petroleum
policy2012
Exploring new energy reservoirs
The new policy promises considerable incentives to investors, whether it will make a difference remains to be seen
By Shujauddin Qureshi
Marred with slow economic growth due to severe energy crisis across the country, the government on August 8, 2012 got approval of yet another Petroleum Exploration and Production Policy (2012) from Council of Common Interests (CCI), the constitutional supreme body for decision making. 
This is the second petroleum policy of the present PPP-led coalition government and eighth of the country since 1991, followed by Petroleum Policies of 1993, 1994, 1997, 2001 and 2007 and 2009. The question arises why yet another policy within three years? 

climate
Food for stocks
A crisis is imminent if the policy makers do not take the right decisions timely
By Aoun Sahi
Food and Agriculture Organization (FAO) of the UN issued a statement earlier this month warning that food prices on international level have started increasing rapidly because of climate change. 
Food price index of the FAO, which measures monthly cost changes for a food basket of cereals, oilseeds and others, had hit 213 points in July, up six points on a month ago in June. Senior economists of the UN agency warned that 2007-08 like food crisis could develop when violent protests against food prices erupted in several countries of the world. 

Shedding the backlog
Our legal system needs to be reformed to end the current backlog of court cases
By Wasif Majeed
On July 16, 2012, an advertisement appeared in newspapers on behalf of the Law and Justice Commission of Pakistan (LJCP) inviting proposals from lawyers, academicians, researchers, human rights activists, institutions, bar councils, bar associations and well-reputed civil society organisations in various areas that, according to LJCP, affect citizens’ access to justice. 

tax
Short on cash
Khyber Pakhtunkhwa has to look for ways to increase its revenue receipts
By Tahir Ali
Khyber Pakhtunkhwa’s receipts from federal and foreign sources have increased in recent years but the province’s own revenue receipts have failed to register any significant growth. 
The PORs stood at Rs18.91bn against the target of Rs19.49bn in 2011-12. These comprised direct taxes — taxes on agriculture, property, land revenue, trade and callings — of just Rs1.4bn, indirect taxes — GST on services, provincial excise, motor vehicle tax, stamp duties, cess of all types, electricity duty etc — of Rs11.1bn and non tax receipts — income from property and enterprises, civil administration, economic services, community services, social services and miscellaneous receipts — of Rs6.3bn.

Putting it plain and simple
A lot of soul searching is required to come out of the crises that we are in
By Bilal Hussain
While the United States and Great Britain are doing whatever they think best to preserve Pakistan — naturally in their own interests — Pakistan is doing its best to destroy itself. Or so it seems.
At some point Pakistan, its government, its parliament and its citizenry must realise that the US — and in fact the rest of the world — does not awake each morning, scratch its head, and ask ‘Huh, I wonder what Pakistan is up to today?’ No, the world has much with which to more than fully occupy itself. 

proposal
Local solutions
The proposed local government draft for FATA can address critical issues for the welfare of the long neglected people
By Raza Khan
Reports have been making rounds for the last several months that the federal government may introduce local government institutions in the Federally Administered Tribal Areas (FATA). 
After the situation remained fluid for a considerable time the federal government eventually decided to put in place elected local government councils in the tribal areas. 

Crux of the problem
Education sector in Khyber Pakhtunkhwa paints a bleak picture which calls for immediate attention
By Mehnaz Aziz
It seems that education has never been a priority for voters when choosing a candidate. It is perceived that the elected representatives neither feel the need to comprehend quality or teachers’ rationalisation issues. 
From time immemorial education departments have been utilised and politicised by political machinery through postings and transfers and teachers for their political campaigns and polling deities. 

 

 

 

 

 

 

 

 

 

 

 

 

 

petroleum
policy2012
Exploring new energy reservoirs
The new policy promises considerable incentives to investors, whether it will make a difference remains to be seen
By Shujauddin Qureshi

Marred with slow economic growth due to severe energy crisis across the country, the government on August 8, 2012 got approval of yet another Petroleum Exploration and Production Policy (2012) from Council of Common Interests (CCI), the constitutional supreme body for decision making.

This is the second petroleum policy of the present PPP-led coalition government and eighth of the country since 1991, followed by Petroleum Policies of 1993, 1994, 1997, 2001 and 2007 and 2009. The question arises why yet another policy within three years?

The government has tried to answer this question in the policy document that the 2009 Policy had to be amended “as the new market conditions warranted urgent changes required for investment promotion in view of increasing international energy prices.”

While looking at the documents of both 2009 and 2012 policies, one can realise that most of the objectives are almost the same; however, two additional objectives have been inserted in 2012 policy – to decrease reliance on imported energy by providing additional incentives to exploration and production companies for enhancing indigenous production and to undertake exploitation of oil and gas resources in a socially, economically and environmentally sustainable manner.

“There has been a paradigm shift in the natural gas scenario due to higher trend of consumption of natural gas in the country and overall energy requirement was changing, therefore, there was great need to bring new policy with additives.”

The new policy, as usual, mostly provides and discusses the licensing issues as well as pricing and taxation on gas and oil exploration and production. It also fixes the rates of royalties, production bonus, windfall levy, etc, and providing guidance how to get licence.

The government has enhanced the rates of windfall levy in 2012 policy, whereas the royalty rates and production bonus rates kept the same as of 2009 policy. For the windfall levy, the base price for crude oil and condensate has been fixed at US$ 40 per barrel (bbl), whereas it was US$ 30 in 2009 policy.

The base price for crude and condensate will escalate each calendar year by US$ 0.5 per bbl (0.25 in 2009) starting from the date of first commercial production in contract areas. Government’s take in windfall levy has been reduced from 50 percent to 40 percent which is applicable on the domestic crude oil price exceeding base price.

In the event Market Price of Crude Oil/Condensate exceeds US$ 110/bbl ($100/barrel in 2009), the 100 percent benefit of Windfall Levy will pass on to the government. The ceiling would be reviewed as and when the pricing dynamics significantly change in the international market, the policy stated.

Pakistan is facing acute shortage of energy (electricity and gas) for the last many years and both domestic and industrial subscribers are bearing the entire brunt. Pakistan’s average daily production of crude oil and gas in 2009-10 was 65,000 barrels and 4,063, million cubic feet, respectively, which were 53 percent of the country’s total demand whereas other indigenous sources provided 19 percent of the energy, rest of the demand gap was filled through 27 percent imports of oil and gas.

