Provincial Advisory Groups Round Tables on "Ownership & Management of Natural Resources in Federal Systems” – Pakistan

Dr. Saubia Ramzan of the University of Balochistan taking part in the discussion on ownership and management of natural resources during a meeting of Balochistan Policy Advisory Group on Federalism

“Ownership & Management of Natural Resources in Federal Systems” Report on Provincial Roundtables The Centre for Civic Education Pakistan (CCEP) and the Forum of Federations (The Forum) held a series of four Provincial Advisory Groups Round Tables on “Ownership & Management of Natural Resources in Federal Systems” in all the four provinces in July 2011. These meetings provided a platform for dialogue and debate among a wide variety of prominent experts from government, academia, and the development community on issues related to ownership and management of natural resources in federal countries in general and Pakistan in particular. Background: Ownership and management of natural and energy resources have been contentious issues in many federal systems. Pakistan is no exception where ownership and control over natural resources has always been a major source of tension between the federal and provincial governments. This conflict has contributed in an important way to the shaping of Pakistani federalism at the time of drafting the 1973 Constitution. The fathers of the Constitution agreed to demands from Khyber Pakhtunkhwa (then NWFP) and Balochistan province on straight transfer of excise duty and royalty on natural gas as well as net hydro-electricity profit to the provinces where the gas fields or power plants were located. During the two long spells of military dictatorships, the provinces could not benefit from these rights. As a result Sindh and Balochistan have not been happy over the payment of meager royalty on oil and gas production while Khyber Pakhtunkhwa had been struggling to recover the arrears of net profit on hydro-electricity. The smaller provinces also have serious concerns over employment patterns in oil and gas companies. Water management is another flashpoint in the context of Pakistani federalism. For a largely arid and agrarian country like Pakistan, water management is a vital priority as the country is fast moving from a water-stressed to water-scarce situation. Pakistan’s failure to devise an effective strategy for political, economic and technological management of water has led to a fall in water availability per person from 5,000 cubic meters in 1947 to 1,100 cubic meters in 2006. Despite the Water Apportionment Accord of 1991 and a federal body named Indus River System Authority (IRSA) for this purpose, the provinces of Sindh and Punjab have serious conflict over water distribution while Khyber Pakhtunkhwa and Balochistan do not have the capacity to fully utilize their apportioned share of water, as a result there is an acute energy-deficit as Pakistan has not able been able to fully utilize its hydro-power potential for cheaper generation of electricity. However, recent changes in the Constitution have attempted to redress many of these issues and grievances. Now ownership of oil and gas is vested jointly and equally in the federal government and the relevant provinces. The federating units are also empowered by providing them more autonomy and resources. The provinces can now raise domestic and international loans and provide guarantees and can also establish power generation units without permission or interference of the federal government. In the wake of this new paradigm of participatory federalism, while provincial autonomy has been acknowledged and the question of ownership and control of the natural resources has been addressed constitutionally, the institutional, legal and political aspects still need to be deliberated upon. While the varied interpretations to the constitution and its amendments and the water accord are still matters of serious dispute amongst provinces, the perceived or real failure to implement the constitution in both letter and spirit has resulted in a huge trust deficit within the federation. There is a need for an informed dialogue to create better understanding and consensus while the provincial governments struggle to prove their capabilities to capitalize on their newly acquired powers. The First of these series of Round Tables was held in Sindh (Karachi) on Thursday, July 21st, 2011 at Sheraton Hotel, Karachi . Ownership
Dr. Kaiser Bengali, former advisor to chief minister, speaking at a meeting of Sindh Policy Advisory Group on Federalism. Also seen the picture are: (From left to right) Dr. Muhammad Ali Shaik, Principal SMI College, Senator Taj Haider, provincial general secretary of Pakistan People’s Party, Christian Brecht, German Consul General in Karachi, and Mr. Zafa Ullah Khan, Executive Director of Centre for Civic Education Pakistan.

