Public Finance in Balochistan

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Balochistan, the largest of the four provinces of Pakistan, spreads over an area of 347,190 Sq, Kms. forming 43.6 per cent of the total area of Pakistan. It has clustered population and is smallest in proportion as compared to that of other provinces. Its population, according to 1998 census, is xx million, having a low density per square kilometer.

An Overview

Blochistan
Capital Quetta
Largest City Quetta
Government Type Province
Body Provincial Assembly
Governor Muhammad Khan Achakzai
Chief Minister Abdul Malik Bloach
Total Area 347,190 sq km
Population 7,914,000
Main Languages Pushto, Brahui
Assembly Seats 65
Departments 39
Districts 32
Autonomous Bodies 5
Union Councils 86
Geography

Physically, Balochistan is an extensive plateau of rough terrain divided into basins by ranges of sufficient heights and ruggedness. Broadly, Balochistan geographic area can be divided in to four distinct zones: Upper high lands, lower high lands, plains, and deserts. The upper highlands, known locally as Khorasan, rise as high as 3,700 meters, with valley floors about 1,500 meters above sea levels The highlands include Makran, Kharan and Chaghi ranges in the West and Sulaiman, Pab, Kirther in the east. The Upper High Lands fall mainly in districts Zhob, Killa Saifullah, Pishin, Quetta, Ziarat and Kalat. It comprises a number of ranges such as Sulaiman, TobakKakari, Murdar, Zarghoon, Takatu, and Chiltan ranges. The Lower High Lands have an altitude ranging from 1970 to 3940 ft (600 to 1200 M). They are located in the south-eastern Balochistan, except eastern part of Kachi, the southern end of Dera Bugti and Nasirabad districts. Some are extension of lower high lands that exist at boundaries of Gwadar, Turbat, Panjgur, Kharan and Chaghi districts.

Balochistan has relatively small area of plains as compared to its total land area. They include the Kachi plain, situated to the south of Sibi and extending into Nasirabad Division, the southern part of Dera Bugti district, and narrow plain area along the Mekran coast stretching from Kachi to the Iranian border. The plains of Kachi, Las Bela and that of river Dasht cover sizable area. Mountains dominate the terrain, and valley floors, and piedmont plain make up only 15% of the landscape. The western part of the province, mostly in Kharan and Chaghi districts, consists of vast plains covered with black gravel surface and broad expanses of sand dunes. The coastal-line is about 760 Kilometers long, with a number of peninsulas and promontories. The coastal area is not effectively connected with the interior; the steep hills rise abruptly beyond the narrow coastal plain. Ports, such as Somiani, Pasni and Gwadar are unsheltered. Federal and provincial governments have comprehensive development plans that feature a deep sea port at Gwadar and a coastal highway.

Economy

The economy of Balochistan, one of the four provinces of Pakistan, is largely based upon the production of natural gas, coal and minerals. Agriculture and livestock also dominate the Baloch economy. Horticultural development is a fairly recent, yet growing phenomenon. Other important economic sectors include fisheries, mining, manufacturing industries, trade and other services being rendered by public and private sector organizations in the province.

Outside Quetta, the infrastructure of the province is gradually developing but still lags far behind other parts of the country. Tourism remains limited but has increased due to the exotic appeal of the province. Limited farming in the east as well as fishing along the southern Arabian Sea coastline is other forms of income and sustenance for the local populations. Due to the tribal lifestyle of manyBaloch and Brahui people, animal husbandry is important, as are trading bazaars found throughout the province.

Though the province remains largely underdeveloped, there are currently several major development projects in progress in Balochistan, including the construction of a new deep sea port at the strategically important town of Gwadar. The port is projected to be the hub of an energy and trade corridor to and from China and the Central Asian republics.

Further west is the Mirani Dam multipurpose project, on the Dasht River, 50 kilometers (31 mi) west of Turbat in the Makran Division. It will provide dependable irrigation supplies for the development of agriculture and add more than 35,000 km² of arable land. There is also Chinese involvement in the nearby Saindak gold and copper mining project.

One of the world’s largest copper deposits (and its matrix-associated residual gold) has been found at Reko Diq in the District of Balochistan. Reko Diq is a giant mining project in Chaghi. The main license (EL5) is held jointly by the Government of Balochistan (25%), Antofagasta Minerals (37.5%) and Barrick Gold (37.5%). The deposits at Reko Diq are hoped to be even bigger than those of Sarcheshmeh in Iran and Escondida in Chile (presently, the second and the third largest proven deposits of copper in the world).