Steep rise in balance of trade due to growing import bill and declining exports has already strained the economy and any further increase in imports, mainly due to growing fuel demand would further aggravate the economic situation.

Due to its failure to kick start the much publicised Iran gas pipeline project to import gas from Iran (owing to strong opposition by the US, backing out of India and increasing oil prices in the international market), Pakistan is left with no other choice but to tap its local reservoirs, many of already explored ones are depleting fast.

There is a need to explore more fields offshore as well as onshore by granting new licences to overseas as well as local companies. The new petroleum policy provides impetus to this growing demand of fuel and the government expects it would increase the chances of new discoveries both in the sea and in the land and would attract foreign direct investment.

The government has provided attractive incentives to the overseas and local investors in the new petroleum policy by enhancing the prices of the wellhead gas price from US$ 4.5 per Million British Thermal Unit (MMBTU) to $6 to $9 per MMBTU. Similarly, a price bonanza of $ 1 per MMBTU has been offered for the first time to investors for the first three discoveries in offshore areas.

This increase in the wellhead gas price is likely to increase the weighted average price of gas and, thus, is bound to have corresponding increase in the domestic gas prices for local consumers. The local prices of gas are already lower as compared to neighbouring India or other countries, but due to poverty and mostly reluctance of the consumers to pay more the price impact would create hardships among the population.

The industrial sector, especially fertilizer, cement, and textile mills are the main consumers of natural gas besides commercial use of natural gas in the form of CNG. There are still many areas where natural gas has still not reached. The government provides cheaper gas to local fertilizer manufacturing plants in order to subsidize the local farmers.

The government is also providing gas to power generating units in order to generate cost-effective electricity and reduce the imported furnace oil bill. “The new policy would encourage foreign investment in exploration and production as attractive prices are offered for oil and gas and discounts are less (5 percent against 10 percent in 2009 policy),” says Khurram Shahzad, senior analysts at InvestCap Securities. He says new explorations were virtually halted because of uncompetitive prices and law and order situation in many areas.

Interestingly, after the 18th          Amendment in the Pakistani Constitution, the role of provinces should have been increased particularly after abolition of the concurrent list. Under the policy, one office of Director General Petroleum Concessions, DG (PC) is empowered to implement the policy, whereas Federal Minister for Petroleum and Natural Resources is the Chairman of the implementation committee.

After insertion of Article 172(3) now the provinces have equal and joint ownership on mineral oil and natural gas. The Article 172 mainly deals with ownerless property in a particular province. 172(1) states any property which has no rightful owner shall, if located in a province, vest in the government of that province, and in every other case, in the federal government, whereas 172 (2) states all lands, minerals and other things of value within the continental shelf or underlying the ocean beyond the territorial waters of Pakistan shall vest in the Federal Government.

“Effective from 19th April 2010 when 18th          Amendment in the Constitution has been enforced, now the 172 (3) is also effective which states: ‘Subject to the existing commitments and obligations, 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,” says Muhammad Arif, President, Energy Lawyers Association of Pakistan.

Talking to The News on Sunday Arif says because of 18thAmendment, the say of the provinces in the policy formulation role has increased as has been proven during the process of the new Petroleum Policy formulation. He says insertion of 172(3) has, however, created a contradiction with Article 161 which provides for the payment of 100 percent of the royalty on natural gas to the provinces.

“Because of misinterpretation of the new Article 172(3), the provinces had started asking for regulatory and administrative control on the day to day administration of the licensing and related affairs. This halted the award of new exploration blocks since June 2010,” he adds. Arif believes that “this new 2012 Policy provides substantial fiscal incentives but these alone may not be sufficient to attract desired level of investment unless sufficient attention was paid to create enabling environments as well. Another big challenge for the federal government would be to implement the policy as soon as possible which also seems quite difficult due to serious capacity constraints of the office of DG (PC),” Arif, adds.

The new policy has provided a provision of setting up of a Technical Committee under the chairmanship of Secretary Petroleum and Natural Resources and comprising of a nominee each of all the Provinces, Director General Petroleum Concessions, DG (Gas), Oil and Gas Regulatory Authority (OGRA), distribution and transmission companies, Pakistan Petroleum Exploration and Production Companies Association (PPEPCA) and the concerned E&P companies and this committee will be empowered to resolve the key issues between E&P and gas marketing companies.

Arif believes creation of such a big committee is likely to cause substantial delays in the implementation of the policy measures which the country cannot afford at this juncture of energy crisis.

Under the policy the government has also committed to bring appropriate changes in relevant rules, regulations and model agreements for its effective implementation.

 

 

climate
Food for stocks
A crisis is imminent if the policy makers do not take the right decisions timely
By Aoun Sahi

Food and Agriculture Organization (FAO) of the UN issued a statement earlier this month warning that food prices on international level have started increasing rapidly because of climate change.

Food price index of the FAO, which measures monthly cost changes for a food basket of cereals, oilseeds and others, had hit 213 points in July, up six points on a month ago in June. Senior economists of the UN agency warned that 2007-08 like food crisis could develop when violent protests against food prices erupted in several countries of the world.

According to FAO, untimely rains in Brazil, extreme hot and dry weather in the US and bad wheat crop in Russia are the major reasons for food inflation at international level.

The US department of Agriculture has already slashed its forecast for drought-hit corn production by 17 percent while soyabean crop has also been badly affected in US. The reduction in estimates of the crop resulted in 60 percent increase in the corn price during last two months in US market.

The US supplies nearly half of the world’s export of corn and much of its soybeans and wheat, is passing through its history’s worst drought since 1956. Parts of Russia, Canada, Australia and Brazil are also experiencing drought conditions.

Most of these countries have downgraded their harvest outlooks. Russia which exported 23 million tons of grains last year may not be able to export more than 10 million tons, and with a possibility that they may ban export all together as they did in 2010.

Responding to the surge in food prices, the British-based charity Oxfam warned that the developing world would be hit hardest. “This is not some gentle wake-up call — it’s the same global alarm that’s been screaming at us since 2008,” Hannah Stoddart, Oxfam’s head of economic justice policy, told The Guardian.

