Significant thrust on infrastructure development, especially roads. Concerted measures to boost the manufacturing sector.

Excise duty on passenger cars and utility vehicles reduced from 32% to 24%. Excise duty on electric vehicles reduced to 8% from 16%.

Reduction in peak customs duty reduced from 30% to 25%.

While dividend tax rate has been scrapped at the shareholders end, a 12.5% dividend distribution tax has been imposed on companies.

Extension of R&D benefits.

Almost 75 small-scale industries (SSI) dereserved in continuation of the last year's budget when 50 SSI were dereserved.

Additional cess of Rs 0.50 paise per litre on diesel.

The auto sector, especially commercial vehicle manufacturers, is likely to be the biggest beneficiaries due to the thrust on infrastructure. The Finance Minister has gone beyond roads to concentrate more on ports and airports, which is also a step in the right direction. This would translate into increased movement of goods, domestic as well as international. This combined with measures taken by the FM to provide a fillip to the manufacturing sector could translate into higher tonnage demand. We expect the CV sector to grow at 5%-6% in FY04.

The reduction in excise duty on passenger cars and MUVs will translate into lower prices. While we do not expect a commensurate decline in prices in light of hardening of input costs, if demand were to slowdown further, manufacturers can resort to price reduction to sustain volumes and market share. Key beneficiaries are Maruti Suzuki, Telco, Mahindra & Mahindra and Bajaj Tempo. We expect the reduction in excise duty on electric vehicle to benefit M&M significantly. The company already manufacturers and markets 'Bijlee' in select metros.

The imposition of Rs 0.50 per litre on diesel is a negative for the sector. One has to view the recent rise in retail prices following the hardening of crude prices in the international markets. Higher fuel costs act as a growth hurdle, particularly for the CV and the passenger car segments.

For high dividend paying auto majors like Hero Honda and TVS, the dividend distribution tax will result in significant outflow. Estimates on our sample study on seven auto majors including Hero Honda, Bajaj Auto, TVS, Telco, M&M, Ashok Leyland and M&M based on our FY04 estimated earnings pegs total dividend tax payment at Rs 1,176 m.

The automobile sector is highly reliant on the small-scale industrial sector for components. Though SSIs that are dereserved have not been detailed, the opening up of SSI will result in access of capital and technology, both of which has been hard to come by for smaller players. If SSIs are able to increase productivity, auto majors also tend to benefit in a large way, both from better quality and lower costs.

Reduction in excise duty on passenger cars and passenger vehicles from the current level of 32% to 16%. Total incidence of indirect tax should be limited to 25% (i.e. 16% Cenvat and state value-add tax of 9%). Current incidence of tax and other levies surmount to 65% at the current juncture.

There should be level playing field for both OEMs and independent bus and truck body builders in the unorganised sector. SIAM has suggested that either both the sectors should be exempted from payment of duty on body portion or both pay duty on the same.

Retention of the existing customs duty structure for both passenger cars and two/three wheelers (60% for new completely built units and 30% for other than CBUs).

Higher weighted deduction of 150% for research and development expenditure and incentivising fleet retirement programme to address pollution from in-use vehicles and also enhance road safety.