Explanatory Memorandum on Federal Receipts 2017-18

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FEDERAL BUDGET 2017-18

EXPLANATORY MEMORANDUM ON

FEDERAL RECEIPTS

Government of Pakistan Finance Division Islamabad

PREFACE

The Annual Budget Statement containing estimated Receipts and Expenditures for Financial Year 2017-18 is being tabled in the National Assembly of Pakistan and transmitted to the Senate of Pakistan as required under Article 80(1) and 73(1) of the Constitution of Islamic Republic of Pakistan.

The “Explanatory Memorandum on Federal Receipts” is being tabled along with the Annual Budget Statement, as additional information, in order to help the readers to understand the details of the receipts included in the Statement. In a structured manner, the major components of Federal resources have been explained, with a view to distinguish Revenue from Capital receipt and to further categorize Revenue Receipt as Tax and NonTax Receipt. A separate Chapter is introduced on External Resources with brief explanation, which has been further elaborated in a separate publication titled “Estimates of Foreign Assistance”. The mechanism for distribution of resources amongst the Provinces is also included with a brief over view of self-financing of their respective Annual Development Programmes.

With the aim of helping the readers to form a comprehensive view of the federal resources that have determined the formulation of the Budget for 2017-18, the nature of receipts has also been explained, wherever considered appropriate. I hope that this document would be useful for a comprehensive understanding of the Annual Budget Statement.

Tariq Bajwa Secretary to the Government of Pakistan Finance Division

Islamabad, 26^th May, 2017

CONTENTS

CHAPTER 1:

FEDERAL RESOURCES AT A GLANCE

1.1 Resource Mobilization is essential to meet the recurring as well as development expenditure. At Federal level, resources are generated through a well coordinated and concerted effort by the revenue collecting agencies and other administrative units. The money so raised are properly deposited in the national exchequer, precisely accounted for and accurately reported as per the principles of financial propriety. The constitutional requirements for maintaining the federal receipts are strictly adhered to. Article 78(1) of the Constitution of Islamic Republic of Pakistan provides that all revenues received by the Federal Government, all loans raised by that Government and all moneys received by it in repayment of loan, shall form part of the Federal Consolidated Fund. Article 78(2) further provides that all other moneys received by or on behalf of the Federal Government shall be credited to the Public Account of the Federation. In pursuance thereof, the Federal Receipts are credited to Federal Consolidated Fund as well as the Public Account of Federation.

1.2 Federal Revenue Receipts are broadly categorized as Tax Revenue and NonTax Revenue. Federal Board of Revenue (FBR) is the major tax collecting agency as substantial portion of Tax Revenue is administered by it. Tax Revenue collected by FBR constitutes the Divisible Pool Taxes to be distributed amongst the Provinces along with other Straight Transfers in accordance with the provisions of National Finance Commission Award. In addition to FBR Taxes, there are Other Taxes i.e Gas Infrastructure Development Cess, Natural Gas Development Surcharge, Petroleum Levy etc, which are administered by Ministry of Petroleum and Natural Resources.

1.3 Non-Tax Revenue represents the recurring income earned by the Federal Government from sources other than taxes. The major sources are Interest receipts, dividends, profits earned by various regulatory authorities. Moreover, various services provided by the government i.e social services, community services, economic services, defence services etc also yield revenue for the government.

1.4 In addition to Revenue Receipts, there are Capital Receipts reflected in Annual Budget Statement. Capital Receipts comprise Recoveries of loans and advances from provincial Governments, local bodies, financial institutions etc as well as Public Debt raised through various government securities.

1.5 Net proceeds of National Saving Schemes and net receipts from transactions under Deposits and Reserves head being Public Account Receipts, form part of Public Account of the Federation.

1.6 External Resources comprise project loans and grants, programme loans and other loans which are received from specialized financial institutions and friendly countries for specific development needs and budgetary requirements.

1.7 Federal Receipts may also be classified as Internal Receipts and External Receipts. Internal Receipts comprise Revenue receipts and Capital receipts. External Receipts comprise project aid, loans and grants.

1.8 Budget Estimates for Fiscal Year 2016-17 and 2017-18 in respect of total Federal Receipts under different heads are given as under;

TABLE 1 Net Federal Receipts

(Rs. in Million)

Chapter 2. REVENUE RECEIPTS

2.1 Revenue Receipts constitute major component of total Federal resources. Revenue Receipts may be categorized as Tax Revenue Receipts and Non-Tax Revenue receipts, which are largely derived from the following sources:-

• i. Collection of Federal Taxes

• ii. Net revenue of the Public Sector Commercial Departments

• iii. Mark up on loans advanced by the Federal Government

• iv. Return on investments made by the Federal Government

• v. Fees, penalties and other Miscellaneous receipts realized by administrative Ministries and Divisions of the Federal Government

• vi. Surcharges, Cess, Levy and Royalty on Petroleum

2.2 TAX REVENUE

2.2.1 The major part of Tax Revenue is administered by the Federal Board of Revenue (FBR), which comprises Customs Duty and Inland Revenue i.e Direct Taxes, Sales Tax and Federal Excise Duty. FBR taxes may also be categorized as Direct Taxes and Indirect Taxes. Direct Taxes comprise Income Tax, Workers Welfare Fund and Capital Value Tax. Indirect Taxes include Sales Tax, Federal Excise Duty and Customs Duty. 2.2.2 In addition to FBR taxes, there are Other Taxes i.e Gas Infrastructure Development Cess, Natural Gas Development Surcharge, and Petroleum Levy administered by Ministry of Petroleum and Natural Resources. Besides, the taxes collected by Islamabad Capital Territory (ICT) Administration and the Airport Tax administered by Civil Aviation Authority also constitute Tax Revenue of the Federal Government. Tax Revenue forms part of Federal Consolidated Fund.

2.3 NON TAX REVENUE

2.3.1 Non-Tax Revenue of the federal government is administered by various Ministries /Divisions/Departments comprising the following sources:

i. Income from Property and Enterprise

ii. Receipts from Civil Administration and other functions

iii. Miscellaneous Receipts

• 2.4 Summary of Revenue Receipts for Budget Estimates and Revised Estimates for Fiscal year 2016-17 and Budget Estimates for Fiscal year 2017-18 is given as under;

TABLE 2 Summary of Revenue Receipts

(Rs. in Million)

Chapter 3 : TAX REVENUE

3.1 FBR TAXES

3.1.1 Tax Revenue collected by Federal Board of Revenue (FBR) comprises Income Tax, Sales Tax, Federal Excise Duty and Customs Duty. Direct Taxes mainly comprise Income Tax. Federal Excise Duty, Sales Tax and Customs duty are indirect taxes. The following table shows the revenue estimates for Fiscal Year 2016-17 (Budget and Revised) and 2017-18.

TABLE 3 Tax wise Estimates of FBR Taxes

(Rs. in Million)

• 3.1.2 Detailed analysis of head wise FBR taxes are highlighted below:

3.1.3 DIRECT TAXES

• 3.1.3.1 During the first 9 months of the current financial year i.e up to 31-03-2017, Direct Tax collection stood at Rs.892.3 Billion with growth of 10.2%. Income Tax contributes around 98.9% in total direct taxes. The target for FY 2017-18 has been estimated at Rs.1,594.9 billion, requiring a growth of 15.7%.

3.1.3.2 Within the direct taxes, Workers Welfare Fund (WWF) is also collected by FBR and is part of Direct Tax collection. The budget estimated for receipts of WWF for 201718 is Rs.14.6 billion.

3.1.3.1 The Budget and Revised Estimates for Fiscal Year 2016-17 (Budget and Revised) and Budget Estimates for 2017-18 on account of Direct Taxes are tabulated hereunder.