“The combination of rising prices and forecast low reserves means the world is facing a double danger. As usual, it will be people in developing countries who will be hit the hardest, with millions who are currently ‘just getting by’ starting to go hungry as a result” she said.

India the world’s second largest producer of sugar, cotton and rice is also experiencing a drought like situation with 35 percent less monsoon rains in key crop-growing areas which will badly affect rice and sugar crops. India’s most water reservoirs out of total 84 have not been filled by 30 percent and may affect its next wheat crop as well.

“Their higher food reserve’s inventory from last year is expected to absorb most of the shock as far as the domestic consumption of food grains is concerned. However, in all probability, India may restrict their agro-exports during the next 6-8 months”, says Dr Qamar uz Zaman Chaudhry, government of Pakistan’s advisor on Met and Climate Affairs.

Pakistan, which at present does not seem affected by the emerging world food crisis as it has sufficient grain stocks. Pakistan’s food basket depends less on corn and soyabean. But Pakistani experts believe it cannot sustain an international food crisis for a longer period of time as it is already a victim of climate change.

Head of Pakistan Meteorological department, Arif Mehmood, tells TNS his department is hoping less monsoon rains in the next couple of months. “In upper Punjab, Gilgit-Baltistan and Kashmir we are having at least 20 percent less rains while in Sindh, Balochistan and south Punjab 40 percent less rains. We think that same rain pattern will be observed in the month of September as well”, he says.

Water situation at major water reservoirs of Pakistan is not encouraging as well. In Tarbela so far, only 3.637 MAF of water is available while its capacity is to store 6.73 MAF which means it is filled only 54 percent of its capacity and its status has already been declared as critical while water storage situation in Mangala dam is even bad.

Its maximum capacity to store water is 7.392 MAF while it has only 2.653 MAF water stored in it which makes only 36 percent of total capacity which is highly critical. Water inflow is these reservoirs would further decrease with coming days as temperature will decrease. So, if there are no good rains in month of September Pakistan would experience worst water shortage for next wheat crop.  

Dr Qamar uz Zaman Chaudhry sent an urgent letter to ministries and departments on August 6, 2012 explaining them about emerging global food crisis and its implications for Pakistan. “I pointed out that the abnormal Climate Patterns in some of the world’s vital food-producing regions are threatening global food shortages. As such there is a strong possibility of lower production of food grains and soaring prices globally in the coming months”, the advisory read.

“All this analysis indicates that the world is fast heading towards another global food crisis. If we recall 2007-08 crisis that sparked food riots in more than 30 developing countries, the expected shortages may surpass that level. To save our country from the adverse impact of this global food crisis, we need to develop appropriate contingency plans and to see how best we can deal with its minimum impacts on Pakistan and particularly on poor people. Because poor will be the most affected from this global food inflationary spear.”

Dr Qamar says Pakistan has satisfactory stocks of grain but once the prices of food item start increasing in neighbouring countries, Pakistan would also be affected. “It will start the phenomenon of hoarding and smuggling of wheat.”

Climate change is another issue that can create problems for next wheat crop in Pakistan. At present, it is also experiencing low monsoon rains, and so far these are largely below normal.

Water levels in our reservoirs are the lowest in many years. This may affect water availability for our next winter wheat crops. “The county’s policy makers and economists need to consider the best possible limited policy options available, including beefing up the strategic grains reserves and discouraging the wheat smuggling”. Qamar says President Asif Zardari has taken notice of the situation and has directed concerned authorities to take steps to fight the situation.

Dr Abid Qaiyum Suleri, Executive Direct of SDPI and an expert on food security and climate change issues says Pakistan at present has been facing two types of issues related to climate change and food security. “We have been observing huge late monsoon rains in a minimum time period like we had in 2010 and 2011 while on the other hand we have drought like situation. Both create huge problems for crops”, he says, adding that in 2010 and 2011 these rains badly affected rice, tomato and banana crops in Sindh province. “Banana crop has not recovered yet and that is why we have seen a huge price hike of banana during the last two years.

These climatic variations would affect crops in Pakistan in future as well. This year we have seen late rice crop sowing because of less rains, next wheat crop may also be affected”, Suleri says, adding it is true that we have stockpiles of wheat at present. “But, because we do not have good storage facilities, we have to export our crop on low prices to stock new crop. During the Shaukat Aziz tenure we exported our good quality wheat crop at low prices while only a few months after that we had to import wheat at very high prices”. He says that smuggling of wheat is another issue which can result in increase in food prices in Pakistan.

 

 

 

   

Shedding the backlog
Our legal system needs to be reformed to end the current backlog of court cases
By Wasif Majeed

On July 16, 2012, an advertisement appeared in newspapers on behalf of the Law and Justice Commission of Pakistan (LJCP) inviting proposals from lawyers, academicians, researchers, human rights activists, institutions, bar councils, bar associations and well-reputed civil society organisations in various areas that, according to LJCP, affect citizens’ access to justice.

In an effort to do my bit as a practicing lawyer to identify the issues that to my opinion currently stifle the justice system of Pakistan (when I refer to justice system I mean to refer to it in a broad sense ranging from legal education to the court system) and propose measures to address them, I accessed the LJCP’s website referred to in the advertisement.

However, to my disappointment and contrary to the contents of the advertisement, the pre-qualification notice clearly limited the right to submit proposals to institutions and organisations. Still determined, I decided to write the current article so as to convey my views on the captioned issues to the relevant officials (not necessarily limited to LJCP).

This article is not an expert report on all the irritants in the justice system of Pakistan, rather it deals with frivolous litigation in the courts. The reason frivolous litigation is a threat to the justice system is that it constitutes a major portion of the current backlog of court cases and the new court cases being filed every day. The measures suggested in this article aim primarily to curb such frivolous litigation.

Short term measures:

The measures suggested under this heading can be deliberated upon and implemented in a short span of time. The first and the foremost measure to curb frivolous litigation is to revise the current court fees law of Pakistan. As per the current court fees law, an ad-valorem court fees of 7.5 percent is payable according to the value of the subject-matter in dispute in the suit subject to the maximum of Rs15000. So it is not unexpected that people resort to the courts to settle even petty disputes, which they could have otherwise settled out-of-court if paying hefty court fees would have been the consideration.

