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Incorporated in 1956 primarily to undertake trade with East European Countries and supplement the efforts of private trade and industry in developing exports from the country, the State Trading Corporation of India Ltd.(STC) has entered into the golden jubilee year of its existence in international trading. Functioning under the administrative control of the Ministry of Commerce, Govt. of India, STC has today grown into a leading trading organisation of the country and has achieved many milestones during the last five decades.
The Corporation started its business operations with an equity of Rs.1 crore which has now reached to Rs.30 crore. Of this, Rs.28 crore was added by way of capitalisation of reserves. In 1991-92, about 9 per cent of the Corporation’s equity was sold by the Government to mutual funds and financial institutions, who have since off-loaded part of their holdings in the market. The Corporation has been earning profits ever since its inception. It has contributed a sum of over Rs.775 crore till date to the public exchequer by way of payment of dividends and taxes. The Corporation has, never in the past, sought any budgetary support from the Government.
Key Role In Indian Economy
In the past, the Corporation has played a key role in the Indian economy. It acted as an arm of the Government of India not only to regulate foreign trade but also for intervention in the domestic market. The Corporation made significant contribution particularly in the following areas - trade with East European countries. Handling canalised exports and imports of items varying from small drugs to bulk commodities such as edible oils, cement, sugar, newsprint, wheat, urea, etc. Price support operations to ensure remunerative prices to growers for their crops such as raw jute, shellac, tobacco and rubber.
Assistance to exporters by providing technical, marketing and financial assistance, arranging import of machinery and raw material for export production, setting up design centres, providing testing laboratories, taking products of small manufacturers to overseas markets by organising their consortia, participation in exhibitions and trade fairs. Import of bulk quantities of essential consumer items like wheat and sugar, sometimes at very short notice.
Areas of Operation
The Corporation exports a diverse range of items to countries all over the world. Its export basket includes wheat, rice, castor oil/seed, tea, jute goods, spices, sugar, other agro products, chemicals, drugs, pharmaceuticals, iron ore, light engineering goods, construction materials, consumer goods, sports goods, processed foods, marine products, textiles, garments, leatherware, etc. The Corporation also monitors counter trade commitments against Government purchases.
Major items of import by STC include gold, silver, edible oils, fertilizers, metals, minerals, hydro-carbons, Fast Moving Consumer Goods (FMCG) IT products and pulses. The Corporation arranges imports of crucial raw materials as and when needed by the Indian industry. It also undertakes import of technical and security equipment on behalf of Forensic Science Laboratories, State Police and Intelligence Departments and Paramilitary Organisations against specific requests.
On domestic front, the Corporation mainly undertakes supply of tea and pulses to Defence.
Performance : 2004-05
During 2004-05, STC attained several new milestones. Diversification into new areas of trade coupled with teamwork steered the Corporation to achieve an all time high turnover of Rs. 9700 crore during 2004-05. The turnover achieved is 44 per cent higher than the target of Rs. 6750 crore set in the MOU with the Government and represents a Compound Annual Growth Rate of 95.7 per cent over last two years.
Imports
During 2004-05, the Corporation recorded its highest ever import turnover of Rs.8422 crore exceeding by 44 per cent the full year MOU target. Bullion, with the highest ever sales of Rs.5677 crore, emerged as the single largest item of import during the year. During 2003-04, the Corporation made a beginning in the import of hydro-carbons, minerals, metals and fertilizers. During 2004-05, STC pursued imports of these items vigorously and, within a short span, has emerged as a major player in these areas. The import sales of hydro-carbons, minerals and metals reached a peak of about Rs.1100 crore during 2004-05 as against only Rs.395 crore during 2003-04. The fertilisers imports undertaken by STC on commercial account increased substantially from Rs.263 crore in 2003-04 to Rs.455 crore in 2004-05. Imports of petro-chemicals, started only last year, yielded a turnover of Rs.300 crore. Besides, the Corporation undertook edible oil imports worth Rs.455 crore during 2004-05. The Corporation also made foray into the import of FMCG goods and IT products and signed MOUs with two multinational companies for developing business in these new areas.