TABLE 4 Direct Taxes

( Rs. in Million)

3.1.4 INDIRECT TAXES

3.1.4.1 Sales Tax

3.1.4.1.1 During the first 9 months of the current financial year net revenue collection from Sales Tax (import + domestic) remained at Rs.897.7 billion as against 886 billion in the corresponding period of the last financial year showing an increase of 1.3%. The revised budget estimates for fiscal year 2016-17 are Rs.1,445 billion. The target for FY 2017-18 is estimated at Rs.1,605.2 billion. The required growth would be 11.1%.

TABLE 5 Sales Tax

(Rs. in Million)

3.1.4.2 Federal Excise Duty

3.1.4.2.1 During the first 9 months of the current financial year net revenue collection from Federal Excise remained at Rs.127.2 billion as against 117.1 billion in the corresponding period of the last financial year showing a growth of 8.6%. The revised

budget estimates for fiscal year 2016-17 are Rs.206.1 billion. The target for FY 2017-18 is estimated at Rs.231.5 billion. The required growth would be 12.3%.

TABLE 6 Federal Excise Duty

(Rs. in Million)

3.1.4.3 Customs Duty

3.1.4.3.1 During the first 9 months of FY 2016-17, net Customs duty collection is Rs.343.4 Billion which is 24.4% higher than the duty collected during the corresponding period of FY 215-16. Budget Estimates for Fiscal Year 2017-18 is projected at Rs.581.4 billion. The required growth would be 18.4%. 3.1.4.3.2 A summary of projections of customs duty target including the projections of collection from major revenue spinners during 2016-17 and 2017-18 is given as under;

TABLE 7 Customs Duty

( Rs. in Million)

3.2 OTHER TAXES

3.2.1 Although FBR administers and collects major portion of Federal Tax Revenue, there are Other Tax sources as well, which are detailed as under;

3.2.2 Gas Infrastructure Development Cess (GIDC)

3.2.2.1 Gas Infrastructure Development Cess Act 2015 provides legal framework to levy

and collect the Cess from gas consumers other than the domestic sector consumers at

the rates as provided in the Second Schedule to this Act. The gas company shall be responsible for billing of cess to gas consumers, its collection and its onward payment to Federal Government in the manner as prescribed by the Federal Government. As per Section 4 of the Act, the cess shall be utilized by the Federal Government for or in connection with infrastructure development of Iran Pakistan Pipeline Project, Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline Project, LNG or other ancillary projects.

3.2.2.2 The major billing companies are 1. Sui Northern Gas Pipelines Limited, 2. Sui Southern Gas Company Limited, 3. Mari Petroleum Company Limited (formerly Mari Gas Company Limited), 4. Pakistan Petroleum Limited, 5. Tullow Pakistan Development Limited, 6. Oil and Gas Development Company Limited. Rates of Cess (Rs./MMBTU) are Rs.300 for Fertilizer Feed, Rs. 200 for Captive Power, Rs.100 for Industry, Rs.100 for KESC/GENCO, Rs.100 for IPPs, Rs.263.56 for CNG Region-I and Rs.200 for CNG Region-2.

3.2.3 Natural Gas Development Surcharge

3.2.3.1 As per Natural Gas Development Surcharge Ordinance, 1967, every company as mentioned in the Schedule shall collect and pay to the Federal Government a development surcharge equal to the differential margin i.e the amount by which the fixed sale price exceeds the prescribed price, in respect of natural gas sold by it.

3.2.4 Petroleum Development Levy

3.2.4.1 Petroleum Products (Petroleum Development Levy) Ordinance, 1961 as amended from time to time provides imposition of Petroleum Levy. Ex-refinery/import price of oil is added with Inland Freight Equalization Margin (IFEM), Oil Marketing Companies (OMCs) distribution margin and dealer's commission as fixed by Government of Pakistan in Rs/per litre. On this accumulated price of oil, Petroleum Levy is fixed by Government of Pakistan in Rs. per litre from time to time is levied.

3.2.5 Airport Tax

3.2.5.1 Civil Aviation Authority collects Airport Tax from domestic passengers for various services offered at the airports at rates notified by the Government from time to time.

The Airline companies charge Airport Tax at the time of preparation of Air Ticket and deposit the same in the Federal treasury.

3.2.6 The Budget and Revised Estimates for Fiscal Year 2016-17 and Budget Estimates for 2017-18 on account of Other Taxes are tabulated hereunder.

TABLE 8 Other Taxes

(Rs . in Million)

CHAPTER 4 NON TAX REVENUE

4.1 Non-Tax Revenue represents the recurring income earned by the Federal Government from sources other than taxes. The major receipts under this head are "Interest receipts" (received on loans extended by the Federal Government to provinces, Public Sector Enterprises etc), dividends received from public sector entities and profits earned by various regulatory authorities. Various services provided by the government i.e social services, community services, economic services, defence services etc also yield revenue for the government. Broadly, Non-Tax Revenue fall under three major heads i.e Income from Property and Enterprise, receipts from civil administration and other functions and Misc Receipts of the federal ministries, divisions and departments.

4.2 Summary of Non-Tax Revenue for Budget and Revised Estimates for Fiscal Year 2016-17 and Budget Estimates for Fiscal Year 2017-18 are given below.

TABLE 9 Summary of Non Tax Receipts

( Rs. in Million)

4.3. INCOME FROM PROPERTY AND ENTERPRISE

Income from Property & Enterprise comprise profits earned by state regulatory authorities, Mark- up receipts on loans extended to provinces, AJK, Public Sector Enterprises, Local bodies etc and dividends paid on Federal government's investment in the share capital of financial institutions and commercial enterprises.

4.3.1 Profits

4.3.1.1 Profits earned by the Regulatory Authorities by way of levy of fees, charges, penalties etc after setting of their authorized expenses is deposited in the Federal

Consolidated Fund. Budget Estimates 2016-17, Revised Budget Estimates 2016-17 and Budget Estimates 2017-18 are given as under;

TABLE 10 Profits

(Rs. in Million)

4.3.1.2 A brief description of functions and sources of receipts of the above regulatory authorities is given as under;

4.3.1.2.1 National Electric Power Regulatory Authority (NEPRA) is mandated to

develop and pursue a Regulatory Framework, which ensures the provision of safe, reliable, efficient and affordable electric power to the electricity consumers of Pakistan, by facilitating the transition from a protected monopoly service structure to a competitive environment and maintaining a balance between the interests of the consumers and service providers in unison with the broad economic and social policy objectives of the Government of Pakistan. In order to ensure effective regulatory functions, NEPRA charges different fees at rates notified from time to time for Application & Modification Generation License Fee, Application & Modification Transmission License Fee, Application & Modification Distribution License Fee, Application for the Approval of Competitive Bidding. Besides, NEPRA upfront tariff is also levied like Fees Pertaining to Tariff Standards and Procedures Regulations 2002 i.e Generation Licensees, Transmission Licensees, Distribution Licensees, Consumers etc.

4.3.1.2.2 Securities and Exchange Commission of Pakistan (SECP) is mandated for Regulation of corporate sector and capital market, Supervision and regulation of insurance companies, non-banking finance companies and private pension schemes and Oversight of various external service providers to the corporate and financial sectors, including chartered accountants, credit rating agencies, corporate secretaries, brokers, surveyors etc. As per Sixth Schedule of the Companies Ordinance, different fee/charges are enforced by the SECP on various services e.g Registration of different types of companies, Filing, registering or recording any document, Inspection of documents and register kept by the registrar, Seeking approval of the Commission or the registrar in the following matters etc. On various defaults, additional fees/penalties are also imposed.

