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Local Governance & Service Delivery
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PFC Award of KP

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3/8/2019

Reg. # 011

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 PFC Award of KP
Concerned Law & Provisions
An act to construct and regulate local government institutions in the Province of the Khyber
Pakhtunkhwa and to consolidate laws relating to these institutions and to provide for matters
connected therewith and ancillary thereto.

Clause (i) of Article 37 of the Constitution of the Islamic Republic of Pakistan as a principle of policy,
requires decentralization of government administration so as to facilitate expeditious disposal of its
business meet the convenience and requirements of the public.

Clause (1) of Article 140A of the constitution of the Islamic Republic of Pakistan provides for the
establishment of a local government system and devolution of political, administrative and financial
responsibility and authority elected representatives of the local governments.

Introduction
1. This Act may be called the Khyber Pakhtunkhwa Local Government Act, 2013.

It extends to the whole of the province of KP.

It shall come into force on such date as Government may, by notification appoint, and
different dates may be appointed.

2. Definitions
3. Local governments have to work within the provincial framework.
4. Local areas for local governments.
For the purpose of this Act Village, Neighborhood, Tehsil, Town, Districts and City District shall
be local areas.
5. Constitution of local governments.
City District for District Peshawar
District government for district other than Peshawar
Tehsil Municipal Administration for Tehsil
Town Municipal Administration for a Town in the City Districts
Village Council for a village in rural areas
Neighborhood Council for neighborhood in areas with urban characteristics
6. Delimitation of Village & Neighborhood Council
7. Delimitation of Tehsils & Districts
8. Provisions of Districts apply to City Districts
9. Setting up of a Town
10. Delimitation Authority and principles of delimitations
Composition
1. The Finance Commission shall consist of the following members:
a) Minister of Finance Department: Chairman of the Finance Commission
b) Minister for Local Government: Elections & Rural Development Department
c) Two members of the Provincial Assembly of KP nominated by CM & Leader Of
Opposition
d) Secretary to Government : Finance Department
e) Secretary to Government: Planning & Development Department
f) Secretary to Government: Local Government, Elections and Rural Development
Department
g) Secretary to Government: Law, parliamentary Affairs & Human Rights Department
h) Two Nazimeens, District Councils elected by Nazimeen District Council in the Province
i) Two Nazimeens, tehsil councils elected by Nazimeen of the tehsil councils in the
province
2. The Finance Department shall provide secretariat support to Finance Commission and provide
annual statement on transfer of funds in accordance with recommendations of the Finance
Commission.
3. No proceedings or act of the Finance Commission shall be invalid merely on the ground of
existence of a vacancy in its composition.
4. Subject to this act, the Finance Commission shall regulate its procedure and business.

Functions
1. The Finance Commission shall make recommendations to the government on:
a) The amount of grant for local government out of the proceeds of Provincial Consolidated
Fund in financial year.
b) Formula of distribution of the grant among local governments in the province.
c) The amount of special grants for local governments with modalities and conditions to
access the facility.
d) Grants in aid to local governments in need of assistance.
e) Matters relating to local governments finance.
2. While making recommendations the Finance Commission shall take into account the principles
of fiscal needs, fiscal capacity, fiscal effort and fiscal performance of local governments.
3. The Finance Commission shall take into consideration poverty, population, lag in infrastructure
and revenue base of local governments as factors while formulating its recommendations.
4. The Finance Commission shall present to the Government annually a report on the analysis of
fiscal transfers, the situation of town source revenue in local governments and the reach and
quality of their services and the government shall cause the report to be laid before the
Provincial Assembly.
Formula for PFC Award
The KP government has announced five PFC awards since 2002.The first three awards were of an
interim nature for one year each. However the fourth and fifth award were announced for three years
each and covered 2005-11.The sixth PFC award as the interim arrangement gives more fiscal space for
the ruling government to an oeuvre in the distribution of resources.

This is reflected in the data that the share of 11 districts exceeds the actual development funds as per
the interim formula. These districts are Peshawar, Mardan, Mansehra, Swat, Swabi, Charsada, Abbott
bad, Nowshera, Dir Lower, Haripur and D.I. Khan.

The districts that did not even receive their due share as per the existing interim order were Tank,
Hangu, Chitral, Battagram, Karak, Shangla, Buner, Lakki, Marwat, Kohat Dir upper and Kohistan.

Under LGA2013, the KP government gave assurance that 30% of the province development budget
would be distributed among its 25 districts. It is worth mentioning that for the first time in the
composition of the commission, equal representation was given to the opposition through a
transparent manner. For the first time it was suggested that the horizontal distribution formula be
changed to multiple criteria. The new parameters include revenue, area, inverse population density,
compensation for terrorism and conflict.

In the first three awards, the horizontal distribution was 50pc for population, 25pc for backwardness
and 25pc for the lag in the infrastructure.The next two awards witnessed slight changes. Under the
fourth and fifth the weight of population was raised to 60pc, while that of backwardness and lag in
infrastructure was reduced to 20pc each. This award has been operating since2011.

Conclusion
The PFC is working but not as efficiently as it should be for the development of province. It should
encourage local institutions of elected representatives and have special representation of peasants,
workers, women, minorities and youth. It is necessary to reorganize the local government system in
the province of KP and consolidate laws relating to these institutions. The budget should be made in
accordance to the demographic conditions. The allocation of resources and their distribution should
be fair and even so each department can receive its funds and work with their best to increase
fairness and effectiveness. There should be transparency in the utilization of resources.