The meeting consisted of three sessions in which eight speakers from government, political parties and civil society presented their views. Forty five key stake holders participated in this round table. Mr. Zafar Ullah Khan, Executive Director of Centre for Civic Education, in his opening address welcomed the guests to what he called a ‘learning session’ by the Provincial Policy Advisory Group. He thanked the German consulate for their generous support and encouragement, stating that it has enabled all of us to grasp this opportunity to reform what is possible. Dr. Christian Brecht, German Consul General expressed his delight at being a part of the event stating two main reasons for his interest. Firstly, because, he said the topic under discussion has become very pertinent in the aftermath of the 18th amendment. The second reason he claimed was because he plans to join the FOF in Canada and wishes to continue his cooperation with Pakistani institutions working on such issues. Dr. Brecht shared that Germany as a federation is very eager to share its experience, but the most important question that arises for him in the wake of the 18th amendment is that of capacity. How can the federating units capitalize on this new found power? The Key note speaker was Mr. Taj Haider, Ex-Senator and General Secretary Pakistan People’s Party started his keynote speech by reemphasizing the importance of the topic stating that Sindh contributes about 70% of the gas and more than 60% of the oil production in Pakistan. He hoped that this session would help clarify many issues and help move towards a solution. Highlighting another important constitutional change regarding the existing arrangements, he said it implies that the existing resources shall now be jointly and equally shared between the federal and the provincial governments. However, he went on to say, there are still hurdles in the way created by misinterpreting the clauses and its implementation. Dr. Kaiser Bengali, former advisor to the Chief Minister Sindh and a major contributor to the 7th NFC awards, gave a presentation titled ‘Ownership and Management of Natural Resources: Need to Meet the Challenge’. Dr. Bengali began by reemphasizing the importance of the 18th amendment stating that it is perhaps the most important development after the 1973 constitution itself. On paper at least, he said, Pakistan is more federal than India, the challenge however, is to make it work. He agreed that the issues of capacity are still there but these are frivolous. Political decisions are not based on capacity. They are made on what people want. He said we are lucky, because the NFC award happened before the 18th amendment, otherwise provinces would have had the powers but not the financial backing to support it. Mr. Naseer Memon, Chief Executive SPO Pakistan gave his presentation titled “Oil and Gas Resources and Rights of Provinces”. He said Sindh is the largest oil and gas producing and therefore may be considered as the energy basket of Pakistan. Interestingly however its ratio of consumption is less than that of Punjab and KPK. He advocated for the case on employment, in energy and power sector, for local communities and for transfer of royalties, to oil and gas producing districts/talukas under PFC. The participants recommended that an authority or controlling body should be created which would be responsible for developing policies and development plans to control and supervise oil and gas resources. Energy shortage in the country can be met by cutting down on wastage and improving efficiency through better management practices and system automation and innovation. For e.g., setting operating criterion for reservoirs, use of automatic valves, constructing underground dams, use of drip irrigation etc. On the issue of hydroelectricity, as a policy Pakistan must go all out to harness cheap Hydroelectric power in Northern Areas, Azad Kashmir & KP, decentralize electric generation and tariffs and allow cheap power to local people and industry while exporting the rest to Pakistan’s major cities. Ownership
A participant taking part in the discussion on ownership and management of natural resources during a meeting of Sindh Policy Advisory Group on Federalism.

The second Roundtable was held in Quetta (Balochistan) on July 23, 2011 at Serena Hotel. Ownership
Mr. Shahzada Zulfiqar, Senior journalist, speaking at the meeting of Balochistan Policy Advisory Group on Federalism. Also seen in the picture are: Mr. Usman Khan Kakar (centre), provincial president of Pakhtunkhwa Milli Awami Party, and Dr. Ishaque Baloch (right), vice president of National Party.

