The Nano effect was too apparent to ignore at Finance Minister P Chidambaram's post-Budget conference on Monday with two-wheeler manufacturers, including Bajaj Auto [Get Quote] and Hero Honda, demanding a further cut in excise duty for a level-playing field with small car makers.

The duty for two-wheelers and small cars has been brought down to 12 per cent in the Budget proposals, a move, two-wheeler manufacturers feel, would lead to unfair competition.

"Two-wheelers are used by real aam admai (common man)," Hero Honda Managing Director Pawan Munjal said at the conference while making a case for lower excise duty on two-wheelers.

"The excise duty on two-wheelers and three-wheelers should be brought down to 8 per cent," Chairman of Bajaj Auto Rahul Bajaj said.

Chidambaram in his Budget has proposed to reduce the excise duty on small cars and two-wheelers from 16 per cent to 12 per cent.

Assuring the industry that he would keep a close watch on developments in the auto sector, Chidambaram said he had kept the duties at the same level for auto and small cars "as they enjoyed the same duty in the last two-three years."

Fearing competition from Tata Motor's Rs 100,000-car Nano, which was unveiled at Auto Show in January in New Delhi, two-wheeler makers want that excise duty on motorcyles and scooters should be lower than the levy on small cars.

Tata Motors [Get Quote] plans to launch its Rs 100,000-car in September, which will now attract excise duty of 12 per cent the same as for two-wheelers and three-wheelers.

Responding to the demand of the industry that encouragement should be given for exports of two-wheelers, Chidambaram said the government refunds excise duty on exports and added efforts could be made to expedite the process of reimbursements.

On the apprehensions that the proposal to narrow down the definition of charitable trusts would bring industry chambers under the tax net, the finance minister said tax exemptions were given to promotion of charitable activities in the field of education, health and feeding the poor.

Under the new proposals, he said all the commercial activities carried out by the charitable institutions and services provided by them in relation to trade and commerce will be taxed.

Asked whether the industry chambers would have to pay taxes, he evaded a direct reply and said in lighter vein, "I thought FICCI, CII and Assocham were loss-making organisations."

He explained that the intention of Parliament was to provide tax exemptions to charitable institutions and not to entities carrying out commercial activities like Guarjat Maritime Board or port trusts as has been held by some courts.

The minister also asked the industry chambers to adopt ITIs as per the scheme unveiled by the Government earlier and pursue the objective of enhancing skills.

Stating that so far MoUs have been signed for only 244 ITIs, he asked the industry to complete the process of initiating upgradation of all ITIs by the end of 2008-09.

Chidambaram said the proposed Skill Development Mission will be developed outside the Government under the public-private partnership mode and would be headed by a corporate leader.