While the automobile industry has little to cheer about in the way of excise duty reduction, the overall tenor of the Budget pronouncements can give some cause for cheer.

Domestic companies like Tata Motors, Ashok Leyland, TVS Motor, Hindustan Motors and Mahindra & Mahindra will benefit from lowered corporate income tax rates from 35 to 30 per cent.

Auto component industries, which are vendors to Indian as well as MNCs, will have to pay lower corporate tax and also lower customs duty on components resulting in indirect benefits to the auto sector. Further, the fall in excise duty on lead will result in battery manufacturers lowering battery prices, which then will be passed on to auto majors and finally, the end-customers.

The 50 paisa cess imposed on petroleum and diesel is likely to have nil impact as customs duty on petroleum has been reduced.

According to Maruti Udyog managing director, Jagdish Khattar, "It is a good budget and a forward-looking one." Tractor companies like Mahindra & Mahindra, Escorts and Punjab Tractors are likely to be hit by the increased excise duty on steel. Tractors of engine capacity more than 1800 cc for semi trailers will now attract increased excise duty at 16 per cent.

However, since the overall tenor of the budget is skewed towards agriculture the impact may be offset considerably.

There has been a marginal cut in customs duty on second hand cars and motorcycles, which now attract a customs duty of 100 per cent compared to 105 per cent earlier.

The cut in excise duty on tyres, tubes and flaps from 24 to 16 per cent is not likely to have much of an impact.

The auto industry is likely to benefit from the implementation of value added tax (VAT) in the states from 1 April 2005, which might lead to a rationalizing of taxes leading to an actual lowering of prices of automobiles.

Most importantly the new income tax brackets, the change in exemption and deductions available to individuals and the increase in exemption for women will result in higher disposable income, and boost auto sales.