A revision in the court fees structure is also due as it has remained the same for the last over a decade. An increase in court fees will not only help curb frivolous litigation to a large extent but it will also increase revenue collection for the provincial governments, which in turn could be spent to improve the quality of service delivery in the justice sector.

Another measure that can be taken is to direct the judges to strictly adhere to the important procedural provisions stipulated in our civil procedural law, i.e., the Code of Civil Procedure, 1908 (the CPC). For instance, one provision of the CPC (Order V Rule 5) obliges a court to determine at the time of issuing summons to the defendant to identify whether the summons are for the settlement of issues or for the final disposal of the suit. However, in practice the summons are issued in normal course without any such direction. Likewise, another provision (Order X Rule 1) obliges a court to ascertain from each party or their pleaders on the first date of hearing whether they admit or deny such allegations of fact as are made in the plaint or the written statement by the other party and record such findings. However, this provision, to my knowledge, has never been applied in practice (if applied this can reduce the scope of litigation to a considerable extent).

Some other pertinent provisions include requiring production of documents on the first date of hearing and requiring parties to admit and deny documents at such hearing (Order XIII Rule 1) and delineating by the court of the issues at which the parties are at dispute (legally termed as framing of issues) on the first date of hearing (Order XIV Rule 1) that are never implemented in practice as required by the CPC. This lax attitude over a period of time has literally made these important provisions redundant paving the way for a recalcitrant party to utilize the court system without fear of any early determination, which may eventually lead to dismissal of his suit.

One of the important tools to discourage frivolous litigation is to invoke the provision for imposition of special costs on recalcitrant parties as a matter of routine. During my practice, I have come across a number of frivolous suits, which were ultimately dismissed after 3-4 years of futile exercise without any compensation to the innocent party. This inaction on court’s part is encouraging the recalcitrant parties to exploit the court system with impunity.

Finally, parties should be obliged by law to mediate their differences before approaching the courts. This can be applied to all categories of cases or to some selected categories of cases, for instance, disputes for subject matter of less than Rs1,000,000.

Although Section 89-A of the CPC empowers the court to refer the parties before it in a suit to alternate means of dispute resolution including mediation and conciliation, this provision has failed to bear any fruit for two reasons: (i) this provision is not mandatory; (ii) and it applies after a suit has been instituted. A provision can be added in the CPC or Section 89-A can be amended so as to oblige the parties to enter into mediation or conciliation before approaching a court of law. Since one of the objectives of the frivolous litigation is to obtain an injunction order without notice to the other party and then to drag the proceedings to cause maximum inconvenience to the other party, the aforesaid change in law will prevent such situation.

Medium term measures:

One of the major causes of frivolous litigation is inappropriate or wrong advice by a counsel to his client. While a litigant may lose his resources, time and energy in courts pursuing a frivolous suit for times to come, the person responsible for the misery of the litigant goes scot free. The bar councils in the country, which are responsible for regulating the conducts of the lawyers, have miserably failed to fulfill their mandate in implementing the ethics of legal practice.

To my knowledge, there is no case in the country’s history where a complaint has been filed or action taken against a counsel for providing wrong advice to his client. Even the complaints which are filed with the bar councils against counsels on other grounds of misconduct do not bear any fruit as decisions on such complaints have to made again by lawyers who fear any adverse order against the fellow lawyer may deprive them of a possible voter or a group of voters in the bar council elections. Hence, one cannot expect fair working by the bar councils in the present scenario.

This requires revamping the bar councils including putting competent non-practicing lawyers or academicians at the helm of affairs of the bar councils. Furthermore, the bar councils should administer programmes on continued professional development (CPD) for the lawyers to assess and improve their legal acumen and the validity of their licenses should be contingent on successful completion of the CPD programmes.

Besides this, the government should encourage infrastructure development relating to alternate dispute resolution. Centres for arbitration, mediation etc should be established in major cities and the stakeholders should be educated and encouraged to utilise services of such centres for settling their disputes. Once the infrastructure is in place, it can be utilised through a legislative measure to adjudicate any particular category of cases, for instance, family cases or rent cases etc.

Long term measures:

In the long term, it is imperative to reform our legal education system and the system for the grant of license by the bar councils to law graduates to practice in courts. Only good and productive law graduates will transform into good lawyers in the future.

The current legal education system should be divided in two categories; (i) legal education for persons interested in studying law only; (ii) legal education coupled with rigorous practical training for persons interested in practicing law after the studies. In this model, the theoretical study should be alike for both groups with more emphasis on legal ethics, but practical training should be reserved for persons interested in law practice afterwards.

 

The writer is a lawyer based in Lahore and can be accessed at www.wmco.pk

 

 

 

 

 

 

tax
Short on cash
Khyber Pakhtunkhwa has to look for ways to increase its revenue receipts
By Tahir Ali

Khyber Pakhtunkhwa’s receipts from federal and foreign sources have increased in recent years but the province’s own revenue receipts have failed to register any significant growth.

The PORs stood at Rs18.91bn against the target of Rs19.49bn in 2011-12. These comprised direct taxes — taxes on agriculture, property, land revenue, trade and callings — of just Rs1.4bn, indirect taxes — GST on services, provincial excise, motor vehicle tax, stamp duties, cess of all types, electricity duty etc — of Rs11.1bn and non tax receipts — income from property and enterprises, civil administration, economic services, community services, social services and miscellaneous receipts — of Rs6.3bn.

For this fiscal a target of Rs20.10bn has been fixed for the PORs. Rs13.8bn of these are tax receipts, including Rs9.89bn GST on services to be collected by the FBR on behalf of KP government, and Rs6.2bn are non tax receipts.

Though GST has been included in the provincial tax receipts which has made the figures look attractive, the decision is not reasonable as the provincial tax machinery takes credit for an amount which has been collected by the FBR.

If we exclude the GST of Rs8.92bn from the provincial taxes, provincial tax receipts register a nominal growth as percentage to the total PORs. Tax receipts were Rs3.64bn or 36 per cent of the PORs of Rs9.98 last year. This year tax receipts will be Rs3.98 or 39 per cent of the PORs of Rs10.18bn.

The share of PORs as percentage to the overall revenue receipts of the province from all sources is on the decline. For example, the total PORs of Rs18.9bn were 7.4 per cent of the revised total revenue receipts of Rs255bn last year but this year’s PORs target of Rs20.1bn is 6.6 per cent of the total expected receipts of Rs303bn. And if the GST is excluded from the tax receipts, last year’s PORs come to just 3.9 per cent and that of this year’s further to 3.3 per cent of the total revenue receipts from all sources.

