ISLAMABAD: For the second consecutive year, the Khyber Pakhtunkhwa finance department has released less development funds for local governments than the amount it is legally bound to give under the Local Government Act 2013.

The LGA 2013 dictates transfer of 30pc of the provincial development budget to the 25 districts.

`They are rolling back fiscal decentralisation,` an official of the KP finance department said, mentioning the amendments to LGA 2013 which allow cuts from resource allocation for local governments.

The move has sparked criticism from donors and opposition parties.

The PTI-led government released Rs21.61 billion in the first three quarters of this fiscal year against the Rs33.9hn allocated in the budget.

The finance department released only Rs15.12 billion in 2015-16 against the committed amount of Rs30.27bn.

However, for the current year the government notified a condition in the budget document: to release Rs5.1bn out of the total Rs33.9bn upon full utilisation of Rs28.815bn by the local governments.

KP Local Government Minister Inayatullah Khan confirmed to Dawn that total funds for local government were reduced to Rs28bn for the financial year 2016-17.

`We will release the last tranche on May 25,` he said.

It means that instead of Rs12.2bn only Rs6.38bn will be released for local governments.

The minister defended the cut on the plea of low level of revenue generation in the province.

Another source in the provincial planning department said the real issue was the opposition within the PTI ranks on the devolution of finances to the local government level.

Under the Provincial FinanceCommission (PFC) up to 2008, 10pc of the district Annual Development Plan were discretionary funds of the chief minister while 5pc were discretionary funds of finance minister under the MMA and the ANP government.

But in LGA 2013, the PTI-led government abolished the chief minister and finance minister discretionary funds.

Since then many attempts were made to revive the facility. However, the officialbelieves that the practice has continued without any legal cover on which objections were raised time and again.

Financial experts term the Khyber Pakhtunkhwa local government model to be the best in Pakistan.

Never in the history of this country has any province financially empowered local governments to this extent, they opine.

Within this model, the most important and critical is the equity-based and formula-based allocation of funds to the district governments.

The PFC comprises of a number of members who are not from the government or not nominated by the government.

While in the LGA 2001, all such members were to be nominated by the government. Under the LGA 2001, initially about Rs800m was allocated to the local governments. Later up to 2008, this amount was ramped up to Rs1.6bn. It was meager compared to transfers proposed under LG Act 2013 and the actual resource distribution to local governments in the past two years.

Responding to the criticism on recent amendments in LGA 2013, Mr Khan said the amendments will apply from the next fiscal year.

According to officials it was stated in the amendment that 30pc of the local governments` budget will be allocated forpublicinterestfund.

The minister, however, said that no public interest fund will be created and the money will go directly to the accounts of district governments.