4.3.1.2.3 Pakistan Nuclear Regulatory Authority (PNRA) is entrusted with the responsibility to control, regulate and supervise all matters related to nuclear safety and radiation protection in Pakistan. It charges Licensing Fee as approved from time to time from nuclear facilities, radiotherapy and nuclear cardiology centres etc.

4.3.1.2.4 Pakistan Electronic Media Regulatory Authority (PEMRA) is required to improve the standards of information, education and entertainment, to facilitate the devolution of responsibility and power to the grass roots by improving the access of the people to mass media at the local and community level and ensure accountability, transparency and good governance by optimization the free flow of information. PEMRA charges Licensing Fee on prescribed rates for FM Radio, Satellite T.V, MMDS, IPTV, Cable TV, DTH, Landing Rights, Temporary Uplinking and Mobile TV. 4.3.1.2.5 Oil and Gas Regulatory Authority (OGRA) has been set up under the Oil and Gas Regulatory Authority Ordinance dated 28th March 2002 to foster competition, increase private investment and ownership in the midstream and downstream petroleum industry, protect the public interest while respecting individual rights and provide effective and efficient regulations. In order to implement regulatory framework, OGRA issues Licenes to oil marketing companies, gas distribution networks, fertilizer

Manufacturing plant etc and charge fees for the services. It also carries out inspections of oil and gas distribution networks and imposes penalties.

4.3.1.2.6 Pakistan Telecommunication Authority (PTA) is mandated to regulate the establishment, operation and maintenance of telecommunication systems and provision of telecommunication services in Pakistan, to dispose of applications for the use of radio-frequency spectrum, to promote and protect the interests of users of telecommunication services in Pakistan, to promote the availability of a wide range of high quality, efficient, cost effective and competitive telecommunication services throughout Pakistan, to promote rapid modernization of telecommunication systems and telecommunication services, to investigate and adjudicate on complaints and other claims made against licensees arising out of alleged contraventions of the provisions of the Act, the rules made and licenses issued there under and take action accordingly. PTA receives fees for issuance and renewal of various telecom licenses. It also imposed fines, penalties for violations.

4.3.2 Mark Up Receipts

4.3.2.1 Federal Government advances loans to Provinces, Government of Azad Jammu & Kashmir, Public Sector Enterprises, Local Bodies and others to assist them in carrying out their development programmes and social initiatives. These loans and advances are of two types, namely, Cash Development Loans, and Foreign Loans. The former is advanced by the Federal Government out of its own resources whereas the latter is relent loans.

4.3.2.2 Mark up accrued on the loans granted by the federal government to provincial governments, local bodies, financial institutions, non-financial institutions, commercial departments and government servants is reflected in this section. The mark up is chargeable in accordance with the terms and conditions of each loan agreement.

4.3.2.3 Unless specified otherwise, every loan other than foreign loan advanced by the federal government to the provincial governments is repayable over a period of 25 years. Moratorium of 5 years is allowed on recovery of principal. Simple mark up is realized at a

rate yearly determined by the Finance Division, as per actual borrowing cost of the Federal Government.

4.3.2.4 Federal Government also advances loans to the Government servants for building houses and for the purchase of transport etc. These advances are governed by the rules as specified by Finance Division from time to time.

TABLE 11 Mark Up Receipts (Provinces)

TABLE 12

Mark Up Receipts (Local Bodies)

(Rs. in Million)

TABLE 13 Mark Up Receipts (Financial Institutions)

(Rs. in Million)

Table 14 Mark Up Receipts (Non-Financial Institutions)

(Rs. in Million)

4.3.3 DIVIDEND ON GOVERNMENT INVESTMENTS

4.3.3.1 Dividends represent return on federal government's investment in the share capital of financial institutions and commercial enterprises. The receipt of dividend varies from year to year depending upon profits earned each year by these bodies and declaration of dividends on share capital.

4.3.3.2 The details of the estimates are given below:

TABLE 15 Dividends

( Rs. in Million)

4.4 RECEIPTS FROM CIVIL ADMINISTRATION AND OTHER FUNCTIONS

4.4.1 GENERAL ADMINISTRATION RECEIPTS

4.4.1.1 Organs of State

4.4.1.1.1 These receipts are realized on account of fees received from the candidates appearing in various competitive examinations conducted by Federal Public Service Commission (FPSC), tuition fees charged by the Pakistan Forest Institute etc. However,

the major portion of receipts under this head come from FPSC. Estimates of receipts on this account are given below:

TABLE 16 Receipts from Civil Administration - Organs of State

4.4.1.2 FISCAL ADMINISTRATION

4.4.1.2.1 Audit Fees

The department of the Auditor General of Pakistan charges fees from autonomous bodies/ corporations etc, which do not fall within its normal audit jurisdiction, for auditing their accounts. This fee is deposited in the government account.

4.4.1.2.2 State Bank of Pakistan Receipts

The surplus profit of the State Bank of Pakistan, after making usual provision for reserve funds and payment of dividend, is transferred to the federal government. The State Bank also pays dividend on the share capital of the Federal Government. The value of coins that are minted and put in circulation in one year are also deposited by the State Bank in Government Account.

4.4.1.2.3 Pakistan Mint Receipts

The Pakistan Mint's receipts are mainly from the disposal of dross & scrap and from minting of medals for defence services, sports and academic institutions etc.

4.4.1.2.4 Pension and Gratuity Contribution

These receipts pertain to pension and gratuity contributions by the borrowing departments in respect of officials serving on deputation basis with them.

The estimates of receipts from fiscal administration are given below:

TABLE 17

General Administration Receipts - Fiscal Administration

( Rs. in Million)

4.4.1.3 ECONOMIC REGULATION

4.4.1.3.1 The receipts on this account largely comprise insurance fees realized under Insurance Act, 1989. The estimates are given below:

TABLE 18 General Administration Receipts - Economic Regulations

( Rs. in Million)

Table 19 General Administration Receipts- Economic Statistics

(Rs. in Million)

4.4.2 DEFENCE SERVICES RECEIPTS

4.4.2.1 These receipts are realized mainly on account of service charges in accordance with the protocol agreements, dues from civil agencies, sale & auction of obsolete stores and charges realized on account of use of army aviation facilities etc. The non-effective receipts include leave salary etc. of armed forces personnel on deputation abroad. 4.4.2.2 The estimates of defence receipts are given below :

Table 20 Defence Services Receipts

( Rs. in Million)

4.4.3 LAW AND ORDER RECEIPTS

4.4.3.1 These receipts represent the proceeds from fines imposed by Insurance Appellate Tribunals, Federal Service Tribunals, Income Tax Tribunals, Drug Courts and Special Judges under the administrative control of Law and Justice Division. These also include fines, fees and recoveries of the Supreme Court of Pakistan, civil armed forces

and frontier watch & ward. The fees realized on account of issuance and renewal of arms licenses by the Ministry of Interior are also reflected under this classification. 4.4.3.2 The estimates of receipts from law and order are given as under;

TABLE 21 Law and Order Receipts

(Rs. in Million)

4.4.4 COMMUNITY SERVICES RECEIPTS

4.4.4.1 The receipts under community services comprise rent of government buildings, land, guest houses, hostels and sale proceeds of material of demolished buildings. These receipts are realized by Housing and Works Division, Overseas Pakistanis Division, Kashmir Affairs and Gilgit Baltistan Division, SAFRON and Interior Division (Frontier Corps). The receipts realized by Survey of Pakistan for its services and supply of maps are also included here. Details of the estimates are given below:-

TABLE 22 Community Services Receipts

(Rs. in Million)

4.4.5 SOCIAL SERVICES RECEIPTS

4.4.5.1 The receipts under this head are realized on account of fees charged from students of the educational institutions of various Ministries and Defence Division. The entry fee for historical places and archeological sites is collected by National Heritage and Integration Division. The charges for medical services are realized by the federal government hospitals and health establishments, and tuition/training fee realized by Human Resources Development Division. The estimates are given in the following table.

