PFC; and (iv) provide transparent mechanisms to use IDC for the development of the port city and its load corridor for future commercial expansion.
The writer was previously Federal Secretary and Provincial Minister of Caregivers. He is currently the president of the Research Council and Policy Advisor.
Posted in Dawn, August 29, 2025