BHP Billiton, the world’s largest copper mining company, began the project in cooperation with the Australian firm Tethyan, entering into a joint venture with the Balochistan government. The potential annual copper production has been estimated to be 900,000 to 2.2 million tons] the deposits seem to be largely of porphyry rock nature.

Government

The Government of Blochistan functions under the provisions of the Constitution of Pakistan (1973). The Provincial Assembly of Balochistan is one of the four provincial assemblies of Pakistan. The Balochistan assembly is the unicameral (single chamber) legislature of the province of Balochistan. It was set up by Article 106 of the Constitution of the Pakistan. The Assembly has 51 directly elected Members of the Provincial Assembly, representing constituencies from each district, as well as 11 seats reserved for women and 3 for non-Muslims.

The Provincial Assembly elects the Chief Minister of the Province who forms a Cabinet of Ministers to look after various Departments. The Chief Minister is the Chief Executive of the Province. The Federal Government appoints a Governor as head of the Provincial Government.

The bureaucratic machinery of the province is headed by a Chief Secretary who coordinates and supervises functions of various Departments headed by Departmental Secretaries.

All the Secretaries are assisted by Additional Secretaries, Deputy Secretaries, Section Officers and other staff. The Departments may have attached Departments and autonomous or semi-autonomous bodies to look after various functions. The Province is divided into 32 districts.

Financial Management System

The Government budgeting is based on the principle of equitable distribution of resources among its citizens through the tools of various fiscal measures. Government first outlines its expenditure programmes and then follows planning for revenue generation. It is a well set rule in Public Finance that an increase in expenditure at a constant tax rate or a decrease in the tax rate at no change in expenditures will always lead to budget deficits. In case of a reverse scenario, a surplus  budget  will  appear,  while,  balance  budget  is  an  equilibrium  between receipts  and  expenditures.  The need for any one of these three options depends upon the overall economy of the country or on the will of the government.

In the context of fiscal federalism, provincial budget is largely a function of Federal Divisible Pool receipts. In this arrangement, all major and robust taxes are  classified  under  Federal  Divisible  Pool  taxes  since  provinces  are  largely dependent on Federal Divisible Pool receipts.

The most important component of provincial budgetary receipts is transfers from the Federal Government every year. These represent the share of the provinces in direct and indirect taxes and duties levied and collected by the Federal Government. Taxes and duties which are subject to distribution between the Federal Government and the Provinces include:

  • Tax on Income
  • Wealth Tax
  • Capita Value Tax
  • Tax on the Sale or Purchase of the Goods
  • Export Duty on Cotton
  • Customs Duty
  • Federal Excise Duty (Excluding excise duty on Gas Charged at Well head)
  • Any other tax which may be levied by the Federal Government

The revenue distribution between the Federation and Provinces is made under the National Finance Commission Awards. National Finance Commission consisting of the Minister of Finance of the Federal Government and Ministers of Finance of the various Provincial Governments. This commission allocates a share for each Province from the divisible pool of taxes collected. In addition, the Provincial Governments receive grants from the Federal Government. The basis of distribution currently enforced is governed by 7th NFC.

Under the 7th National Finance Commission Award, the percentage share of the provinces in the Divisible Pool is 57.5% w.e.f. FY 2011-12. Under the 7th NFC Award, the Divisible Pool now comprises Taxes on Income, Customs Duties, Sales Tax, Federal Excise excluding Excise Duty on Gas charged at well head, and any other tax levied by the Federal Government. With the exception of Federal Excise Duty on gas, the taxes listed above are distributed between the provinces and the Federal Government in the ratios given below:

Vertical Distribution of Resources
Provincial Share Federal Share
57.50% 42.50%
The provincial share is divided amongst the provinces in the ratios given below.  This share was decided on the basis of a multiple criteria based on population, inverse population density, revenue and poverty.
Horizontal Distribution of Resources
Punjab Sindh Khyber Pakhtunkhwa Balochistan
51.74% 24.55% 14.62% 9.09%
As regards expenditure, each Provincial Government incurs outlays according to the commitments made in individual budget estimates. Because of commonality in the financial provisions of the Federal and Provincial Governments, procedures and practice in budgeting and accounting are similar and vary only in detail.

To achieve the policy objectives four important fiscal Management reforms are being planned in financial year 2013-14 as under:

  • Establishment of Balochistan Revenue Authority;
  • Designing and implementation of budget execution and monitoring framework for departments under Medium Term Budgetary Framework (MTBF);
  • Establishment of Economic Policy Development & Implementation
  • Unit in the Finance Department
  • Automation of pension disbursement systems