TABLE 23 Social Services Receipts

(Rs. in Million)

4.4.6 SOCIAL SERVICES MISC RECEIPTS

4.4.6.1 Under Social Services Miscellaneous Head, the Emigration Fee deposited by Pakistani Workers working abroad in terms of Emigration Ordinance, 1979 are reflected. The receipts of Human Resource Development Division on account of registration of overseas employment agencies and deposits by individuals for protection of their visas are also deposited under this head. Moreover, the fee for registration of trade union and West Pakistan Ordinance, 1969 are also reflected under this Head of Account. The details are given in the following table.

TABLE 24 Social Services Miscellaneous Receipts

( Rs. in Million)

4.5 MISCELLANEOUS RECEIPTS

4.5.1 Miscellaneous receipts comprise (i) Economic Services Receipts and (ii) Other Receipts. A brief description of these receipts is given in the following paragraphs.

4.5.2 ECONOMIC SERVICES RECEIPTS

4.5.2.1 Agricultural Receipts

4.5.2.1.1 These receipts are realized on account of quarantine fee on animal exports/imports by National Food Security and Research Division.

4.5.2.2 Receipts from Explosive Department

4.5.2.2.1 Receipts under this head pertain to the fee charged by the Department of Explosives for granting licenses to the firms dealing in explosives.

4.5.2.3 Receipts from Cabinet Division

4.5.2.3.1 The sale proceeds of government publications and stationery by the Controller of Forms and Stationery realized from various government departments/agencies are reflected under this head.

4.5.2.4 Receipts from Lighthouses and Lightships

4.5.2.4.1 These receipts comprise of (i) examination fee, survey and registration fees realized by the Mercantile Marine Department, Karachi, (ii) cargo shipping and discharging fees from the shipping companies, (iii) fines realized from seamen for offences committed by them, (iv) fees realized from cadets under training in the Mercantile Marine Academy, Karachi, Seamen's Training Centre, Karachi and (v)

Lighthouse dues realized from the shipping companies operating on the coasts of Pakistan. These receipts are shown under transportation and communication heads.

4.5.2.5 Receipts from Special Communication Organization

4.5.2.5.1 These receipts are collected by the Special Communications Organization for providing telecommunication services in specific areas. The Special Communications Organization primarily operates in the Azad Kashmir and Gilgit-Baltistan.

4.5.2.6 The receipts under Economic Services Head mostly comprise of Food Department, Agriculture Receipts and Farms Receipts collected by Islamabad Capital Territory. The details are as under:-

TABLE 25 Miscellaneous Receipts

(Rs. in Million)

4.5.2.7 The receipts of Economic Services - Fisheries & Animal Husbandry of Livestock and Diary Development in federal capital territory are collected by Islamabad Capital Territory Administration are reflected in the table given below:

TABLE 26

Economic Services Receipts- Fisheries & Animal Husbandry

(Rs. in Million)

TABLE 27

Economic Services Receipts- Forest

(Rs . in Million)

TABLE 28

Economic Service Receipt- Cooperation Irrigation, Embankment

(Rs. in Million)

4.5.2.8 The table given below reflects the receipts of Explosive Department for industrial safety. The Ports & Shipping Department Receipt on account of management and upkeep of port/landing charges and receipts of Special Communications Organization are also reflected the Economic Services Receipts - Others.

TABLE 29

Economic Services Receipts - Others

(Rs. in Million)

TABLE 30 Foreign Grants

(Rs. in Million)

4.5.3 OTHER RECEIPTS

4.5.3.1 These receipts are realized by different Ministries, Divisions and Departments. The brief introduction of the main regular receipts under this head is given as under with a relevant statistics in two tables;

4.5.3.2 Receipts From UN, Staff Welfare and Accreditation

4.5.3.2.1 The major portion of receipts comes from United Nations in lieu of services rendered by Pakistani troops taking part in various peacekeeping operations worldwide. The other receipts are generated by various staff welfare initiatives and accreditation services. Budget Estimates are given as under;

Table 31 Extraordinary Receipts

(Rs. in Million)

4.5.3.3 Citizenship, Naturalization and Passport Fees

4.5.3.3.1 These receipts are realized mainly by the Immigration & Passport Offices in Pakistan and Pakistani Missions abroad on account of issuance, renewal and endorsement of passports and visas.

Table 32

Citizenship Nationalization, Passport and Copyright Fees

( Rs. in Million)

4.5.3.4 Royalty, Pollution, Trekking Fees From Tourists

4.5.3.4.1 The royalty fee is charged from the tourists coming to Pakistan for climbing the mountain peaks having a height of 7000 meters. Whereas, tracking fee is charged from trackers climbing the mountain on the established track less than the height of 7000 meters.

4.5.3.5 Receipts from Tourism Department

4.5.3.5.1 The receipts of the Tourism Department include licenses fee of Hotels, Restaurants and Travel Agencies, Registration Fee of Hotels & Restaurants, Licenses Renewal fee of Hotels, Restaurants and Travel Agencies and the fines/late fee of Hotels,

Restaurants and Travel Agencies within Capital Territory by Capital Administration & Development Division.

4.5.3.6 Receipts Collected by Ministry of Foreign Affairs

4.5.3.6.1 It includes the receipts realized on the auction of vehicles, sale of used machinery and equipments, gains on exchange against the remittances made by the Government for the expenditure of the Pakistan's missions in various countries, recovery of overpayment made to the Government servants posted abroad and the deduction of income tax, GP Fund, Benevolent Fund, House Building and Motor Car Advances of the employees posted in various Pakistan's missions abroad.

4.5.3.7 Kashmir Affairs and Gilgit Baltistan Division

4.5.3.7.1 These include the receipts from motor vehicles, forest revenues, agriculture income, rent of buildings, electricity charges and other indirect taxes collected and deposited directly into the Government Treasury by the administration of the Kashmir Affairs & Gilgit - Baltistan Division.

4.5.3.8 States and Frontier Region Division

4.5.3.8.1 There are various receipts which are collected on account of stamp duty, fee and fine, agriculture receipts, etc. in various agencies in the Federally Administrated Tribal Areas. These receipts are collected by the Political Agents of various Agencies and deposited directly into the Government Account.

Table 33 Details of Other Receipts

(Rs . in Million)

4.5.4 RECEIPTS FROM OIL AND GAS SECTOR

4.5.4.1 Royalty on Oil and Gas

4.5.4.1.1 According to Article 16(1) of the Constitution of Islamic Republic of Pakistan, the royalty collected by the Federal Government shall not form part of the Federal Consolidated Fund and shall be paid to the provinces in which the well-head of natural gas is situated. As per Clause 5 of 7th National Finance Commission Award notified vide President's Order No.5 of 2010, each of the provinces shall be paid in each financial year as a share in the net proceeds of the total royalties on crude oil an amount which

bears to the total net proceeds the same proportion as the production of crude oil in the province in that year bears to the total production of crude oil.

4.5.4.1.2 Petroleum Exploration & Production Policy 2012 approved by Ministry of Petroleum & Natural Resources Government of Pakistan imposes Royalty on exploration and production of oil and gas. Clause 4.1of Section II of the said policy provides that Royalty will be payable at the rate of 12.5% of the value of petroleum at the field gate. The royalty will be paid by the Federal Government to Provinces to the extent of their share of liquid and gaseous hydrocarbons (such as LPG, NGL, Solvent oil, gasoline and others) as well as all substances including sulphur, produced in association with such hydrocarbon. The lease rent paid during the year shall not be deductible from the royalty payment. 10% of the royalty will be utilized in the district where oil and gas is produced for infrastructure development.