From the financial year 2005-06 to 2009-10, actual collection of the PORs has been way short of the targets. The targets/actual collection were Rs4.47bn /Rs4.34bn, Rs5.20/Rs4.77bn, Rs6.22bn/Rs5.32bn, Rs7.44bn/Rs5.43bn and Rs7.53bn/Rs6.41bn in the above five years respectively.

Some ascribe this gap to unrealistic target by finance department and the dilapidated law and order situation but others say complicated tax system and lack of incentives to entrepreneurs are also to blame.

The share of direct taxes has been on the decline and while that of the indirect taxes is on the rise in PORs. While direct taxes constituted 30 per cent of the tax receipts in 2011, their share has come down to just 11 per cent this year. And the share of the indirect taxes has jumped to over 89 per cent from 64 per cent, according to the budget white paper 2011-12.

On the other hand, non tax receipts have been on the rise and always met the targets. These receipts rose from Rs4.7bn in 2009 to Rs5.4bn and Rs6.3bn in the next two years.

The outlook for the future is not bright either. Under the Medium term fiscal framework, fiscal outlook paper prepared by the KP finance department that shows fiscal targets and prospects for all the departments in KP, PORs are projected at Rs10.21bn for the ongoing year, Rs11.3bn for 2013 and Rs12.58bn for the FY 2014. On the contrary, KP has projected income from federal transfers at Rs183bn this year which will go up to Rs213bn and Rs249bn in the next two years. 

The targets for the PORs are frequently missed for constraints like terrorism that has grievously impacted businesses in KP and, therefore, resulted in low taxes, the lack of enthusiasm on part of the taxpayers, the capacity constraints of the tax collection machinery and the elements of corruption therein, huge informal sector and most of all the lack of commitment to exploit the potential on part of authorities.

As per the Seventh NFC Award, provinces were required to streamline their tax collection systems, reduce leakages and increase their revenues by effectively taxing agriculture and real estate sectors and develop and enforce mechanism for maintaining fiscal discipline but this didn’t happen. In an election year, there could hardly be any worthwhile attempt to increase taxes now.

That KP has a limited capacity to collect taxes was also revealed when it assigned the task of collecting the GST to the federal board of revenue unlike Sindh which established and utilised the Sindh Revenue Board for the purpose.

Khyber Pakhtunkhwa needs to focus, especially on stamp duties, motor vehicle tax, land revenue, electricity duty and agriculture income tax to improve resource mobilization. These four taxes earned Rs550mn, Rs900mn, Rs915mn, Rs470 and Rs21mn last year respectively.

The share of agriculture sector has also been minimum though there is a great potential while only Rs21mn were collected in agriculture income tax last year, with around 4.5mn acres cultivated land in KP, income from the agriculture sector could have been dozens of billions even if we consider the average annual income from one acre of land at average of Rs0.1mn.

Given the massive increase in financial resources and additional responsibilities placed on the provinces in the post-18th amendment scenario, it is important to revisit the traditional development policies and practices to revamp the inefficiencies and harness the full productive potential of the economy.

The government should focus on the growth sectors of the economy and concentrate on the natural resource endowments of KP in hydel power, mining and minerals, oil and gas and agriculture value addition and agro-processing industries.

Under the Provincial Reforms Programme, KP intends to increase its own revenues and bring them to 0.9 percent of provincial GDP. Another point of emphasis is to bring down the current expenditure from 8.1 percent to 7.7 percent of provincial GDP. During the medium term, the provincial government will keep the establishment charges at 4 percent of its GDP.

But the targets for revenue growth can hardly be achieved with the existing half-hearted efforts to increase provincial revenue amid rising security expenditure and pay and pension budget.

KP relies for over 93 per cent of its revenue needs on federal transfers and local and foreign loans. It must increase its revenue generation potential to ensure sustained growth of its economy, to offset the negative fallouts of frequent delays in federal transfers amid growing current expenditure.

The province should bring down its current expenditure by unifying several overlapping departments, restructuring of Public Sector Enterprises, rationalisation of government size, budgetary measures, substantial curtailment of foreign visits and of expenses on public offices, security and energy efficiency and conservation.

The informal economy of the province, estimated much higher than formal economy, would have to be brought into the tax-net. The limited private sector presence is further shrinking as entrepreneurs are shifting to other provinces. This trend has to be reversed through investors’ friendly environment.

The Excise and Taxation Department collects all provincial taxes except the land revenue or Abiana. It is the major contributor of revenue to the provincial tax receipts. The biggest handicap of the department, according to the whitepaper, is the lack of capacity to collect all these taxes effectively, both in terms of physical infrastructure and human resources.

As per the recommendations of a special committee of the provincial cabinet, the Board of Revenue has been given more authority and the post of patwari has been increased and upgraded. Computerisation of the system is underway.

The provincial government had in 2008-09 prepared a strategy for increasing the PORs known as Out of Box strategy of Revenue Expansion (OBSRE).

“The province has tremendous water and hydel power resources, lush green forests, great reserves of gas resources and minerals and human capital. The federal government is earning from resources of this province but is giving little to the province. Consequently, KP has to depend on federal transfers. Also, the out of fashion and traditional strategies for revenue generation from own resources have resulted in very nominal growth.

Every year, when the provincial government negotiates any loan with donors, it has to defend relatively weak position of revenue generation as these agencies insist on much needed reforms in this sector,” states the OBSRE paper.

Under the OBSRE, PORs had increased by over 18 percent in 2009-10 to Rs6414mn as compared to Rs5430mn in 2008-09, out of which almost 19 percent (Rs183mn) increase was recorded in the Urban Immovable Property Taxes, land revenue (Abiana) and Traffic fines (which were also the key focused areas in the OBSRE).

Further due to reforms in the over-all revenue department both from the revenue/tax structure perspective and human and physical capital improvements, the recovery against the budget estimates also improved. For example the UIPT shown an astonishing 130 percent achievement, Abiana 97 percent, traffic fines 106 percent and over all combined it had shown 113 percent achievement of its targets against 67 percent, 51 percent and 35 percent performance in 2008.-9.

