New Delhi: A cess on insurance premium is likely to be levied in the Budget to build a "catastrophe fund" for meeting exigencies such as terror strikes and national calamities.

Official sources said that the fund is needed to be built from the cess on insurance premium as no insurance companies can bear the huge cost otherwise.

Also if one plans to insure such catastrophe, the premium will be so high that it would not be cost effective, the sources said, adding the Budget is also likely to reduce the average customs duty from the present 26 per cent to 23 per cent as part of tax reforms.

The sources said there is unlikely to be any reduction in income tax rates but corporate tax could be reduced from the present 35 per cent to 30 per cent besides tax incentives to revive textiles industry and encourage agro-processing units in rural areas.

Notwithstanding lower revenue collections in 2002, mainly due to economic slowdown, the Budget is expected to rationalise both excise and customs duties to remove anomalies.

While the peak customs duty is likely to be brought down from the present 35 per cent to 30 per cent, a sincere attempt would be made to correct distortions like imports of raw materials attracting more duty than finished products.

PTI