4.5.4.2 Windfall Levy on Crude Oil

4.5.4.2.1 As per Petroleum Exploration & Production Policy 2012, Windfall Levy (WLO) will be applicable on crude oil and condensate using the formula i.e WLO = 0.4 x (M-R) x (P-B) Where: WLO - Windfall Levy on crude oil and condensate; M - Net production (petroleum produced & saved); R - Royalty; P - Market Price of crude oil and condensate; B - Base Price. All the benefit of windfall levy may be equally divided between the Federal Government and Provincial Government concerned.

4.5.4.3 Discount on Local Crude Oil

4.5.4.3.1 Crude Oil and Natural Gas is explored/extracted by the Exploration and Production (E&P) Companies working under "Petroleum Concession Agreement (PCA)". E&P companies sell the crude oil to refineries at the rate prevailing in the international market based on the formula as per PCA. Under various agreements, E&P Companies agree to sell the crude oil to refineries at different discounted rate on attainment of certain milestones as per PCA. The amount of discount is retained by the refineries while making payment of crude oil to E&P companies and deposited in Government head of account.

4.5.4.4 The details of development surcharges and levies are given below:-

TABLE 34

Royalties, Discount retained on Crude Price and Windfall Levy

( Rs. in Million)

Chapter 5: PROVINCIAL SHARE IN REVENUE RECEIPTS

5.1 The provincial share of revenues from the divisible pool taxes, straight transfers etc. is governed in accordance with the provisions of 7th National Finance Commission Award notified vide President's Order No.5 of 2010 issued on 10th May, 2010, which is reproduced as under:

PRESIDENT'S ORDER NO.5 OF 2010

AN

ORDER

to provide for distribution of revenues and certain grants

WHEREAS in pursuance of clause (1) of Article 160 of the Constitution of the Islamic Republic of Pakistan (hereinafter referred to as the Constitution), the President, by the Finance Division's Notification No. S.R.O. 739(I)/2005 dated 21st July, 2005, as modified by the said Division's Notification No.S.R.O.693(I)/2009, dated 24th July, 2009, appointed a National Finance Commission to make recommendations, among other matters, as to the distribution between the Federation and the Provinces of the net proceeds of certain taxes;

AND WHEREAS the said Commission has also submitted its recommendations with regard to the said distribution;

NOW, THEREFORE, in pursuance of clauses (4) and (7) of Article 160 of the Constitution, the President is pleased to make the following Order:-

1. Short title and commencement.- (1) This Order may be called the

Distribution of Revenues and Grant-in-Aid Order, 2010.

• (2) It shall come into force on the first day of July, 2010.

2. Definitions.- In this Order, unless there is anything repugnant in the

subject or context.---

• (a) "Net Proceeds" means, in relation to any tax, duty or levy, the proceeds thereof reduced by the cost of collection as ascertained and certified by the Auditor General of Pakistan, and

• (b) "taxes on income" includes corporation tax but does not include taxes on income consisting of remuneration paid out of the Federal Consolidated Fund.

3. Distribution of Revenues. (I) The divisible pool taxes in each year shall

consist of the following taxes levied and collected by the Federal Government in that year, namely:

• (a) taxes on income;

• (b) wealth tax;

• (c) capital value tax;

• (d) taxes on sales & purchases of goods imported, exported, produced,

  • manufactured or consumed;

• (e) export duties on cotton;

• (f) customs duties;

• (g) federal excise duties excluding the excise duty on gas charged at

  • well-head; and

• (h) any other tax which may be levied by the Federal Government.

• (2) One percent of the net proceeds of divisible taxes shall be assigned to

• Government of Khyber Pakhtunkhwa to meet the expenses on War on Terror.

(3) After deducting the amount as prescribed in clause (2), of the balance amount of the net proceeds of divisible pool taxes, fifty six percent shall be assigned to the provinces during the financial year 2010-11 and fifty seven and a half percent from the financial year 2011-12 onwards. The share of the Federal Government in the net proceeds of the divisible pool shall be forty-four percent during the financial year 201011 and forty -two and half percent from the financial year 2011-12 onwards

4. Allocation of shares to the Provincial Governments. (1) The Province

-wise ratios given in clause (2) are based on multiple indicators. The indicators and their respective weights as agreed upon are:-

(a) Population 82.0 % (b) Poverty or backwardness 10.3%

(c) Revenue collection or generation 5.0 % (d) Inverse population density 2.7 %

(2) The sum assigned to the Provincial Governments under Article 3 shall be distributed amongst the Provinces on the basis of the percentage specified against each:-

(3) The Federal Government shall guarantee that Balochistan Province shall receive the projected sum of eighty-three billion rupees from the provincial share in the net proceeds of divisible pool taxes in the first year of the Award. Any shortfall in this amount shall be made up by the Federal Government from its own resources. This arrangement for Balochistan shall remain protected throughout the remaining four years of the Award based on annual budgetary projections.

5. Payment of net proceeds of royalty on crude oil : Each of the Provinces shall be paid in each financial year as a share in the net proceeds of the total royalties on crude oil an amount which bears to the total net proceeds the same proportion as the production of crude oil in the Province in that year bears to the total production of crude oil.

6. Payment of net proceeds of development surcharge on natural gas to the provinces : (1) Each of the Provinces shall be paid in each financial year as a share in net proceeds to be worked out based on average rate per MMBTU of the respective province. The average rate per MMBTU shall be derived by notionally clubbing both the royalty on Natural Gas and Development Surcharge on Gas. Royalty on natural gas shall be distributed in accordance with clause (1) of Article 161of the

Constitution whereas the development surcharge on natural gas would be distributed by making adjustments based on this average rate

(2) The development surcharge on natural gas for Balochistan with effect from Ist July, 2002 shall be reworked out hypothetically on the basis of formula given in clause (1) and the amount, subject to maximum of ten billion rupees, shall be paid in five equal installments by the Federal Government as grants to be charged on the Federal Consolidated Fund.

7. Grants-in-Aid to the Provinces : There shall be charged upon the Federal Consolidated Fund each year, as grants-in-aid of the revenues of the province of Sindh an amount equivalent to 0.66% of the provincial share in the net proceeds of divisible pool as a compensation for the losses on account of abolition of octroi and zila tax.

8. Sales Tax on services : NFC recognizes that sales tax on services is a Provincial subject under the Constitution of the Islamic Republic of Pakistan, and may be collected by respective Provinces, if they so desired.

9. Miscellaneous : (1) NFC also recommended increase in the rate of excise duty on natural gas to Rs. 10.0 per MMBTU. Federal Government may initiate necessary legislation accordingly.

(2) The NFC recommended that the Federal Government and Provincial Governments should streamline their tax collection systems to reduce leakages and increase their revenues through efforts to improve taxation in order to achieve a 15% tax to GDP ratio by the terminal year i.e. 2014-15. Provinces would initiate steps to effectively tax the agriculture and real estate sector. Federal Government and Provincial Governments may take necessary administrative and legislative steps accordingly.

(3) Federal government and Provincial Governments would develop and enforce mechanism for maintaining fiscal discipline at the Federal and Provincial levels through legislative and administrative measures.

(4) The Federal Government may assist the Provinces through specific grants in times of unforeseen calamities.

(5) The meetings of the NFC may be convened regularly on a quarterly basis to monitor implementation of the award in letter and spirit.

10. Repeal.- The Distribution of Revenues and Grant-in-Aid Order, 1997 (P.O.No.1 of 1997), and the Distribution of Revenues and Grants-in-Aid, Order, 2010. (P.O. 4 of 2010) are hereby repealed.