Detailing on the causes of low revenue base of the province, the paper points out that rich/revenue generating sectors are federally owned. Further, due to the lack of tax administration capacity and political commitment deficiency revenue reforms at sub-national governments do not take place. Again, this seems less than before mainly due to exemptions in flood and war on terror stricken areas, had they been included then the performance had been much better.

Similarly, to increase its own revenue receipts and decrease the burden on provincial exchequer, KP has established several investment funds that have earned dozens of billions by investing the funds in treasury bills, investment bonds and other investment opportunities.

The general provident investment funds, where the money deducted from the monthly pay of the provincial employees is kept and on which the government gives a profit of 11 per cent every year, opened with just Rs200mn has now over Rs18bn in its account despite the fact that Rs6.75bn have been released to employees from the fund thus far.

Similarly, the size of the pension fund which was Rs4bn in 2006 is Rs12.4bn by June30 this year though Rs6.85bn were released from it. Again, the Hydel development fund opened with Rs50mn has now increased to over Rs24bn despite the fact that over Rs16bn released from it for financing different hydro power projects in the province. The CPF opened with Rs50mn has now around Rs3bn while Rs2.4bn have already been utilised out of it.

 

 

 

 

 

 

Putting it plain and simple
A lot of soul searching is required to come out of the crises that we are in
By Bilal Hussain

While the United States and Great Britain are doing whatever they think best to preserve Pakistan — naturally in their own interests — Pakistan is doing its best to destroy itself. Or so it seems.

At some point Pakistan, its government, its parliament and its citizenry must realise that the US — and in fact the rest of the world — does not awake each morning, scratch its head, and ask ‘Huh, I wonder what Pakistan is up to today?’ No, the world has much with which to more than fully occupy itself.

It is Pakistan that wrongly assumes it is the centre of the world, that it possesses some extraordinary ability which makes it the universal ‘victim’ and which provokes others to attempt to destroy it or at the best to do it down. It imagines itself surrounded by enemies for which reason it does everything to survive!

Since its birth Pakistan has displayed great adeptness in manipulating its hand in international affairs. It extracted an invitation from Moscow in 1949 only to goad Washington into dispatching an invitation to Prime Minister Liaquat Ali Khan, which was promptly accepted. The Russian invitation was ignored even though some diplomats insist that it was not formalised.

Pakistan’s history is replete with similar instances. It used friendship with China as a countervailing factor against the US when Washington refused to support it in the 1965 conflict with India. Russia came in handy at Tashkent in 1966 when a foreign mediator was needed. Pakistan took advantage of its friendship with Beijing to facilitate Henry Kissinger`s secret trip to China to win US goodwill during the 1971 crisis.

Recently, Pakistan garnered an invitation to the Nato Summit in Chicago under the garb of re-opening the Nato supply routes to Afghanistan. The supply routes are now open after Washington apologized for the Salala incident.

The eight month impasse between Islamabad and Washington broke abruptly when the later came to know about Russian President Vladimir Putin’s visit to Islamabad later this year (of late Moscow and Washington are positioning themselves on opposite sides in global politics).

Apart from Pakistan’s despicable politics, another aspect is its armed forces’ obsession with the ‘traditional enemy’ and the ‘core’ issue which sadly will never go away only to feed and succor the 65 years of status quo with India. Never mind that they have provoked and lost three wars through arrogance and poor abilities.

The nation has accepted all that happily and readily allowed them to become the richest, most powerful and leading industrialists of the country. It has forgiven multiple sins and transgressions and with a couple of hiccups here and there never failed to back them.

This is Pakistan’s biggest problem that it easily forgives and forgets. Ralph Peters, a retired American army officer who was posted in Pakistan in the 1990s rather said it with elegance that “Pakistan knows only a wretched past that keeps repeating itself in a deteriorating cycle.” While moving in this deteriorating cycle it has created monsters and undoing such creation is not a simple task — it will require ruthlessness for which the nation is neither willing nor ready.

Pakistan’s another problem is that it has always created misplaced interests. It tends to forget that it cannot stake national survival on policies which is permanently clouted with short term interests of the country’s tiny kleptocratic elite. Pakistan forgets that no country can be an astute player on the world stage if its power base is weak.

Indubitably, national power never comes from military strength. It comes from cohesive populations that are educated, healthy, economically productive and show tolerance and acceptance of political plurality and socio-cultural diversity.

This is possible only when governments set the stage by introducing and managing a sound political and socio-economic system based on democracy, moral integrity and social justice. A country where one province is torn by civil war and others are decimated by violence cannot be considered strong.

What happened to the country in 1971, when a big chunk of it broke away to set up the new state of Bangladesh, which is by all accounts doing so much better than Pakistan? East Pakistan was lost because political differences with the Awami League could not be resolved. Pakistan is doing the same today as the country moves towards destruction brought on by its own domestic failures.

Unchecked by any law-enforcement agency or military might, the local Taliban have crawled all over Pakistan and are wreaking havoc wherever they can. Pakistan’s leaders have yet to craft a compelling counterterrorism blueprint and their past ability to cope with similar threats is no useful guide to what lies ahead. Fearful of taking on powerful religious forces, no serious attempt has been made to stop future minds from being molded by fanatics.

To criticize Pakistan’s leaders, however — much though they may deserve it —is to miss the point. It is ordinary people, locked in a series of personal Pakistanis, who seem unable or unwilling to unite over the threat to their nation. Pakistanis will point to the oppressive hand of history or the machinations of foreign nations to explain their descent into chaos, and to a certain extent both have played a role. But no one bears more responsibility for a slow collective suicide than Pakistanis themselves.

It is all highly depressing, and only Pakistan can be blamed for it. While other nations vie to compete and march ahead; the Pakistani populace gears up every day to battle within the country. With such people and organisations on the rise, Pakistan has enough qualified enemies within its borders to destabilise it. It does not need anyone from the outside.

As exclaimed Pogo, on the famous 1970 Earth Day poster: “We have met the enemy and [it] is us.”

 

 

 

 

 

 

 

 

 

   

proposal
Local solutions
The proposed local government draft for FATA can address critical issues for the welfare of the long neglected people
By Raza Khan

Reports have been making rounds for the last several months that the federal government may introduce local government institutions in the Federally Administered Tribal Areas (FATA).

