Mining sector's down in the dumps. Can Budget 2012 change its fortune?

Mining companies have probably been the worst affected in the economic slowdown. The sector has been reeling under a toxic mix of high borrowing costs and policy paralysis on the part of the government. Mining projects across the country have stalled because of regulatory, environmental and land acquisition issues.

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However, political compulsions are likely to rein in the government’s appetite to push through any major sector-related Bills. That’s why16 March (when the Union Budget will be announced) is unlikely to completely change the fortunes of metal and mining companies.

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Here are the key expectations for the sector, according to different brokerages:

Hike in excise duty: An increase in excise duty to 12 percent is likely to be marginally negative for the sector.

Privatisation of coal mines: Kotak Securities believes the Budget could announce steps to privatise coal mines to reduce the coal shortage in the country.

Thrust to infrastructure: A renewed thrust to infrastructure is possible in the Budget, although a sharp jump in allocations looks unlikely. It could be marginally marginally positive for steel and sponge iron companies, according to Kotak.

**Duty on coal imports:**The current 5 percent duty on coal imports could be abolished, which could marginally benefit aluminium, steel and power producers.

Duty on low-grade iron ore: A cut in the export duty of low-grade iron ore could benefit iron ore exporters such as Sesa Goa, said Angel Broking.

Disinvestment: SAIL could be put up for disinvestment in the Budget, according to some experts.

Infrastructure sector status for steel: This has been a key demand for steel firms, which would ensure long-term funds and tax holidays.

Duty on HR coils (steel product): A hike in import duty on HR coils will help local steel makers. Surging imports, mainly from China, have been a persistent problem for manufacturers in 2011.

Increase in income tax exemption limits: This could boost demand for consumer durables and automobiles, which could help steel producers.