ASIF ALI ZARDARI

President

5.2 Distribution of Revenues and Grants-in-Aid Order, 2010 (President's Order No. 5 of 2010) was slightly amended through President's Order No.6 of 2015, which is reproduced as under;

PRESIDENT'S ORDER NO.6 OF 2015

AN

ORDER

To amend Distribution of Revenues and Grants-in-Aid Order, 2010 (President's Order

No.5 of 2010)

Whereas it is expedient to amend the Distribution of Revenues and Grants-in-Aid Order, 2010 (P.O. No. 5 of 2010) for the purpose hereinafter appearing.

Now therefore in pursuance of clause (6) read with clause (7) of Article 16 of the Constitution of the Islamic Republic of Pakistan, the President is pleased to make the following Order:-

1. Short title and commencement: (1) This Order may be called the

Distribution of Revenues and Grants-in-Aid (Amendment) Order 2015.

• (2) It shall come into force on the first day of July 2015.

• (3) It will remain in force till further orders.

2. Substitution of Article-4(3) P.O No.5 of 2010: In the Distribution of

Revenues and Grants-in-Aid Order, 2010 (P.O. No. 5 of 2010) for Article 4(3) the following shall be substituted;

3. The Federal Government shall guarantee that Balochistan Province shall receive the projected sum of eighty-three billion rupees from the provincial share in the net proceeds of divisible pool taxes in the first year of the Award and any shortfall in this amount shall be made up by the Federal Government from its own resources. This arrangement for Balochistan shall remain protected throughout Award period based on annual budgetary projections.

MAMNOON HUSSAIN

President

5.3 The following table shows the estimated transfers to the provincial governments on account of their share in Federal Taxes and by straight transfers during the year 2016-17 and 2017-18;

Table 35 Provincial Share in Revenue Receipts 2016-17 (Budget)

( Rs. in Million)

Table 36 Provincial Share in Revenue Receipts 2016-17 (Revised) (Rs. in Million)

Table 37 Provincial Share in Revenue Receipts 2017-18 (Budget) (Rs. in Million)

Chapter 6: CAPITAL RECEIPTS

6.1 Capital receipts comprise Recoveries of Loans and Advances from Provinces and other entities and Public Debt which includes Permanent Debt and Floating Debt. The net capital receipts so realized by the federal government generally constitute the available resources for the financing of its Public Sector Development Programme. External finances and un-funded debt (primarily made up of the various instruments available under the National Savings Schemes) also fall under the category of Capital Receipts, however they are covered under separate chapters of this publication.

6.2 The following table indicates the position of Capital receipts for 2016-17 (budget and revised) and 2017-18 (budget).

Table 38 Capital Receipts

(Rs. in Million)

6.3 RECOVERIES OF LOANS AND ADVANCES

6.3.1 The recovery of principal amount of loans and advances from provinces, public sector enterprises, financial and non-financial institutions is reflected in this section. 6.3.2 The estimates of recoveries of loans and advances are given below :

TABLE 39 Recover of Loans and Advances (Provinces)

( Rs. in Million)

TABLE 40 Recover of Loans and Advances (Local Bodies)

( Rs. in Million)

TABLE 41 Recovery of Loans and Advances (Financial Institutions)

(Rs . in Million)

Table 42

Recovery of Loans and Advances (Non-Financial Institutions)

( Rs. in Million)

6.4 PUBLIC DEBT

• Public Debt of the Federal Government is classified into two basic categories:

  • (i) Domestic debt, which includes permanent debt, floating debt and unfunded debt; and

  • (ii) Foreign currency debt, which includes long, medium and short term debt.

6.4.2 DOMESTIC DEBT (PERMANENT)

The main features of securities through which domestic debt (permanent) is raised are given below:

6.4.2.1 Pakistan Investment Bonds:

6.4.2.1.1 This security having maturity period of 2, 3, 5, 7, 10, 15, 20 and 30 years is in operation since 2000. Against the budgeted receipt of Rs.150,000.000 million for the year 2016-17, the revised estimates for the year 2016-2017 have been worked out at

Rs.110,020.400 million whereas the budget estimates for the year 2017-2018 are estimated at Rs.115,000.000 million.

6.4.2.2 Government Ijara Sukuk Bonds:

6.4.2.2.1 The Government of Pakistan Ijara Sukuk Bonds are issued through Pakistan Domestic Sukuk Company Limited. The Sukuk are not redeemable before maturity. The profit on the Sukuk is payable bi-annually on rental rate to be announced by State Bank of Pakistan. Against the budget estimates of Rs.463.000 for the year 2016-17, the revised estimates have been projected at the same level. The budget estimates for the year 2017-18 are estimated at Rs.60,000.000 million.

6.4.2.3 National Prize Bonds:

6.4.2.3.1 These are of bearer type non-terminable securities freely en-cashable and transferable by delivery. These are issued in denomination of Rs.100/-, Rs.200/-, Rs.750/-, Rs.1500/-, Rs.7500/-, Rs.15000/-, Rs.25,000/- and Rs.40,000/-. Against the budgeted receipt of Rs.110,000.000 million for the year 2016-2017, the revised estimates for the year 2016-17 are kept at Rs.115,830.900. Budget estimates for the year 2017-18 are estimated at Rs.85,000.000 million.

6.4.2.4 The net receipts from domestic debt (permanent) during the year 2016-2017 (budget & revised) and 2017-2018 (budget) are estimated as under:-

6.4.2.4 Premium Prize Bonds (Registered):

6.4.2.4.1 Premium Prize Bonds (Registered) of Rs.40,000/- denomination have been launched. These bonds offer biannual profit payment on completed period of six months as well as prize money on quarterly draws. The bond shall be registered against the name of purchaser. The ownership of bond is transferable from one person to another person through an application on prescribed format.

Table 43 Public Debt

(Rs. in Million)

6.4.3 FOREIGN CURRENCY DEBT (PERMANENT)

It includes the following securities:

6.4.3.1 Foreign Exchange Bearer Certificates(FEBCs): Budget estimates in case of repayment of 6.4.3.1.1 Foreign Exchange Bearer Certificates for financial year 2016-17 were estimated at Rs.5.000 million. Revised estimates for the year 2016-17 are projected at Rs.1.000 million whereas budget estimates for financial year 2017-2018 have been kept at Rs.5.000 million.

6.4.3.2 Foreign Currency Bearer Certificates(FCBCs):

6.4.3.2.1 Repayment on account of Foreign Currency Bearer Certificates in the budget estimates for the year 2016-2017 was estimated at Rs.5.000 million. Revised estimates for the year 2016-2017 and budget estimates on account of repayment have been kept at Rs.1.000 million and 5.000 million respectively. These certificates are in US$ and Pound Sterling. Profit is payable half yearly at floating rates which is not liable to income tax. Investment in these certificates is exempt from Wealth Tax and compulsory deduction of Zakat.

6.4.3.3 US Dollar Bearer Certificates (DBCs):

6.4.3.3.1 This security was introduced in 1991 and discontinued on 17th November, 1994. Against the repayment of Rs.3.000 million in the budget estimate 2016-2017, revised estimates 2016-2017 and budget estimates for the year 2017-2018 have been kept at Rs.1.000 million and Rs.3.000 million respectively.

6.4.3.4 Special US Dollar Bonds:

6.4.3.4.1 These bonds were issued under Special US Dollar Bonds Rules, 1998 to the Foreign Currency Accounts holders or Foreign Currency Certificates holders with scheduled banks or non-bank financial institutions out of their foreign currency deposits. Against the repayment of Rs.50.000 million provided in budget estimates 2016-2017, the repayment on account of these bonds in revised estimates 2016-2017 has been estimated at Rs.10.000 million. Budget estimates for the year 2017-2018 are estimated at Rs.50.000 million.

