Concerned over the slump in industrial production and to maintain inflation around 4 per cent, the government is likely to provide relief to the manufacturing sector by marginally cutting excise duty rates or sector-specific duties in the Budget 2008-09.

Finance Minister P Chidambaram may announce cut in excise duty rates across the board from 16 per cent to 14 per cent or sector-specific duty cuts in the Budget to be presented on February 29, official sources said.

Sectors like pharmaceutical, textile machinery, food processing, paper and auto including two wheelers, tyres are expected to get relief in excise duty, but like last year Chidambaram could also prune excise duty exemptions to maintain revenue collections, sources said.

According to the finance ministry, due to various excise duty exemptions the estimated revenue foregone touched Rs 99,690 crore (Rs 996.90 billion) in 2006-07 as against Rs 66,760 crore (Rs 667.60 billion) in the previous year. It includes area-specific tax exemptions of Rs 7,000 crore (Rs 70 billion) in 2006-07.

With the approval of over 400 special economic zones, the revenue foregone figures could be much higher for 2007-08, although some tax exemptions were withdrawn in the last budget.

The finance minister had earlier said that tax exemptions would have to go in a phased manner. While commenting on the fall in industrial production till November, he indicated that the government could take steps to boost consumption and investment to sustain the GDP growth close to 9 per cent.