The Counsel


The Economic Impact of the Constitution (Eighteenth) Amendment Act, 2010

by Taj Haider

Former Senator Government of Pakistan

The 18th Amendment to the Constitution brings about certain basic changes that are economically very relevant. We can briefly classify them as under:

1. Certain entries have been deleted from the Federal Legislative list Part I and have not been included in any other list. These entries are now within the domain of residuary subjects that are not included in any legislative list and thus have automatically been shifted to the provinces. These are as under:

• Entry 33. State Lotteries.
• Entry 45. Duties in respect of succession to property.
• Entry 46. Estate duty in respect of property.
• Entry 50. Taxes on Capital value of immovable property.

2. A few entries have been moved from the Federal Legislative List Part I to Federal Legislative List Part II. These entries are thus no longer the exclusive domain of the Federation. Like other entries of Federal Legislative List Part II these entries and the resources and related institutions thereof will now come under the joint supervision of the Federation and the Provinces. This control and supervision shall be exercised now through the Council of Common Interest (CCI Article 153) whose functioning has now been greatly enhanced and made provincial autonomy oriented. These very important entries are:

Entry 21. Major Ports.
Entry 32. National Planning and national economic coordination including planning and coordination of scientific and technological research.
Entry 38. Census.
Entry 39. Establishment of standard of weights and measures.

3. The Concurrent List stands abolished in total. Entries previously included in the Concurrent List (except a few) are now residuary entries falling under the provincial domain. Certain key entries of the Concurrent List now coming over to the Provinces that are going to have significant economic impact are:

• Drugs and medicines.
• Environment.
• Population planning and social welfare.
• Labour welfare, trade unions, labour exchanges, unemployment insurance.
• Zakat.
• Tourism.

4. However, certain entries that were previously in the Concurrent List have now been included in the Legislative List Part II. These entries now will fall under the joint control and supervision of the Federation and the Provinces and will be looked after from the forum of the CCI. These entries are:

• Entry 34. Electricity.
• Entry 43. Legal, medical and other professions.

5. Both the Council of Common Interest (CCI Article 153) and the National Economic Council (NEC Article 156) have been greatly strengthened. Detailed procedures for working of both these bodies have been laid down. These institutions were already a part of the Constitution but had been lying dormant. Smaller provinces had been constantly demanding that these 2 institutions should be activated. The 18th amendment by strengthening them and by laying down strict procedures for their working gives new substance to the relations between the Federation and the Provinces.

6. The change in CCI is oriented towards greater provincial autonomy and greater say of the provinces in supervision of Federal resources and dispute management. One very important objective laid down in Para 21 of the amendment is “providing a collective leadership to further strengthen the Federation”. The CCI “shall submit an annual report to both the houses of the Parliament [153 (4)]. Under Article 154 (1) “The Council shall formulate and regulate policies in relation to Part II of the Federal Legislative List and shall exercise supervision and control over related institutions.” Similarly, under Article 154 (2) The Council shall be constituted within thirty days of the Prime Minister taking oath of office.” Article 154 (3) binds the Council to “have a permanent Secretariat” and to “meet at least once in ninety days.” Certain new entries have also been added to the Federal Legislative List part II, which shall now be jointly looked after through the CCI. These entries are:

• Supervision and management of public debt.
• Federal regulatory authorities.
• Inter-provincial coordination matters.

7. The Prime Minister shall be the Chairman of the Council. He will nominate three other members of the Council from the Federal Government. Chief Minister of Provinces will be members of the Council. The decisions of the Council shall be expressed in terms of the opinion of the majority. [Article 154 (4)].

8. The issues of Water and Power have been most contentious between Federation and Provinces and between Provinces. The forum to settle such disputes is the CCI. The 18th amendment provides in Article 157 (3) that “In case of any dispute between the Federal Government and a Provincial Government in respect of any matter under this article any of the said governments may move the Council of Common Interests for resolution of the dispute.” Thus the calling of a meeting of the CCI, which the Provinces had been demanding repeatedly, is no longer the exclusive right of the Federal Government.

9. The National Economic Council (Article 156) attains enhanced importance in the 18th amendment. Its size, procedures and functions have been enhanced to make it a truly representative and independent forum to undertake national economic planning. Besides the Prime Minister who shall be the Chairman of NEC and four other members nominated by him from time to time it shall include Chief Ministers of the provinces and one member each from every province to be nominated by its Chief Minister.