6.4.3.5 The estimates of foreign currency debt (permanent) are tabulated below:-

Table 44 Public Debt (Foreign Currency Permanent)

(Rs. in Million)

6.4.4 Floating Debt

The term "floating debt" is applied to borrowing of purely temporary nature with currency of not more than twelve months. Market Related Treasury Bills and Bai-Maujjal Ijara Sukuks are included in this category.

6.4.4.1 Market Related Treasury Bills (Auction):

These reflect non-bank borrowing of the Federal Government.

6.4.4.2 Government Bai-Muajjal Ijara Sukuk :

6.4.4.2.1 Government Bai-Maujjal Sukuk are issued through auction for a maturity period of one year from date of issue. Bai-Maujjal Ijara Sukuk shall be repaid only on maturity. The profit earned on Bai-Maujjal Ijara Sukuk shall be liable to income tax. Withholding tax shall be deducted at source at the applicable rate.

6.4.4.3 The estimates of receipts from floating debt during the year 2016-2017 (revised) and 2017-2018 (budget) are as under:-

Table 45 Floating Debt

( Rs. in Million)

Chapter 7: PUBLIC ACCOUNT RECEIPTS

7.1 Article 78(1) of the Constitution of Islamic Republic of Pakistan provides that all revenues received by the Federal Government, all loans raised by that Government and all moneys received by it in repayment of loan, shall form part of the Federal Consolidated Fund. Besides, Article 78(2) provides that all other moneys received by or on behalf of the Federal Government shall be credited to the Public Account of the Federation. Public Account largely comprises money kept by the Government as a trust, which may be repaid on demand subject to such terms and conditions as prescribed in this regard.

• 7.2 Public Account Receipts may be categorized as Deferred Liabilities and Deposit Receipts.

7.3 DEFERRED LIABILITIES

These receipts represent the net proceeds of various savings schemes launched by the Government. Brief introduction of each saving scheme is given below.

7.3.1 Defence Savings Certificates

7.3.1.1 This is a ten years scheme. However, the investment can be encashed at any time. The rate of return on Defence Savings Certificates has been linked with the yield of Pakistan Investment Bonds of ten years maturity. The existing rate on this scheme is 7.54% p.a. on maturity. Withholding tax is deducted from the profit payment. Apart from individuals, institutions may invest their individuals’ funds such as pension, gratuity, superannuation, contributory provident funds and trusts etc. in this scheme.

7.3.2 Special Savings Certificates/Accounts

7.3.2.1 Special Savings Certificates (Registered/Accounts) is a three years scheme with profit payable on six monthly basis. The rate of return on Special Savings Certificates/Accounts has been linked with the yield of Pakistan Investment Bonds of three years maturity. The existing rate of profit in this scheme is 6.00% per annum for first to fifth profits and 6.20% for the last sixth profit. Withholding tax is deducted from the profit payment. Apart from individuals, institutions may invest their individuals’ funds

such as pension, gratuity, superannuation, contributory provident funds and trusts etc. in this scheme.

7.3.3 Regular Income Certificates

7.3.3.1 This scheme was introduced on 2-2-1993 to ensure payment of income on monthly basis. The rate of return on Regular Savings Certificates has been linked with the yield of Pakistan Investment Bonds of five years maturity. The existing profit on this scheme is 6.54% per annum. The profit in the scheme is subject to withholding tax and the investment is exempt from compulsory deduction of Zakat at source. Apart from individuals, institutions may invest their individuals’ funds such as pension, gratuity, superannuation, contributory provident funds and trusts etc. in this scheme. Premature encashments on these certificates carry service charges as under:-

(i) if encashed before completion of one year from the date of issue @ 2% of face value (ii) Before two years @ 1.50% of face value (iii) Before three years @ 1% of face value (iv) Before four years @ 0.5% of face value

7.3.4 Mahana Amdani Account

7.3.4.1 It is a five years scheme in which only individuals can invest from Rs.500/- to Rs.5000/- each month consecutively for five years and thereafter, the return was paid on monthly basis equal to the amount of monthly deposit till the withdrawal of accumulated principal amount. However, the account holders who opened accounts on or after 1.7.2000 and 1.7.2002 were required to deposit monthly installment for six years and seven years respectively to get monthly profit equal to the amount of monthly deposit so long as the account is not closed. The return upto Rs.1000/- is tax free. Zakat is deducted on principal value at the time of payment of return if declaration in this regard is not filed. However, Mahana Amdani Account Scheme has been discontinued after 17^th May, 2003.

7.3.5 Savings Accounts

7.3.5.1 This is the oldest savings scheme in operation which provides profit on nonchequing accounts. Zakat is deducted @ 2.50% on credit balance on valuation date each year if declaration in this regard is not filed. The existing profit on savings account is 3.95% p.a. Withholding tax is deducted from the profit payment. Apart from individuals, institutions may invest their individuals’ funds such as pension, gratuity, superannuation, contributory provident funds and trusts etc. in this scheme.

7.3.6 Pensioners' Benefit Accounts

7.3.6.1 This scheme has been launched with effect from 20-1-2003 to provide incentives to the retired officials of the Federal Government, Provincial Governments, Azad Government of the State of Jammu and Kashmir, Armed Forces, Semi Governments and autonomous bodies and in case of death the pensioner’s eligible member of the family. Only one account can be opened in the National Savings Centre with a minimum deposit of rupees ten thousand and in multiple of one thousand with the facility of seven subsequent deposits subject to the maximum limit of five million rupees. It is a ten years scheme and profit is payable on completion of each period of one month reckoned from the date of opening of an account till maturity or encashment whichever is earlier. The existing rate of profit on this scheme is 9.36% p.a. Premature encashment before completion of one, two, three and four years carries service charges at the rate of 1.00%, 0.75%, 0.50% and 0.25% of principal amount respectively. Profit accrued from this scheme is exempt from compulsory deduction of withholding tax and Zakat. The scheme has been made more attractive as any upward revision in rate of profit notified after 9.3.2009 shall also be applicable to existing accounts holders whereas downward revision shall apply to fresh investment only.

7.3.7 Bahbood Savings Certificates

7.3.7.1 Initially this scheme was introduced exclusively for widows to cater for their needs with monthly profit payment facility. The scheme was further extended to the aged persons 60 years or above. The existing rate of profit on this scheme is 9.36% per annum. The maximum investment limit in this scheme is five million rupees and ten

million rupees for joint holders. It is only a compensatory package to enable widows and senior citizens to supplement their income to lead a respectable life. Service charges at the rate of 1.00%, 0.75%, 0.50% and 0.25% of the face value are deducted if certificates are encashed before completion of one, two, three and four years respectively. Profit accrued from this scheme is exempt from compulsory deduction of withholding tax and Zakat. The scheme has been made more attractive as any upward revision in rate of profit notified after 9.3.2009 shall also be applicable to existing certificate holders whereas downward revision shall apply to fresh investment only. 7.3.8 The estimates of receipts are tabulated as under.

Table 46 Deferred Liabilities

( Rs. in Million)

7.4 DEPOSITS AND RESERVES

7.4.1 The public account deposit receipts are broadly of two types known as (i) Reserve funds and (ii) Other deposits. The reserve funds, falling in the category of renewal reserve and depreciation funds, are designed to meet the cost of renewal and replacement of assets of the commercial departments and undertakings to which they relate. These are fed by annual contribution from these departments and organizations, calculated either on commercial principle or on ad-hoc basis. The expenditure on renewal and replacement in a year is initially booked as expenditure under the relevant capital head of account but at the end of the year, it is transferred to the appropriate depreciation or renewal reserve fund per contra-credit to the expenditure head.

7.4.2 Reserve funds and deposit accounts, other than the renewal reserve and depreciation funds, are intended to provide for liabilities and requirements of funds for specific purposes for which they have been created. Like renewal reserve and depreciation funds, these are fed by regular yearly payment or ad-hoc contributions from the current revenues. Such transfers generally pass through the budget grant of the concerned Ministry or Division.

