Monday, 5 November 2012

Pakistan: Spending its way into social inequality

by Saleem

Discretion Vs Rules in Federally Funded PSDP Projects Allocation

The overall size of the Public Sector Development Programme (PSDP) for the Financial Year (FY) 2012-13 is Rs 873 Billion as approved by National Economic Council (NEC) and reported in the budget documents of the Ministry of Finance1.  Different components of the PSDP can be summarized as below;

Table 1
S.No
Area
Funds Allocations as per Budget FY 2012-13
1.
Federal Ministries/Divisions
Rs 207        Billion
2.
Corporations
Rs 80.382  Billion
3.
Peoples Works Programs (PWPs)
Rs 27          Billion
4.
Special areas
Rs 36.055  Billion
5.
ERRA
Rs 10          Billion
6.
Provincial PSDP
Rs 513        Billion

                                                                    Total PSDP

Rs 873       Billion
   
                                               
After the adoption of 7th NFC award in December 2009 with consensus among the federating units, which is applicable to the budgets in FY 2010-11 and onwards, the share of Provincial PSDP has been considerably increased as more resources were transferred from federal government to the provincial governments.  Earlier, the 5th NFC award, which was adopted in 1997 and valid for five years, was in place till 2010 as no consensus has been reached over the 6th NFC award. Under the 7th NFC award, the financial autonomy of the provinces has been ensured by increasing their share in the divisible pool from 50 percent to 56 percent in 2010-11 and 57.5 percent from 2011-12 onwards2. The size of the provincial governments Annual Development Programmes (ADPs), thus, increased considerably.  This is a healthy sign for the federation of Pakistan as provinces can now devise their own developmental schemes in accordance with the development requirements of its own people with more resources at their disposal.

However, there is still considerable amount of funds left with the federal government in federal PSDP to be utilized in the public sector development projects (See Table 1) of national importance. These include Funds available with the Federal Divisions/Ministries and Peoples Works Programmes (PWPs) among others. 

Should these funds be utilized throughout Pakistan under some Rules or should it be ‘discretionally’ used by the Chief Executive (PM) or his federal ministers?  There should be no room for discretionary allocations of these funds and strict rules are needed to maintain the regional parity while distributing these resources across different federating units.  This is the main point of this write-up and to show it I will try to highlight two such areas where extensive discretionary powers with the PM/Federal Ministers distort the allocation of these funds where some provinces are preferred while others were ignored. To me, this may ultimately increased alienation among the deprived provinces and their elected representatives will echo their voices in the parliament.
One Such area where discretionary allocations were made is from the PSDP allocation to the Planning and Development (P&D) Division.  P&D Division is one of the 41 other federal divisions which were allocated with funds to be used under PSDP (See PSDP 2012-13 published by Planning Commission of Pakistan). The total PSDP allocated to this division is Rs 37.840 Billion3. Out of this total amount, Rs 22.2 Billion has been allocated to some 25 projects across the country on some very vital programs in the social and development sector. These projects include, for example, Population Welfare Programs (part of the Vertical Programmes) for four provinces and GB, AJK & FATA. The shares allocated to different federating units indicate the proportionate share of each region according to its size. This is fair enough as the shares indicates the proportionate share of each region according to its size and that rules were adopted to maintain regional parity. However, the remaining funds of Rs 15.7 Billion were block allocation under 4 ambiguous heads namely a) Challenge Fund; b) Feasibility studies; c) Project Prefatory Funds & d) Develoved/closed Projects Liability. The funds allocated under these four heads are as under;

Table 2
        S.No
‘Ambiguous’ Heads in PSDP with Serial Numbers
Funds Allocated in FY 2012-13
           1.
26. Challenge Fund
Rs 10 Billion
           2.
27. Feasibility Study
Rs 2.5 Billion
           3.
28. Project Preparatory Funds
Rs 2.2 Billion
           4.
29. Devolved/Closed Projects liability
Rs 1.0 Billion

                                          Total
Rs 15.7 Billion
 
According to the preface of the PSDP document of 2012-13 (published by P & D division under its secretary Asif Bajwa) , the ‘Challenge Fund’ will be the first step in setting fresh trends in the Public Sector Development arena to align PSDP with the objectives of New Growth Strategy announced by the Planning Commission of Pakistan.  The document says that this fund will be available to provinces for making ‘innovative projects’ targeting at ‘creative cities’ and ‘promoting youth skills’. I think it will be good to quote the entire 3rd paragraph of the preface to the PSDP 2012-13 document here
                “For the year 2012-13, the elements of New Growth Framework form the basis of allocation of resources. Measures have been taken to align PSDP with the objectives of new growth strategy. Federal PSDP 2012-13 sets fresh trends in the public sector development arena. As a first step ‘Challenge Fund’ has been created. This fund will be available to provinces for making innovative projects targeting at creative cities and promoting youth skills’
 In the total PSDP of Rs 37.84 billion of the Planning & Development Division, the money allocated to the challenge fund was Rs 10 Billion. As of today, Rs 9.6 billion has been spent on various projects under this head  which means the funds were utilized in the first four month of the fiscal year as budget was presented in June, 2012 (this is a remarkable! achievement as normally PSDP projects are faced with slow utilization which often lead to lapse of funds).  