In another notable achievement, the Corporation launched retail sale of imported gold coins in denominations of 5 gms and 10 gms from its Corporate office building. The gold coins of 0.999 purity were specially got made by M/s. Pamp of Switzerland, who are one of the finest refiners of gold in the world. The response was good not only from public but also from corporates. It is proposed to extend the sales network to other metropolitan cities also.
Exports
In one of the noteworthy achievements on the export front during 2004-05, the Corporation made the highest ever exports of chemicals, drugs & pharmaceuticals items amounting to Rs.227 crore as against negligible exports in the past years.
The Corporation has also made headway in the export of iron ore by successfully effecting shipments worth Rs.8.5 crore. Foodgrains exports of the Corporation during 2004-05 amounted to only Rs.342 crore as against exports of over Rs.1000 crore during 2003-04 because the Government did not release any quantities of foodgrains for exports at subsidised prices as was done during the previous years. Excluding foodgrains, the Corporation exceeded the MOU target for exports by 168 per cent. Another major item of export by STC during the year was teak wood, with sales worth over Rs.11 crore. Total exports during 2004-05 amounted to Rs.610 crore.
Domestic Trade
During 2004-05, the Corporation also achieved the highest ever domestic sales of Rs.669 crore and the same were over 5.5 times the full year MOU target. Petro-chemicals, minerals/metals and pulses/coarse grains/maize were the major items of domestic sales during 2004-05.
Profit
As a result of increased volumes of existing businesses, diversification into new areas of trade, concentration on items yielding higher trading margin, better treasury operations and cost reduction measures, the Corporation has been able to improve its profitability position further. During 2004-05, STC has provisionally reported a net Profit After Tax (PAT) of Rs.23.5 crore, which is 68 per cent higher than the MOU target fixed for the year and about 20 per cent higher than the PAT earned during 2003-04.
MOU Rating
As a result of further improvement in performance, the overall performance of the Corporation, in terms of MOU 2004-05 signed with the Ministry of Commerce, is likely to be rated as ‘Excellent’ for the second consecutive year.
Corporate Image
In the recent years, the Corporation has been able to improve its corporate image in the world market and among associates/trade associations, etc. According to various latest surveys of India’s top companies, STC has been ranked 19th in terms of sales and 12th in terms of growth in sales during 2004 (over 2003) by Economic Times and 73rd by Dun & Bradstreet Information Services Pvt. Ltd.
Outlook Ahead
Many new initiatives and diversification plans are proposed to be pursued for achieving higher turnover and profitability. The Corporation has already made headway in the export of iron ore and imports/domestic sales of petro-chemicals. It is now planned to undertake exports of petro-products.
During 2004-05, STC was successful in getting nominated by the Government of Uzbekistan as a nodal agency for imports from and exports to India. The Corporation is planning to set up operations in the areas of pharmaceuticals and textiles in Uzbekistan jointly with local entrepreneurs. Likewise, joint production of pharmaceuticals in Kazakhstan is also being planned.
On import front, the Corporation has already started imports of FMCG goods. Imports of IT products are also likely to be started shortly. Encouraged by the big success achieved in imports of minerals & metals, STC is now proposing to diversify into imports of non-ferrous metals such as zinc, copper, etc. The Corporation is also planning to take mining capacity on lease for which purpose serious negotiations are underway for entering into joint venture with a reputed Indian company.
In a significant development, the Corporation has entered into overseas steel operation in Philippines under which STC is arranging supply of raw material from third countries to a steel plant set up by an Indian company in Philippines. Gradually, such operations shall also be undertaken in other countries.
The Corporation is thus all set to achieve yet greater heights in the coming years.
*Chairman-cum-Managing Director, STC
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