National Finance Commission - NFC

History of distribution of revenue between Center and Provinces in the subcontinent dates back to Government of India Act 1935. Pakistan came into existence on 14th august 1947. After the creation of the country, first award of distribution of revenue was announced in 1952 popularly known as Raismen award. It distributed the revenue between the center and provinces of the federation of Pakistan.

Third constitution of Pakistan was passed in 1973 and was effected on 14th August 1974. Article 160 (1) of the constitution of the country provides for the establishment of the National Finance Commission (NFC). Article 160 (2) of the constitution provides:

“It shall be the duty of National Finance Commission to make recommendation to the President as to-

(a) The distribution between the Federal and the provinces of the net proceeds of the taxes mentioned in clause (3) [of the constitution];

(b) The making of grants-in-aid by the Federal government to the Provincial government;

(c) The exercise by the federal Government and the Provincial Governments of the borrowing powers conferred by the constitution; and

(e) Any other matter relating to finance referred to the Commission by the President.”

After the enforcement of the Constitution 1973, seven NFC awards have been announced so far. First National Finance Commission Award was announced in 1975. The 7th NFC Award was signed on 30th December, 2009 and its recommendations were given legal cover with effect from 1st July, 2010, through President’s Order No.5 of 2010 (Distribution of Revenues and Grant-in-Aid Order,2010).

Awards

Article 160 of the Constitution of Islamic Republic of Pakistan authorizes the President of Pakistan to approve distribution of revenues between the federation and the provinces through an Order (the NFC Award), on the recommendation of the National Finance Commission (NFC).

The 7th NFC Award was signed on 30th December, 2009 and its recommendations were given legal cover with effect from 1st July, 2010, through President’s Order No.5 of 2010 (Distribution of Revenues and Grant-in-Aid Order,2010).

Clause 3(B) of Article 160 of the Constitution of Islamic Republic of Pakistan provides as follows:

“Federal Finance Minister and Provincial Finance Ministers shall monitor the implementation of the Award biannually and lay their report before both Houses of Majalis-e-Shoora (Parliament) and the Provincial Assemblies”.