Thirty Nine Key federalism stake holders participated in this meeting and debated on ideas of ownership and management of natural resources in federal systems. The themes of the meeting comprised of presentations and addresses by eminent speakers on oil, gas and water resources in Balochistan. Dr. Abdul Salam, Director, Centre of Excellence in mineralogy, University of Balochsitan addressed the geological settings of Balochistan Province. He focused on the statistics compiled by the provincial finance department reflecting that Pakistan is a federal republic constituting four provinces with imbalanced populations; all provinces are the producer of oil and gas with asymmetric proportions. Therefore, the provinces with larger production are not getting due share of their taxes which causes tension between federal and provincial governments. He summed up his presentation by stating that decisions on energy projects should be resolved by considering the due share and ownership of federating units rather than native political and individual interests. The facts and figures reveal that Pakistan’s energy sector is in a state of crisis and has negatively impacted social and economic growth. Management and ownership for the composition of energy-mix encompassing oil, gas, hydro-electricity, nuclear, coal, electricity, wind, waste, solar power under 18th amendment are the solution to control energy crisis as energy sector forms the backbone of the country. One of the major issues disclosed by Mr. Dostain Jamaldini, Secretary Finance, Government of Balochistan, during the interactive session was that the stakeholders need to concentrate the issue of Kachhi canal accomplishment as it can bring about 0.8 million acre of land under cultivation in the districts of Nasirabad, Jaffarabad, Bolan, Jhal Magsi and Dera Bugti. The major phases have now been delayed due to the shortage of finance and conflicts, however, Reko Deq, Copper and Gold project has also become a major controversy in the province. The facts reflect that there are sufficient mineral deposits in Balochistan and optimum utilization can be made possible only by encouraging foreign capital investment and technology. The best solution for this is to remove the feeling of mistrust and unrealistic presumptions by granting autonomy to the masses and state of Balochistan. Session II of the meeting portrayed a vivid picture about water, oil and gas resources in Balochistan with the key concerns and choices which set up the path to draw recommendations and conclusion from significant aspects of discussion. One of the speakers Mr. Usman Khan, President Pashtoonkhwa Milli Awami Party commented about the Balochi resentment due to the discriminatory conduct of federal government with Balochistan lacked the parity doctrine by federal state. Moreover, inter-provincial water conflicts have now become severe on the case of water entitlement and sharing the water shortage which has almost taken the form of a war between the provinces. In this regard, the issue of proper measurement of water has the same intensity for controversy which needs to be adjusted as Water Apportionment Accord allows the provinces to market the excessive water and develop a viable system of water measurement to resolve inter-provincial differences. Taking into account the case of natural resources, Dr. Ishaq Baloch, Vice President, National Party presented facts and figures about the allocation and issues relating to water, oil and gas resources in Balochistan. He mentioned that constitutional crisis proved to be a source of political dispute on the matter of federalism amongst federating units and the federal government. Addressing the issues of dams he said that smaller dams should be the priority for provinces to deal with the major concerns of water shortage in Balochistan. Chromite, coal, copper, gold metallic and non metallic minerals compose the economic value of the province. In this context, technology, capital and export opportunities should be made available in order to address the hunger and aggressiveness of marginalized communities of the province. Informal breakouts and interactive sessions summed up some useful recommendations and a way-forward for the autonomy and management of natural resources in a true federal state. The exploration and management of these resources should be the sole concern of the province in order to define its priority by encouraging foreign investment and capacity building practices to achieve the self-sustainability. The ideas highlighted during the debate would empower the federating unit with control to transform the deprived community into progressed framework. The Government of Balochistan needs to concentrate on intelligent planning for productive strategy formulation for the overall progression of the region while the federal government has to observe the doctrine of parity and federalism. Ownership
A view of the meeting of Balochistan Policy Advisory Group on Federalism.

The Third meeting of this series of Round Tables was held in Khyber Pukhtoonkhwa (Peshawar) on July 27th 201. Ownership
Mr. Noor-ul Haque (2nd from right), Executive Director Accounts, Oil & Gas Regulatory Authority (OGRA) raising a question during a question & answers session at the meeting of Khyber Pakhtunkhwa Policy Advisory Group on Federalism.

Fifty two key stake holders, including experts on Natural resources, decision makers, civil society academia and media representatives took part in this day long deliberations. The Key note speaker was Senator Afrasiab Khattak who was also the member of the Constitution reform Committee on 18th amendment. Mr. Khattak said that the Khyber Pakhtunkhwa government would revisit all laws related to natural resources as the recent constitutional changes made provinces equal owners of natural resources with the federal government. In his speech on ‘Ownership and management of natural resources in Pakistan: Khyber Pakhtunkhwa’s concern and choices’, Mr Khattak said that 18th Amendment made Pakistan the best federal system in Asia where provinces were given maximum autonomy. He added that as “As autonomy without resources is meaningless, the 18th amended Article 172 of the Constitution has addressed this issue and now oil and gas resources are jointly and equally owned by the federal government and provinces”. He said that Khyber Pakhtunkhwa was endowed with immense natural resources, there is potential for hydel power generation in the north while the southern districts are rich in oil and gas resources. Provincial government has established a separate division to look at issues of power and energy, to explore and fully utilize its energy potential. The province should invest all proceeds of the net hydel profit for enhancing its electricity generation. Ownership
Senator Afrasiab Khattak (centre), member of the Implementation Commission on the 18th Amendment, speaking at a meeting of Khyber Pakhtunkhwa Policy Advisory Group on Federalism. Also seen in the picture are: Quraysh Khattak, program manager of the Centre for Civic Education Pakistan (left) and Prof. Dr. Sarfraz Khan, Director of Area Study Centre, University of Peshawar (right).

