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.

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.

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.