Second NFC Session Delayed Despite Announced Timeline
The National Finance Commission (NFC) appears to have slowed down sharply after an active start. Nearly two months after its inaugural meeting, the commission has not held its second session. The follow-up meeting was originally scheduled for the second week of January but has yet to be announced.
Sources familiar with the process say the delay reflects broader inaction within the NFC framework. The eight technical working groups formed to support the 11th NFC award have largely failed to function. Only two groups have met once. The remaining six have not convened at all since their notification in mid-December.
After the first NFC meeting on December 4, officials from the Ministry of Finance and provincial governments shared an ambitious roadmap. They said monthly meetings would begin in January. These sessions were meant to resolve long-pending issues related to revenue sharing after a gap of more than 15 years.
However, that momentum appears to have faded. The absence of working group reports has stalled progress. As a result, the second NFC meeting remains on hold.
Working Groups Struggle to Begin Consultations
The most active group so far has focused on the merger of the former FATA with Khyber Pakhtunkhwa. This group is led by KP Finance Minister Muzammil Aslam. It was formed to assess how the merger impacts provincial shares under the NFC formula.
The group requested detailed financial data from the federal finance secretary. The data was meant to explain how the ex-FATA allocation would affect other provinces. More than seven weeks later, those details are still awaited. The group has not held a second meeting.
Another working group on divisible pool taxes met once in late January. It is led by Federal Finance Minister Muhammad Aurangzeb. The group is reviewing whether certain taxes should be added to or removed from the divisible pool. One key proposal under review is the possible exclusion of customs duty, which the centre views as a purely federal subject.
The remaining six groups have not held any sessions. These groups cover critical areas such as vertical distribution, debt composition, tax-to-GDP improvement, straight transfers, and horizontal distribution criteria. Most of these groups are led by provincial finance ministers.
Provincial officials say meetings were disrupted by the unavailability of federal representatives. Federal officials, however, cite foreign visits by senior finance authorities as a reason for delays.
Revenue Disputes and Constitutional Challenges
The NFC deadlock comes amid deep disagreements between the centre and provinces. At the first meeting, Sindh objected to discussions on expenditure control. The province argued that the NFC’s constitutional role is limited to revenue distribution only.
The federal government has since sought legal advice suggesting that expenditures may also fall within the NFC’s scope. This disagreement has added to the slowdown.
The centre has also pushed for higher revenue mobilisation. It wants to raise consolidated revenues by over 5 percent of GDP within three years. Provinces have been urged to increase their own tax collections through property, agriculture, and services.
Officials argue these steps are needed to control a growing fiscal deficit and rising debt levels. Provinces, however, remain cautious. Past commitments under the 7th NFC award were not fully met by either side.
The 11th NFC must reach consensus among the federation and all four provinces. Constitutional rules bar any reduction in provincial shares. This makes negotiations complex and politically sensitive.
The last NFC award, finalized in 2009, remained in force for 15 years. It significantly increased provincial shares but strained federal finances. With rising security, infrastructure, and disaster-related costs, the centre is now seeking fiscal rebalancing.
As delays persist, concerns are growing that the 11th NFC award may face further setbacks. Without active working groups, meaningful progress remains uncertain.