10. It is very pertinent to note that in its structure the NEC is heavily tilted towards the provinces. The total representation of the Federal Government including the Prime Minister is restricted to five members and that of the Provinces stands at eight members. This is the forum where major issues of economic planning have to be discussed and decided.

11. The improvements brought about in the functions of the National Economic Council are very important and provincial autonomy oriented. It shall “review the overall economy”, shall advise “the Federal Government and Provincial Governments” and “make, formulate plans in respect of financial, commercial, social and economic policies” [Article 156 (2)] . What is most progressive in this new article is the binding that “in formulating such plans it shall among other factors, ensure balanced development and regional equity”. The NEC “shall also be guided by the Principles of Policy set out in Chapter 2 of Part II” of the Constitution.

12. The working procedure outlined for the NEC binds it to meet “at least twice in a year” [Article 156 (4)] and shall “submit an annual report to both Houses of the Parliament.”

13. Some very important changes have been brought about in the constitutional provisions for the National Finance Commission. Now under the new provision of Article 160 (3A) “The share of Provinces in each award of National Finance Commission shall not be less than the share of the Provinces in previous Award.”

14. Article 160 (3B) makes it the responsibility of the Federal and Provincial Finance Ministers to “monitor the implementation of the Award biannually and lay their reports before both houses of Parliament and Provincial Assemblies.”

15. Very important changes and ones that shall make significant improvement in the revenues of Sindh are the transfer of Federal Excise Duty levied on the well-heads of both gas as well as oil and collected now by the Federal Government. Under the new Article 161 (a) the Federal Excise Duty collected on gas “shall not form part of the Federal Consolidated Fund and shall be paid to the province in which the well-head is situated”. Similarly Article 161 (b) stipulates the same for the Federal Excise Duty collected on oil well-heads. It shall now go to the province in which the oil well-head is situated.

16. Of great importance to the development of a province is the availability of international loans to be able to finance its development projects. These were formerly routed through the Economic Affairs Division of the Federal Government. The procedures were so long and cumbersome that very often by the time a foreign loan was made available to a provincial government for any of its projects, the cost estimates of that project would be outdated needing fresh revisions. Furthermore and something that amounts to outright cheating is the fact that while the long term international loans were given to the Federal Government at very low interest rates, the Federal Government would charge a very high interest differential from the Provinces. The initial and running costs of the projects of the Provinces were shooting up on the one hand and on the other the Federal Government was making huge amounts of money on the loans used by the provinces just because these had to be contracted through the Economic Affairs Division of the Federal Government. Now after the 18th amendment things have changed radically.

17. Under Article 167 (4) “A province may raise domestic or International loan, or give guarantees on the security of the Provincial Consolidated Fund within such limits as may be specified by the National Economic Council”.

18. Significant changes which bring additional resources to the Provinces have been made in Article 172. In Article 172 (2) the word ‘within’ has been changed by ‘beyond’ and thus ‘lands, minerals and other things of value’ underlying the ocean in the territorial waters of Pakistan will be owned by the Provinces instead of the Federal Government. Similarly with the addition of the new clause (3) in Article 172 ‘mineral oil and natural gas within the Province or the territorial waters adjacent thereto shall vest jointly and equally in that Province and the Federal Government’.

19. In order to ensure that the hurdles created in the devolution process of matters mentioned in the Concurrent Legislative List to the Provinces should be swiftly overcome the 18th Amendment has given through article 270 AA (8) a cutoff date to complete the process. The devolution resulting from the omission of the Concurrent Legislative List has to be completed by the “thirtieth day of June two thousand and eleven”. The Parliamentary Committee for amending the Constitution in its recommendations has proposed the “constitution of an Implementation Commission for the devolution process and transition as a consequence of the abolition of the Concurrent List”. This Commission has already been formed at the Federal level under the chairmanship of Senator Raza Rabbani. Similar commissions have also been formed at the provincial levels since while the Federation is handing over the powers and it is the Provinces that are receiving it.

The writer is a former Senator and a serving member of the 18th Amendment Implementation Committee of Sindh. Comments may be directed

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