State Trading Corporation (STC)

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A brief history: 1956-2019

Sep 17, 2019: The Times of India

One-sentence histories of the STC. MMTC and PEC.
From: Sep 17, 2019: The Times of India

The gover nment has decided to shut down the 63-year-old State Trading Corporation (STC), once among the largest public sector companies, along with PEC (earlier Project and Equipment Corporation of India Ltd), which are remnants of the “import-licence raj”, when they were sole agencies responsible for routing foreign goods such as second-hand cars, gold, urea and palm oil for a generation of Indians seeking access to prized global brands.

From the time when they commanded enormous influence in the Indian markets, the PSUs—dogged by corruption controversies and inefficient management—have now become a drag on the system after failing to repay loans and facing bankruptcy.

MMTC (formerly Minerals and Metals Trading Corporation), the third major trading public sector unit, will also be revamped.

END OF ERA

Lifting of import curbs made life tough for STC, MMTC

While STC has repaid loans of Rs 1,100 crore to lenders led by Syndicate Bank, it will transfer some of its prime real estate to settle the remaining dues of Rs 300 crore. Even the landmark 23-storeyed Jawahar Vyapar Bhavan on Janpath in the capital will not be spared as part of the commerce department’s cleanup drive. But PEC has few assets other than some real estate to clear the outstanding loans. In return for the immovable property, Syndicate Bank will withdraw ongoing bankruptcy proceedings in the National Company Law Tribunal.

In June 2018, TOI had reported on the two PSUs turning NPAs. In 1956, it was STC that was the first trading company to be set up, primarily to trade with east European countries, but expanded its footprint over the years. So, it shipped out wheat and rice for the government and was the canalising agency, or the designated company, to import a host of products—from “high-value” items such as gold and silver to commodities such as sugar and pulses. In between, it had also diversified into hydrocarbons—when it was supplying coal to state electricity boards besides importing kerosene. Plus, it had subsidiaries that dealt in tea and spices. “It was the mother ship and MMTC and PEC emerged from it,” said a former executive.

PEC was incorporated as a subsidiary of STC in 1971 to handle the canalised business of the export of railway and engineering equipment and turned into an independent entity in 1997. But as the private sector grew, the PSU had less to do with project exports and more with importing pulses and other commodities during periods of scarcity.

During their heyday, the bosses of STC and MMTC could walk into a minister’s room but with the government lifting import restrictions in 1991, life became tough for these PSUs, especially after local manufacturing of cars and other products began. While STC’s turnover rose from Rs 2,867 crore in 1997-98 to Rs 8,900 crore last year, there was a time when it was over Rs 10,000 crore, although the profitability was weak. In contrast, between 1997-98 and 2018-19, RIL’s revenues have shot up from Rs 13,700 crore to almost Rs 4 lakh crore.