7.4.3 The reserve funds and deposit accounts in respect of which provision for contributions have been made in the revised estimates for 2016-17 and budget estimates for 2017-18 are tabulated on the following pages.

Table 47 Deposits and Reserve Fund

( Rs. in Million)

7.4.4 A brief description of the main deposits/reserve funds are given below.

7.4.4.1 Post Office Renewal Reserve Fund

7.4.4.1.1 The objective of establishing this reserve fund is to secure the payment of annual contribution from general revenues, to provide funds to meet the actual cost of renewing and replacing assets. The fund also bears the cost of relieving capital of the value of an asset, other than land, which is sold, abandoned or otherwise disposed off without being replaced. The fund receives credit for an annual contribution from working expenses of such amount fixed from time to time as a depreciation charge based on the life of assets as well as sale proceeds of unserviceable materials, block value of dismantled assets etc.

7.4.4.2 Railways Depreciation Reserve Fund

7.4.4.2.1 The Railways Depreciation Reserve Fund provides for the cost of renewals and replacement of assets as and when it becomes necessary. The Fund was to provide the amount of original cost of the assets replaced and its scope was restricted to the replacement of complete units of certain classes of wasting assets. With a view to providing safeguard against over capitalization, the entire cost of the replacement of an asset including the improvement elements is charged to the Fund. Presently, the contribution to the fund is made by adopting "Straight Line Method".

7.4.4.3 Railways Reserve Fund

7.4.4.3.1 The objective of establishing this Fund is to secure the payment of annual contribution of general revenues to provide, if necessary, for arrears of depreciation and for writing off capital and to strengthen the financial position of the Railways. The Fund was also used for temporary borrowings for the purposes of meeting the expenditure for which there was no provision or insufficient provision in the revenue budget. The receipts in this Fund consist of the surplus which remains out of the profit of Railways after payment to general revenues of the contribution fixed under the Convention.

7.4.4.4 Workers Welfare Fund

7.4.4.4.1 This Fund was created for provision of housing facilities and other amenities to industrial workers. Initial contribution of Rs.100 million was made by the federal

government. Further contributions to the Fund are being made in the form of Workers Welfare Tax @ 2% per annum of the total assessable income of industrial units whose income is not less than Rs.100,000 and the amount transferred to the Fund from time to time, under clause (d) of Section 4 of the scheme set out in the schedule to the "Companies' Profit (Workers' Participation ) Act, 1968 (XII of 1968). All proceeds of the fund will initially be credited into the WWF Trust Fund and money from the fund for incurring expenditure on the defined/prescribed purposes will be withdrawn by submitting a proper sanction of competent authority to AGPR. However, the profit earned either from investment of Bank accounts and income from properties and assets will be credited direct in the WWF bank Account and the entire amount shall be treated as part of the "Workers Welfare Fund" and it shall be subject to audit.

7.4.4.5 Fund for Exchange Risk on Foreign Loans

7.4.4.5.1 The federal government pays the difference of exchange rate fluctuations on behalf of borrowers, and charges an exchange risk fee. The rate of this fee is different for different foreign currencies.

Chapter 8: EXTERNAL RESOURCES

• 8.1 External Resources comprise Project Loans and Grants, Programme Loans and Other Loans. A brief description is given as under;

8.2 Project Loans and Grants

8.2.1 Project loans and grants are received from specialized international financial institutions and friendly countries with specific purpose falling under the following broad categories;

8.2.2 For Project under Public Sector Development Programme (PSDP)

8.2.2.3 Project loans and grants for PSDP are received for various projects being executed by Federal Government, Provincial Government and various Autonomous bodies such as WAPDA, PEPCO, NHA etc.

8.2.3 For Projects outside Public Sector Development Programme (PSDP)

8.2.3.1 There are certain projects kept out of PSDP, which are executed by Federal Government, Provincial Government and Autonomous bodies by receiving project loans and grants.

8.3 Programme Loans

8.3.1 Programme loans are provided for budgetary support and are linked/tied with achievement of specific targets and goals. Programme Loans not only stabilize foreign exchange reserves but also generate rupee counterpart to meet country's development needs.

8.4 Other Loans

Other loans comprise loans from Islamic Development Bank, Sovereign Bonds, Sukuk Bonds, etc received from non-traditional sources generally by way of payment as well as for budgetary support.

8.5 The estimates of external resources for the year 2016-17 (budget and revised) and 2017-18 (budget) are tabulated on the following page.

Table 48 External Resources

(Rs. in Million)

Chapter 9:

RECEIVABLES

9.1 The Federal Government extends loans to the provincial governments, AJ&K, local bodies, autonomous organizations, financial and non-financial institutions for meeting their development needs and other budgetary requirements. As per the agreement, certain time-lines with regard to payment of principal amounts and interest are to be followed. However, there is growing tendency of default on this account in a number of organizations. In this publication, statistics regarding such receivables have been included for the first time.

• 9.2 The figures of receivables are given in the following table;

Table 49 Arrears of Foreign Relent Loans as on 30-06-2016 as intimated by EAD vide Letter No.6(1)DMR-I/2016 Dated 28-02-17 (Rs. In Million)

Consolidated Receivables - FRL and CDL

(Rs. In Million)

Receivables - Cash Development Loans

(Rs. In Million)

Chapter 10: PRIVATIZATION PROCEEDS

9.1 Privatization in Pakistan is an important economic reform policy tool, for generating growth and to expunge structural inefficiencies, by removing false barriers and opening up the economy to competition. The Privatization program is part of the economic and structural reforms agenda of the Government of Pakistan that along with deregulation and good governance, seeks to enhance the growth and productivity of Pakistan’s economy, by harnessing the private sector as its engine of growth. It takes an integrated approach, towards enhancing the private sector’s role and goes beyond the transfer of public assets to the private sector, by identifying the linkages and role of regulation, good governance, market competition in fostering conditions that provide incentives for the private sector to invest in providing goods and services efficiently.

9.2 The Privatization Commission Ordinance, 2000 was promulgated on 28th September, 2000 to establish "Privatization Commission" for implementation of privatization policy of the federal government.

9.3 Section 16(2) of the said Ordinance envisages that the privatization proceeds shall be utilized by the Federal Government as follows :-

• (a) ten percent shall be used for poverty alleviation programmes ; and

• (b) the remaining ninety percent for retirement of the Federal Government debt

9.4 The estimates of privatization proceeds are given below:

Table 50 Privatization Proceeds

(Rs. in Million)

Chapter 11: DEVELOPMENT ASSISTANCE TO PROVINCES

10.1 The provinces fund their respective ADPs from two sources i.e Self-Financing and Federal Assistance.

10.1.1 Self Financing

10.1.1.1 Largely the Provinces finance their respective ADPs out of their budgetary resources comprising self-generated receipts as well as share in Federal revenue receipts i.e Divisible pool taxes and straight transfers. However, they also rely on the assistance provided by Federal Government.

10.1.2 Federal Assistance

10.1.2.1 The Provinces also receive Federal assistance in the shape of Cash Assistance and Foreign Project Assistance i.e Loans and grants.

10.1.3 The provincial development scenario has been depicted in the following tables from difference angles;

Table 51 Self-Financing of ADPs by Provinces

(Rs. in Million)

Table 52 Financing of ADP of Balochistan

(Rs. in Million)

Table 53 Financing of ADP - Khyber Pakhtunkhwa

( Rs. in Million)

Table 54 Financing of ADP - Punjab

( Rs. in Million)

Table 55 Financing of ADP - Sindh

( Rs. in Million)

Table 56 Development Assistance to Provincial Governments A Consolidated View 2016-17 (Budget)

(Rs . in Million)