This is also in complete violation of the rules set by P & D Division where a maximum of only 20% of the total cost in each quarter can be released during the first two quarters of the fiscal year4. Now please have a look at the projects which were approved and where funds were allocated are as under (I personally ‘collected’ this list from the P & D Division as access to information is the right of every citizen Now!); 


Table 3

Projects
Funds Allocated in FY 2012-13
A.
 Challenge Fund

1.
M-4 Motorway Multan
Rs 1,000  Million
2.
Multan Inner Ring Road including 6 Interchanges
Rs 100     Million
3.
Khanewal-Multan Inter District Road (Bosan Road)
Rs 400     Million
4.
Dualization of Mandra to Chakwal Road
Rs 2,100  Million
5.
Dualization of Sohawa to Chakwal Road
Rs 350     Million
6.
Execution of 33 Miscellaneous development Schemes in NA-51 Gujar Khan
Rs 1,650  Million
7.
Kacchi Canal (Phase-I, Balochistan)
Rs 4,000   Million

                                                                                               Total
Rs 9,600   Million
B.
Feasibility Studies
Rs 50.0     Million
1.
Establishment of COMSATS institute of IT, Jaffarabad
Rs 1.7       Million
2.
Inspector General Development Projects, Balochistan
Rs 126.3   Million
3.
Rainee Canal (Phase-I) Sindh
Rs 2,000   Million

                                                                                               Total
Rs 2,178   Million

                                                                                    
While the funds allocated to Kachi Canal in Balochistan and other transfers from ‘Feasibility Studies’ to Balochistan make sense as it may be used by the federal government to reduce the grievances of the people of Balochistan but ignoring KP & FATA altogether clearly shows that while distributing these regional parity was not maintained.  The ‘domicile’ of these projects corresponds with the domiciles of our two illustrious Prime Ministers i.e. Punjab.  It is not in my knowledge whether this apparent inequality in funds allocation is somehow accounted for in somewhere else or not (I will feel happy if I am corrected).

Another such area is Peoples Work Program (PWPs) named as Special Programmes in PSDP 2012-13. A total of Rs 22 Billion were allocated in the initial budget as documented in June, 2012. There are media reports that another Rs 10 Billion were added to this particular head on the request of PM thus increasing the total amount to Rs 32 Billion. There are no such rules for the allocation of these funds (as no details were given how this money will be utilized across different federating units). This may depends solely on the discretionary authority of the PM and his ministers to utilized these funds5. There are media reports that almost all the funds under PWPs were utilized within the first four months of the budget by the new Prime Minister/ Federal Ministers on his selected projects.  The media reports indicate that these funds are mainly used for ‘vote-buying’. I have no problem as such with vote-buying as all government does it everywhere in the word but I am interested to know the ‘geography/domicile’ of this vote-buying. If votes are purchased in all four provinces, FATA, GB & AJK then it can be tolerated but if vote-buying is mainly restricted in Multan or Gujjar Khan (Punjab) at the expense of other areas then it becomes problematic.  
And by the way this is not limited to this year budget only as it is a recurrent practice.  Every year, in the federal budget, an amount is earmarked to keep it in large Block Allocation without any projects under its head. Last year the Federal Government used heads of a) feasibility study; b)Other requirements and c) devolved subjects at Federal level to ‘hide’ these block allocations to be used with discretionary powers of the PM/Federal Ministers.  

Now it is good that the share of the provinces from divisible fools have been increased but should the remaining funds with the Federal Government be spent in disregard of the provincial allocation? And the problem is that this is not the ONLY case where such disparities exist in the Federal PSDP. All such allocations spent on discretionary powers of the Chief Executive (in this case with the PM) will increase inequalities across different regions.


Lessons learned!
1.       There should be no discretionary authority of the chief executive or his ministers over the funds in federal PSDP. The same should also apply to the provincial governments. There should be clear and transparent rules for resource allocations across the different regions.
2.       No ambiguity should be kept in the federal budget as the representatives of the countries can discuss each and every component of the PSDP in both National Assembly and Senate of Pakistan.
3.       The existing Rules with the P & D regarding the utilization of the PSDP should be strictly followed.    

 -The writer @saleemiss is a PHD student 

Refrences:


1.       Source: Budget in Brief 2012-13, Ministry of Finance & Public Sector Development Programme 2012-13, Planning & Development Division, Government of Pakistan.
2.       Source: Pakistan Economic Survey 2011-12, Ministry of Finance, Government of Pakistan.
3.       Source: Public Sector Development Programme 2012-13, Planning & Development Division, Government of Pakistan page 75-76.
5.       Some rules can be easily devised here as in the case of initial launching of the BISP program where each elected MNA/Senator was given with 8000 BISP forms to be distributed in their respective constituency thus maintaining regional parity!