While the various schemes under agriculture will no doubt improve both the production and productivity of this segment, it is not very clear as to whether the changes in the excise and customs duties will help in restructuring the corporate sector to rejuvenate the economy and withstand globalcompetition.

Reduction of excise slabs from the existing 11 major ad valorem rates to three slabs namely, a central rate of 16 per cent, a merit rate of eigth per cent, and a demerit rate of 24 per cent, and reduction in the customs duties from the existing seven major ad valorem rates to five basic rates of five per cent, 15 per cent, 25 per cent, 35 per cent and 40 per cent is coupled with a surcharge of six per cent and 16 per cent over the rates of 24 per cent which carry a rate of duties of 30 per cent and 40 per cent in respect of excise and of 10 per cent on customs duties. The impact of this on the various units of production and the demand for these goods needs to be closely examined to assessee the overall effect. The Indian corporate sector which has been experiencing a deceleration in the growth rate of net profits in 1994-95 and 1995-96, a loss in 1996-97 and slight recovery in 1997-98, may still be snot out of the woods.

Exemption of dividend from US64 Scheme as also of other open endedequity-oriented schemes of UTI and other mutual funds (with more than 50 per cent investment in equity) from dividend tax, reducing the rate of long-term capital gains tax from 20 per cent to 10 per cent to be on par with the long-term capital tax for non-residents will benefit the investors directly.The proposal to permit trading terminals abroad facilitating participation of non-resident Indian (NRI) in our capital markets and extending the facility of automatic approval for investment up to 100 per cent by NRI's/OCB's in most of the industrial limits will accelerate flow of funds from this vast reservoir of resources.

Liberalizing the eligibility criteria for tax concessions in respect of amalgamations and demergers will help in accelerating the restructuring process of the Indian industry. The proposal to amend the law on buy-back of shares, restricting the shareholders to payment of capital gains tax only and not subjecting them to payment of dividend tax, can induce buy-backs.The question of modifyingsuitably the FIFO method for determining the date of transfer and period of holding has unfortunately not been tackled. As this system can lead to automatic generation of profits to the investor and consequent requirement to payment of taxes, it is necessary to grant him the facility presently available in the physical segment of choosing the shares for sale wherein he can maximise the losses and minimise the profits by selecting the shares bought at various times and various prices.

The proposal to raise Rs 10,000 crore by way of sale of shares of public sector enterprises will fail to rejuvenate the primary market if the present policy of disinvestment by way of book building process, share swap arrangements and global depository receipts (GDR) offerings continue. There has to be a direct offer to the small investors at reasonable prices with reasonable discounts to the ruling level of prices. The recent experience of Air France offering its shares at 14 euros resulting in oversubscription of 10 times andgenerating 1.5 million share holders overnight and the post listing price being 18 euros is an example we should follow. The proposal to have stock options taxed as a perquisite at the time of the exercise of the option by the employee and later as capital gains at the time of sale of the security is inequitous. The only reasonable tax that needs to be levied should be on the capital gains the employee makes as and when he decides to sell the shares related to the offer price which is the price of acquisition, adjusted to indexation. The decision to set up a joint mechanism between Sebi and the Department of Company Affairs for taking stringent action against unscrupulous promoters who raise money from investors and misutilise them, needs to be implemented vigorously. While the surcharge of 10 per cent on corporate tax and tax on individuals and Hindus undivided families (HUF) cannot really be objected, given the need to augment revenues, the tax slabs of Rs 50,000 - Rs 60,000, Rs 60,001 to Rs 1,50,000 andabove Rs 1,50,000 should have been revised to Rs 50,000 - Rs 1,00,000, Rs 1,00,001 - Rs 2,00,000 and above Rs 2,00,000 to mitigate the hardship of the middle class.

The author is a former executive director of BSE