The exercise to ensure this, currently on in the finance ministry, is both difficult and scary. Because the indirect tax structure is much more complex and revenue realisation is twice that of direct taxes. Hence, any misadventure will be difficult to bear.

However, the question being asked is if Chidambaram could prove the prophets of doom wrong by his bold measures, why can't Sinha? Sinha himself told industry that he was trying to reduce excise rates to three per cent from the current 12 per cent.

According to Sinha, the ministry was working on three rates: mean rate, merit rate and demerit rate. Certain principles were being evolved and goods would be classified accordingly, he added. Thereafter it will be difficult for interest groups to lobby for better rates, he said.

The minister, however, did not talk about the rates for the threecategories of excise duties. According to informed sources, the rates being contemplated were 8 per cent, 15 per cent and 30 per cent. The rate structure, if approved, will help certain industries while the others may be adversely effected.

Interestingly, the chambers have indirectly expressed their reservations over such a move. The pre-Budget memorandum took note of the minister's desire, but wanted the government to reduce excise rates to six and not three.

The rates suggested by CII include 0, 5, 10, 15, 20 and 30. The CII also wants the average rate of excise to be brought down from 18 per cent to 15 per cent.

Significantly, in the finance ministry's scheme of things there will be no place for zero duty. Sinha, in the case of customs duty, had also indicated that, in principle, he was against zero duty imports. Although this would be difficult to achieve in case of excise because of various pressures and lobbies.

Since it is impossible for the Government to bring down the average rate of excisefrom an estimated 18 per cent in view of revenue considerations, the option is to bring down the peak rate and improve the base rates to streamline the structure and concentrate on volumes.

Another task before the finance ministry is of levying duties on everything on the sale price. For instance, the duty on cigarette, at present, is per 1000 sticks and not on the sale price. In the new regime, duties will be levied on price and not on per-piece basis.

The experience gained on levying duties on maximum retail price will help in transforming to the new structure.

Apart from fixing rates of three duties, the finance ministry is also working on improving procedural problems to prevent misuse of Modvat provisions. Although the industry has been suggesting that the restriction of Modvat to 95 per cent be withdrawn, it is unlikely that the ministry will agree to it this year.