Taxes: Exemption limit for personal income tax is likely to be hiked. Marginal rate for personal tax may be increased to 35 per cent.Possible increase in investment limit for tax rebate under Section 88 of the IT Act.

Iron & Steel : The import duty has been reduced from a high of 35-110 per cent in 1993 to the current level of 5-30 per cent. I-Sec does not expect the Chelliah committee recommendations of imports duty of 20 per cent on finished steel and 10-15 per cent on other items would be implemented.

They expect a marginal increase in import duties to the extent of 5-10 per cent as a sop. They also do not expect the excise duty to be reduced from the current level of 15 per cent as it already in line with the Chelliah committee recommendations. These duty revisions are not expected to have any impact on domestic prices as domestic prices are lower than landed cost ofimports.

Non-ferrous metals: Customs duty have been reduced from 70-85 per cent in 1994 to 10-25 per cent and no change is expected. The import and excise duties are at levels close to those suggested by the Chelliah panel and there are no expectations of any hike in duty of aluminium ingots.

However, the duty on aluminium scrap might be cut to 10 per cent to rationalise the duty differential between the raw material and finished goods.

FMCG:This sector is likely to remain unaffected by the budget since changing the tax rates and hiking excise duties are the two ways the sector could be affected. The probability of the government increasing the corporate tax rates remains low. In terms of indirect taxes, except cigarettes, the budget is unlikely to have a significant impact on the revenue and earnings. In fiscal 1997, tobacco netted Rs 49 billion in excise collections and the basis was changed to 'specific' from 'ad-valorem'.

Hotels: The low effective tax rates for the hotelare due to the favourable tax shelters outlined under Sec 80 HHD. Sec 80 HHD is unlikely to be withdrawn in the forthcoming budget. But if the tax shelters are completely withdrawn, the EPS of hotel companies could decrease by 18-20 per cent. Oil & Gas : With international crude prices falling to around $ 12-13 per barrel, the government is facing a sharp fall in the customs collections from the petroleum sector. So the proposed cut in customs duty on crude from 27 per cent to 20 per cent, would be difficult to implement. But, in view of the depressed international petroleum product prices, marginal 3-5 per cent increases in product duties are easier to implement. Thus the domestic industry would get a duty protection while at the same time maintain customs collections. Price disadvantages faced by marketing companies is selling industrial fuels in some states due to high local taxes is likely to be rationalised by applying a flat central sales tax rate across all states for petroleumproducts.

Petrochemicals

: A status quo is expected with regard to the customs duty and any significant change in the excise duty structure except a possible reduction in excise duty on polyester filament yarn from 34.50 per cent to 30 per cent. An increase of 5 per cent on customs duty on naphtha is likely.

Telecommunications : The budget is expected to clear up the regulatory hurdles and policy initiatives to smoothen the raising of funds for private telecom operators. It could also contain incentives for domestic telecom equipment manufacturers.

Cement : Excise and customs duties on cement are likely to remain unchanged. While excise duty at RS 350 per tonne has remained the same over the last three years, a hike is unlikely considering the inability of several companies to absorb further increase in administered costs. A lowering of excise duty would entail significant loss of revenue.

Banking : The key variables to look out in the budget are the fiscal and monetiseddeficits. Further, we believe that in order to revive the economy by investment in infrastructure, the government may take steps to streamline FDI procedures and introduce new incentives to channelise domestic savings towards this sector. The government may also partially open the insurance sector for the private domestic players.

Capital goods/ engineering : No significant changes in duties expected. For capital goods imports by greenfield refineries, the 'zero duty status' could be scrapped. A 10 per cent duty on such imports is possible. Customs duty on general machinery as well as project imports stand at 25 per cent which is in line with the Chelliah Committee recommendations. Further rationalisation of duties to correct the 'inverted' duty structure expected and the hike in excise duty (from 10 to 13 per cent) effected in 1997-98 budget may be removed for some segments of the electrical machinery industry such as transformers and motors.