The Economic Survey, as a precursor to the general budget, has already set the agenda for a tough set of measures, which Sinha as the finance head of a fragile Government is not competent to take.

Yet the minister has geared up to present a budget which shall be more known for putting indirect taxes, especially excise, on even keel. Although the minister has promised to reduce excise slabs to three, he is likely to settle for five to accommodate the demand of divergent segments of industry and political compulsions.

The biggest challenge before the minister will be to streamline excise exemptions which a host of industries at present enjoy. This is necessary bothto streamline the tax structure and raise revenue. Latter is more important as reduction excise rates at the higher end will result in loss of revenue.

Initially, the finance minister has indicated to the industry that he was working on three excise rates namely mean rate, merit rate and demerit rate. The minister is likely to come out with the principles on the basis of which goods can be classified and rates will apply accordingly. In the process, some goods will be taxed at higher rates, while the duty on others may come down.

The rates which the ministry is looking at are 5 per cent (merit rate), 18 per cent (mean rate) and 30 per cent (demerit rate). What it means is the all the goods attracting zero rates will have to be taxed at 5 per cent. At the same time, those goods taxed at 40 per cent will become cheaper. However, the revenue implications and the likely opposition from certain industries will force the minister to settle for five slabs.More significantly, what the minister is endeavouring toachieve is to put in place the principles for classifying goods. This will pave the way for further streamlining the excise structure in the medium term.

Apart from excise, the finance minister will also try to do away with the concessions, especially, zero-duty imports. This will be done primarily to raise revenue and partly to give breathing space to the indigenous industry for gearing up for global competition.

Unfortunately, the move to do away with the zero-duty import duty has been met with resistance from a section of industry, especially the exporting community. The pressure is already on to retain exemptions. However, the minister, on his part, will be required to match the conflicting interest of exporting community and the need for fiscal consolidation in the budget to be presented in Lok Sabha on Saturday.

In addition to indirect-tax restructuring, broadening of direct-tax base and raising more resources from sale of PSU shares, the fiscal consolidation is sought to be achieved by pruningunproductive expenditure and un-targeted subsidies. The Economic Survey has already underlined the need for downsizing Government and reducing subsidies for averting fiscal crisis of the type witnessed in 1991. Also the deliberations at the National Development Council (NDC) has strengthened the case for reducing and narrowing subsidies. However, everything will depend upon the skills of Sinha to encash on the general consensus which is in favour of containing the subsidy bill. Some subsidies will have to continue and the watchword in the Government is that "those who can afford to pay should pay."

The other task of the minister will be to give a hard look at the Non-Plan expenditure and identify segments where allocations can be retained at the same level if not curtailed.