After the situation remained fluid for a considerable time the federal government eventually decided to put in place elected local government councils in the tribal areas.

The authorities concerned have already prepared a draft of proposed FATA Local Government Regulation 2012. Federal Law and Justice Minister, Farouq H. Naek, has reportedly discussed the draft with Prime Minister Raja Pervez Ashraf.

After which President Asif Ali Zardari is all set to promulgate an ordinance introducing local bodies in the tribal areas. The President has exclusive authority to introduce and make changes in the existing laws in FATA.

Recent developments have raised hopes FATA would get local government structures as announced by the federal government. However, when it comes to tribal areas nothing can be said with certainty. For instance, President Asif Ali Zardari extended Political Parties Act to FATA in August 2009 but the order remained dormant until he again announced the order in August 2011.

At a time when the rest of Pakistan has been awaiting revival of the LG System for the last four years the proposal to have local government structures in FATA is not only welcome but is of profound political, economic and administrative significance.

If the federal government is able to put in place LG structures in FATA it would be extensively consequential not only for the tribal areas but also for the entire Pakistan given the fallout of the adverse security situation and the long-existing legal-political vacuum in FATA on the whole country in recent years.

The introduction of local government bodies in FATA, unlike the rest of Pakistan, is of profound significance as they could be instrumental in transforming the near stateless nature of the region. Equally important is the role which elected local government councils in FATA could play in detribalizing and developing the areas.

The finer details of the draft FATA Local Government Regulation and the procedures it envisages have not been made public so far. However, according to the available information the local bodies in the proposed regulation would comprise of elected municipal councils. Each of these municipal councils would be headed by a “chairman” to be assisted by a “vice chairman”.

In order to hold elections for local municipal councils one block of population census would be considered as one ward, an electoral tier. The governor would be authorised to divide a local area, within different FATA agencies or districts, into one or many wards. Obviously this would depend upon the size and population concentration of the local area.

The local council established for each of the towns would have the status of a municipal committee. According to the proposed regulation, the governor would ascertain the number of general members of the local councils who would be elected through adult franchise. The governor would have the authority to nominate the representatives of traders, women, farmers, artisans etc. on the reserved seats.

A local council within three months after coming into existence would devise its rules of business. However, according to the FATA LG Regulation every municipal council must have at least one meeting a month.

Significantly, these meetings would be public. “This would go a long way in laying the foundation of a democratic culture in FATA. It has been behind the doors consultation regarding the matters of tribal areas which has been a cause of much problem,” said Imran Khan Wazir, a Peshawar based political commentator.

FATA to date does not have their own public service structure and most of the top officials that have hitherto been serving there came from federal or Khyber Pakhtunkhwa bureaucracy.

Keeping this in view the Regulation envisages FATA United Group of Functionaries. Every local municipal council would have officials on its disposal from United Group of Functionaries. But the authority to form this group would rest with the governor.

Local councils in FATA would deliver a considerable range of services. This include sanitation, drainage, birth and death registration, managing slaughter houses, quarantining, fire services.

Every municipal council would also be responsible for devising master plan for the respective area, serve as building control authority, providing street lighting, traffic control, provision of transportation services, holding sporting, cultural and literary activities, controlling environmental pollution, price-control, looking after graveyards, growing and maintaining gardens, establishing libraries besides other social welfare services.

“These are indeed an extensive range of services which have been unheard of by the residents of FATA. The core issue is whether the proposed local council would deliver them. I think keeping in view the capacity issues we would always find them wanting. Still we must have to start somewhere,” said Imran.

The finances of the local councils according to the proposed Local Government Regulation would be raised through funds and grants received from the federal government and taxes collected locally.

Every local council would have the authority to levy local taxes like toll tax, tax on property, buildings, land, transfer of immovable property, water, vehicle, parking as well as professional taxes and birth registration fee. If these taxes and fees are handled adroitly every local council could raise a fair amount to run its affairs and make itself self-sufficient.

Every local council would present its annual budget and it could be passed through simple majority by the members. As these council would not be allowed to get loan this would go a long way in making the council to look for ways and means to raise funds locally.

The finances would be spent according to the direction of the governor for special purposes which should not be at all on the direction of the governor. Because the governor KP himself cannot pinpoint what kind of civic problems, social services and development needs a particular part of FATA may have.

The civilian bureaucracy has always had a vested interest in FATA as in the absence of local government there, FATA has been bureaucracy’s virtual fiefdom. Against this backdrop, it seems that this clause(s) of getting the governor’s direction for using up the funding of municipal councils have been included at the behest of the civilian bureaucracy.

The apparent purpose is to somehow have its stakes in the new regulation. One is apprehensive that the full regulation would have many clauses which would ensure the bureaucracy’s supremacy and ways and means to meet its vested interests.

Therefore, the proposed FATA Local Government Regulation should be placed before the tribal and civil society leaders particularly lawyers belonging to FATA as well as researchers and experts on FATA for having their input before its actual enforcement.

The draft Local Government Regulation for FATA proposed the municipal councils to be elected on the basis of adult franchise. Electiveness is the most significant aspect of the proposed FATA. Because for the first time in history the inhabitants of the tribal areas could have real self-rule as the members of national parliament from FATA ironically could not make laws for the tribal areas.

Expressing his reservations on the Regulation, Ijaz Mohmand, who is president of FATA Lawyers Forum, said, “As far as I know in the proposed Local Government Regulation Governor has the full authority regarding a number of matters which should not have been the case.

In particular, the governor has a carte blanche in filling the seats of the technocrats in the local municipal councils. I don’t think that independent elections are possible in the present situation in the tribal areas due to adverse security situation. Even if elections are held for the local councils only candidates supported by the political administration or civilian bureaucracy and Members of National Assembly and Senate from the tribal areas would win.”

“We have doubts that these local councils would be instrumental in brining about systematic and social change in the tribal areas. The situation could only improve if the jurisdiction of the Supreme Court of Pakistan and High Courts is extended to FATA. Many of our friends think that the government has come up with the plan to introduce so-called local municipal councils to get funds from western countries and international donors.        

However, Mohmand agreed that introduction of local government system to FATA is in itself a good development. “In order to make these councils viable and placed on sound legal and administrative footing, I think those lawyers who are still living in the tribal areas must be given representation in their respective areas municipal councils.”