Two geologists Dr Mohammad Hanif and Dr Fazli Rabbi made presentations on oil and gas potential in Khyber Pakhtunkhwa and the Federally Administered Tribal Areas. Dr Said Alam Mehsud spoke about water distribution and governance systems in the country as well as gains and losses of Khyber of Pakhtunkhwa while Prof Shafiqur Rahman chaired the session on water. Dr Sarfaraz Khan, Director of the Area Study Centre, University of Peshawar, acted as the moderator. Noorul Haque of OGRA and Quraysh Khattak, CCEP Programme Manager, also spoke on the occasion. Ownership
A view of the meeting of Khyber Pakhtunkhwa Policy Advisory Group on Federalism.

The last and the final meeting of this series of Round Tables was held on 30th July in Punjab (Lahore), at the Avari Hotel. Ownership
Mr. Zafarullah Khan, Executive Director of the Centre for Civic Education Pakistan, Dr. Pervez Tahir, former chief economist, Planning Commission of Pakistan, and Dr. Gulfaraz Ahmed, former Federal Secretary for Petroleum, responding to questions from the participants during a meeting of Punjab Policy Advisory Group on Federalism.

Forty Seven key federalism stake holders participated in this meeting. Dr. Pervaiz Tahir, Former Chief Economist moderated the day long deliberations. Mr. Zafarullah Khan, Executive Director, CCEP welcomed the participants and gave a brief over view of the project and informed the participants that similar rounds of Provincial Advisory groups on three topics on Federal System had already been completed. He noted that as a result of the 18th Amendment and the start of the decentralization process, provinces have more autonomy than ever before. As a result of this he advised that it is important to get beyond the grievance narrative (ie others have an eye on our resources) but rather work toward developing resources to benefit the people living in provinces because, if the people are very satisfied, the sum totals will be very fruitful for a progressive Pakistan. Dr Gulfraz Ahmed, Former Federal Secretary Oil, Gas and Natural Resources and member of the 7th NFC Awards, in his key note speech “Natural Resources in Punjab: new opportunities & Challenges in turning Potential into Profit” mapped the renewable and non renewable resources of Punjab in detail and also gave a brief historic prospective that it was long before partition that excavation for natural resources had started in this part of the sub continent now province of Punjab. He was of the opinion that the need of the hour was to improve the confidence of the foreign investors who at present need a presidential guarantee before they start investing in Pakistan or any of its provinces and a one window operation needs to be in place to attract the diminishing foreign investment in the field of oil and gas exploration. Provinces should not only depend upon oil and gas explorations but should also explore their other resources to become economically viable. Dr. Nazir Ahmad from the Department of Oil and Gas, University of Punjab, Lahore gave a case study on “Oil & Gas Resources and Rights of Provinces”. He gave a very detailed presentation on the production and reserves of oil & gas, where the wells are located through geological maps and surveys done. He also shared the statics of the production of oil and gas by Punjab and its share in the national grid. Identifies the areas which are viable for exploration but are still unchartered. Ownership
Ms. Asam Afzal, Associate Professor, Government College University taking part in the discussion during a meeting of Punjab Policy Advisory Group on Federalism.

The last session was chaired by the former Chairman of Indus Water Commission, Syed Jamait Ali Shah and a detailed presentation on “Water Distribution and governance in Pakistan: What are the gains and losses of Punjab?” was given by Mr. Ibrahim Mughal, Chairman Pak Agricultural Forum. Mr. Mughal argued for the case that the distribution system of water should be made more efficient and wastage of water should be minimized He said that the amount of water at canal heads is much greater as compared to what the users are getting and this needs to be work out. As available water is dwindling, more dams to store water should be made and treaties like the Indus Water Treaty between provinces, which were made for water distribution when availability of water was plentiful, should be revisited and redrawn to mange distribution with scarce resources. The meeting was also attended by the Director and Secretary of the Department for Mines and Minerals Government of Punjab, Heads of departments of oil, gas and geology from leading universities of Punjab, members of the Provincial Assembly, Academia, students and civil society. After completing of the process of Round Table consultations in all the provinces and taking on board the solicit views of the provincial stakeholders a National Conference will be held in Islamabad in October this year to widen the scope of dialogue on analyzing various federal options. The conference will bring together National as well as International Experts. Ownership
Mr. Akhtar Javed, Director Mines and Minerals, Government of Punjab, (2nd from left) raising a point during the questions and answers session.

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