As I noted in Part I of this article (‘Federalism at risk’, October 9), critics argue that the 7th NFC allocated ‘excessive’ resources to provinces and ultimately bankrupted the federation.

The claim doesn’t survive the numbers. Provinces do not “get 60 per cent of everything”; they receive 57.5 per cent of the divisible federal tax pool, not of total federal inflows. Major receipts – most notably the petroleum levy – sit outside the pool and are retained at the centre, even though this tax, which is not listed in the Federal Legislative List, fall in the provincial domain under our constitution.

The fairest way to test the ‘excessive-transfer’ narrative is a like-for-like comparison. Take this year’s budget baseline and rebuild the pool as if the 5th NFC logic still applied: exclude customs duty from the shareable base (as under the 5th) but include the petroleum levy (in substance a sales tax on goods, which is part of the divisible pool). For FY2025–26, provinces are budgeted to receive about Rs7.99 trillion from the divisible pool plus Rs0.22 trillion in straight transfers (royalties etc), totalling Rs8.21 trillion. With GDP around Rs120 trillion, that equals 6.84 per cent of GDP.

Let us now work out the divisible pool implied by the 57.5 per cent provincial share: Rs13.89 trillion. Now apply the 5th-NFC lens: subtract customs (Rs1.55 trillion) and add the petroleum levy (Rs1.47 trillion) to get an adjusted divisible pool of Rs13.81 trillion. Deduct 2.5 per cent collection charges to Rs13.46 trillion, then split 80:20: provincial entitlement comes to Rs10.77 trillion – 9.0 per cent of GDP – versus Rs8.21 trillion (6.84 per cent of GDP) actually budgeted this year.

In other words, under an honest like-for-like base, provinces would have received more, not less, under the 5th NFC formula. The 7th NFC did........

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