It is clear the proposed Local Government Regulation for FATA may not put into place an ideal system of local government; however, it would lay its foundation.

The government will have to introduce a full-fledged local government system in the tribal areas. Because the roots of problem in FATA are in the long-existing political, legal and systemic vacuum and elected local councils could go a long way in plugging that vacuum.

 

The writer is a political analyst and researcher currently working on his PhD on roots of terrorism and religious extremism in [email protected])

 

 

Crux of the problem
Education sector in Khyber Pakhtunkhwa paints a bleak picture which calls for immediate attention
By Mehnaz Aziz

It seems that education has never been a priority for voters when choosing a candidate. It is perceived that the elected representatives neither feel the need to comprehend quality or teachers’ rationalisation issues.

From time immemorial education departments have been utilised and politicised by political machinery through postings and transfers and teachers for their political campaigns and polling deities.

The elected representatives have been missing from the informed debate in their constituencies in the form of political will, children’s learning, reaching out to parents demands and just as small as a visit to the school. 

A political representative’s meeting was held under the auspices of United Nations Girls Education Initiative at the National Assembly Hall to understand the dynamics of KPK province and its some districts. Each parliamentarian described the current problems in the education system and facilities in the area with reference to girl education.

Meher Sultana from Malakand, Karak (PML-N) holds education as a central problem. Plagiarism and cheating have become a new menace. There has been an increase in the number of private schools and Chakara has become a hub of low cost private schools.

The teacher student ratio is not ideal and when teachers go for maternity leaves, the school suffers for two months. PA40 and PA49 are two districts where girls want to get education but there aren’t any schools. Middle and High School needs to be constructed and secondary schools should be upgraded to high school.

There should be a community level engagement so that the families get involved in respect to their child affairs. Girls are discouraged to pursue education as schools are distant. KPK is a province with multiple issues in different districts and the issues have to be dealt accordingly.  

Uzma from Lower Dir (JUI) says her constituency is near FATA and the Afghan refugees are our main problem. Parents don’t let their girls to school. Higher education facility is 40 km away and teachers come from Chitral and Swat. A majority of students are enrolled in the University of Peshawar are from the areas of Chitral, Swat and Lower Dir. The appointed teachers don’t show up in schools and there are no teachers for arts and science. Transportation is a major drawback.

Tabassum Shams from Charsadda Union Council Shabqadar (ANP) says they are facing a lot of challenges and need to work in the present times and have to yield positive results. From individual ideology, we need to come up with a collective solution to these problems.

Schools are located in far off areas or damaged and transportation is a major obstacle. The current situation of the area is because of the military operations. Parents are scared to send their children to school. There is bleak law and order in Shabqadar near the Afghan border. A survey was conducted in FATA and settled areas and it was found that a majority of the children work and the programme food for education works well in such situation.

Sikander Irfan from Swabi (ANP) says there are no proper school buildings. Poverty, absence of teacher training, and missing facilities are a hurdle in the prosperity of education in KPK.

Javed Khan from Swabi (ANP) says he doesn’t believe in a generalised discussion.  Quality education for girls is indeed a priority. The government seems more interested in the education for boys than girls. There is a shortage of staff. There is no provision for sports, especially for girls. Health and hygiene should be integrated. Member Provincial Assemblies should have a forum and come up with issues and solutions. Transportation should be provided to girls.

Muhammad Ali from Charsadda, (PPP Sherpao) says Shabqadar is adjoining Waziristan. Education implementation is a problem as majority schools have been destroyed by the Taliban. Population is in thousands and there are only two schools. Seven schools remain shut.

Teacher availability is an issue due to their postings. To give an example, there is a school of 1300 girls and there are only 10 teachers for them. There are only 18 primary schools. There should be more schools and colleges and hiring of local teachers.

Shagufta from Naushera (ANP) is of the opinion that awareness is the key to progress. We don’t have the data to understand the current scenario. No survey or data is collected in PA-5. Survey should be carried out in particular areas to gather the required information. Constituency survey should be done for elected officials.

Financial support should be given to the children to prevent drop outs. Tarogil and Kohistan are critical areas as no child has reached to grade 10. I would suggest that we should give Rs1500 to 2000 for students in the tenth grade. The existing government schools need to be upgraded to high schools.

Jaffer Shah from Swat says terrorist operations and floods have left the area in a bad state. Ninety percent schools have been washed away due to floods. The schools which are excelling have a lack of trained staff. For girls, we require functional literacy and schools in remote areas and transportation is a must as teachers don’t want to go. Private partnership is gaining momentum in towns and populous areas. Development in the public sector is very slow.

Noor Seher from Swat from PPP says 400 hundred schools have been destroyed by Taliban’s. We should focus on budget allocation for education. Rationalisation of teachers is a concrete issue. No one talks about the Madressahs and private sector contributions especially of the government.

There are only 3 to 4 classrooms for a school. Major advancement in the district is the women getting their ID cards made. Girls should be provided security and respecting the cultural norms, separate schools for boys and girls be established.

Disasters and conflict areas should be managed accordingly. We should be aware of the demand and supply. Elected representatives should focus on access and incentives. Data collection and surveys should be carried out. Social media should encourage participating in such efforts. Private and government sectors should join hands together for the pursuit of universal education. Current development budgets should be utilised for quality education.

Summing up the MPA’s statement, it is evident that KPK is a diverse province and districts cannot be treated in a generalised manner. Districts suffering by conflict and disaster and those with normal circumstances should be treated separately.

The notion that the whole province is conflict driven has to be abandoned. Development in the public sector is not according to the demands of parents and children. Parents’ voices are ignored in the process.

Budget for girls and boys’ education should be separately allocated as there is a bias towards boy’s education. Public data management systems should be upgraded and made public to the elected representatives according to each constituency as well as learning indicators.

Teacher’s awareness is central to the problem. Most importantly, there is a silent revolution in the form of low cost private sector and is very active in KPK. There should be a serious focus on the public sector for primary and secondary schools.

The elected representatives and the department of education will have to bring in a social contract and a platform so we demystify the invocation of why the public school doesn’t work while the low cost private school in the vicinity has full attendance.

 

The writer is Founding Director Children’s Global Network-Pakistan

 

 

  Home|Daily Jang|The News|Sales & Advt|Contact Us|

 


BACK ISSUES