A reduction in the level to 24 per cent would have augured well for the industry as this would lead to across the board price reductions which in turn would lead to increased consumption.

The surcharge, however, has negated this benefit and no price reduction is expected, industry analysts said. It is thus unclear as to whether prices would be reduced.

According to JK Helene Curtis executive director Nanu Mehta, the marginal decline in excise levels will have a positive impact on the industry. "The sops announced for the small scale industry is a good growth opportunity for the industry. Leading players will increase their outsourcinglevels and a number of new players will make inroads into this industry with branded products. This will create price competition and lead to growth," he said.

This was a step towards a growth-led decentralisation of capacities which is the order of the day globally, Mehta concurred. He estimates the industry growth to improve by 20 per cent this year on this count.

The Rs 1,500 crore cosmetics and toiletries industry is growing at the rate of 15 to 20 per cent this year. The growth was 20 to 25 per cent in 1997.According to Indian Soaps & Toiletries Makers' Association (Istma) secretary general VP Menon, no dramatic changes have been announced in the budget which can lead to large scale growth.

However, the new sops announced for the small scale sector will lead to growth as this will attract new players in the industry which is expected to increase the consumer base.

As far as price reductions are concerned, Godrej Soaps vice president (marketing) HK Press said, "what ever has to be passed down tothe consumer due the excise benefits, we will do that. However, the budget has some inflationery aspects attached to it, like the surcharge on diesel will impact freight."

On cosmetics and toiletries, the excise is levied on 50 per cent of the MRP. Major players in this industry are Hindustan Lever Ltd (HLL), Procter & Gamble, Colgate Palmolive (India) Ltd and Godrej Soaps. These companies, say analysts, will benefit so far as increasing outsourcing levels is concerned.

For Colgate, for instance, outsourcing forms 25 per cent of its sales (around Rs 1,000 crore). Says Dalal & Broacha head of research Milind Karmarkar, "outsourcing for all FMCG companies would increase by around 5 per cent and that for Colgate should increase to substantially of its sales." For HLL, personal products forms a huge 17 per cent to gross sales of Rs 10,216 crore.

Cosmetics and toiletries contributes around 8 per cent to each of P&G's and Godrej Soaps sales. Excise duty on dental care products at 8 per cent will continue toenjoy this slab. This has a neutral impact on companies like Colgate Palmolive (90 per cent sales come from dental care) and Hindustan Lever, which has cornered a market share of 32 per cent in the Rs 1,100 crore market.

The growth of the cosmetics and toiletries 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 1997-98.