Provinces pay Rs10.5bn interest to federal govt. These figure indicate there is a huge need to use Islamic Financial product for inter govt. transaction. Government easily designed these products with the collaboration of local Islamic Financial experts in Pakistan on Modaraba, Murabahah, Istisna and Sukuk Basis to avoid interest base transaction system inter provinces.
According to the news, published in Daily Nation last week that the four provincial governments paid Rs10.506 billion in shape of interest on loans to the federal government in first six months of the current financial year 2006-07.

According to fiscal operation of provincial governments data released by the Ministry of Finance, the provincial share in federal revenue was Rs170.152 billion during the first six months of the ongoing financial year.

The provincial taxes generated Rs17.005 billion out of which the share of property tax stood at Rs1.732 billion, agriculture tax Rs268 million, excise duties Rs974 million, stamp duties Rs4.663 billion, motor vehicle tax Rs3.886 billion and others Rs5.770 billion.

The provincial non-tax collection stood at Rs18.232 billion as it generated Rs55 million in shape of interest, Rs1.50 billion as profits from hydro electricity, irrigation Rs916 million and others Rs15.812 billion.

The federal government has provided Rs14 billion grants to the four provinces in first six months of the current fiscal year.

Punjab’s revenue stood at Rs101.148 billion in first six months of the current fiscal year. The provincial share in the federal revenue was Rs80.357 billion and the provincial taxes generated Rs8.654 billion. Punjab generated only Rs252 million with the imposition of agriculture tax in first six months of the current fiscal year.

On the expenditure side, Punjab paid Rs4.952 billion to the federal government in shape of interest payment on loans. Punjab spent Rs33.854 billion on development side in first six months of the current fiscal year.

Sindh’s total revenue stood at Rs64.403 billion during the first half of the current fiscal year and its share in the federal revenue was Rs56.120 billion. The provincial taxes generated in first six months were Rs6.924 billion. The collection in shape of property tax was Rs288 million out of which the agriculture tax attracted only Rs6 million.

Sindh paid Rs2.791 billion to the federal government in shape of interest payment on loans in July-Dec period of the current fiscal year. The development expenditures were Rs9.524 billion in the first half of the ongoing financial year. NWFP’s total revenue was Rs29.854 billion in first six months and the MMA led provincial government obtained Rs19.155 billion from federal revenue. The agriculture tax collection was just Rs10 million. The profits from hydro electricity generated Rs1.500 billion for NWFP government in the first half of the current fiscal.

The federal grants stood at Rs5.718 billion for NWFP in this financial year. In shape of interest payment to the federal government, the NWFP paid Rs1.479 billion in first six months of the current fiscal year. The development spending of the province stood at Rs8.179 billion so far during the current fiscal year.

The total revenue of cash-starved Balochistan stood at Rs20.339 billion during the first six months of FY 2006-07 as the provincial share in the federal revenue was Rs14.520 billion. The provincial taxes only generated Rs359 million in first six months.

The property tax collected Rs24 million, agriculture tax zero amount, excise duty Rs78 million, stamp duties Rs63 million, motor vehicle tax Rs171 million, and others Rs23 million. In shape of provincial non-taxes, Balochistan collected Rs1.029 billion during the first six months of the current fiscal year. The provincial did not generate any amount from hydel profit share.

The federal government provided Rs4.431 billion to Balochistan during the first six months of the current fiscal year in shape of loans and grants.

On expenditures side, the provincial government paid Rs1.284 billion in shape of interest payment on loans and development expenditures stood at Rs3.889 billion in July-December period of FY 2006-07