According to Godrej Soaps managing director Adi Godrej, the excise levels had to be brought down as it was extra-ordinarily high. However, he said, the level of 50 per cent too was slightly high as compared to the industry standards.

The reduction in prices is expected to boost demand for these products, which in turn would beef up the industry's growth. Analysts said the prices would come down as the excise element constitutes almost 30 per cent of the total cost. Price reductions would be to the tune of 10 per cent.

Alcohol-based toiletries is part of the Rs 1,500-crore cosmetics & toiletries industry in India. The industry, valuedat Rs 1,500 crore, posted a growth of 20-25 per cent in 1997. This is expected to result in a higher generation of excise revenue for the government, feels the industry.

The industry was expecting a cut in excise duty on cosmetics also. However, this has not happened. The current excise level is 30 per cent on cosmetics & toiletries.

The growth of the industry has been on an upswing since 1992-93, after the government introduced a spate of excise duty reductions. The duties have been brought down from 120 per cent in 1992-93 to 30 per cent in this year. For instance, when duty was reduced to 70 per cent in 1993-94, the industry grew at 25 per cent and the revenue generation was Rs 130 crore. When the duty came down to 50 per cent and 40 per cent in the subsequent years, the industry growth energised to 30 per cent with a revenue generation of Rs 208 crore and Rs 228 crore in 1994-95 and 1995-96 respectively.

This is mainly because price reduction is sacrosanct to excise duty levels. Revenue collectionis related to penetration and volumes. When volumes increase, due to price reductions on account of lower duties, revenue collection goes up.