KP approaches FCC, challenges years-long extension of 7th NFC Award after Fata merger

The Khyber Pakhtunkhwa (KP) provincial government in Pakistan has lodged a constitutional petition with the Federal Constitutional Court (FCC), challenging the prolonged extension of the 7th National Finance Commission (NFC) Award. The province asserts a claim of Rs964 billion on the Federal Consolidated Fund (FCF) and argues that its share of federal revenue should be adjusted to account for its significantly increased population, territory, and development needs following the 2018 merger of the Federally Administered Tribal Areas (FATA).

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This violates the global principle of ‘finance follows functions’, resulting in an under-allocation of resources for the additional population of the merged districts in Khyber Pakhtunkhwa.

The petition, filed after the 25th Constitutional Amendment integrated FATA into KP, contends that the existing NFC formula has not been updated to reflect these changes. KP argues that this failure to revise the formula violates the principle of 'finance follows functions,' resulting in an insufficient allocation of resources for the merged districts. The province maintains that the formula itself does not need reopening, but rather that its existing parameters should be applied to KP as it constitutionally exists post-amendment.

KP's stance is that the population, geography, and development indicators of the merged districts have been excluded from its share calculation, despite their constitutional incorporation into the province on May 31, 2018. The provincial government is seeking a declaration that its entitlement to an increased share is payable from the date the 25th Amendment came into force, asserting this is an automatic constitutional consequence rather than a retrospective claim.

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The formula continues to be used, but the values inserted into that formula still reflect the pre-merger Khyber Pakhtunkhwa. This means that the population, geography and development indicators of the merged districts have not been included in the share of Khyber Pakhtunkhwa, despite the fact that they became part of the Province by constitutional amendment on May 31, 2018.

Furthermore, the petition seeks clarification from the FCC on whether the federal government's justification of a 'constitutional logjam' is valid or constitutes a refusal to fulfill its constitutional obligations. The KP government believes a favorable ruling could potentially mitigate criticisms of the 18th Amendment and clarify the federal government's role in resource distribution.

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The province’s position is that this was not a discretionary grant, nor a political concession, but the automatic constitutional consequence of the 25th Amendment when read with the existing NFC formula.