State Trading Corporation of India Limited

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State Trading Corporation

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 State Trading Corporation of India Limited

INDEX

Topic Page Number

1. INTRODUCTION 3

2. FUNCTIONS OF STC 5

3. OBJECTIVES OF STC 6

4. STC’S EXPORTS 7

5. IMPORTS INTO INDIA 8

6. SERVICES 9

7. ANALYSIS 10

8. OTHER STATE TRADING

ORGANIZATIONS IN INDIA 14

9. CANALYSING AGENCY 15

10. ADVANTAGES – DISADVANTAGES 16

11. STC’S ITEMS FOR EX-IM 16

12. CONCLUSION 17

13. QUESTIONNAIRE 18

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 State Trading Corporation of India Limited

INTRODUCTION

The State Trading Corporation of India Ltd. (STC) is a premier international trading
house owned by the Government of India. Having been set up in 1956, the Corporation
has developed vast expertise in handling bulk international trade. Though, dealing largely
with the East European countries during the early years of its formation, today it trades
with almost all the countries of the world.

The institution of Public Sector Commercial Corporation was created in the fifties
when India started developing trade exchanges with the East European countries. India
was one of the few developing countries to have established trade with the East European
countries. The Rupee Payment Agreement was instrumental in improving trade with these
countries. In the initial years of India’s planning era, this agreement had helped the
country to have access to capital goods and equipment as wall as key inputs like
fertilizers, non-fertilizers, non-ferrous metal and petroleum for which otherwise payment
would have been made in hard earned foreign exchange.

India was also able to develop some of its exports sectors, especially wool and
woolen products, readymade garments and leather footwear by exploring the market of
East Europe. These exports and imports were undertaken by the state trading organization
like STC.

By virtue of infrastructure and experience possessed by the Corporation, it plays

an important role in arranging import of essential items into India and developing exports
of a large number of items from India. It exports a large number of items ranging from
agricultural commodities to manufactured products from India to all parts of the world.
Because of Corporation's in depth knowledge about the Indian market, STC is able to
supply quality products at most competitive prices and ensures that the goods reach the
foreign buyer within the prescribed delivery schedule. It also imports bulk commodities
for Indian consumer as per demand in the domestic market.

Over the years STC has become the premier international trading organization. It
offers a wide range of services and handles exports of almost everything that India
produces from coffee to compressors, tobacco to textile machinery. It imports wide range
of products from raw materials to equipment. The role of STC as a path finder for the
Indian industry has been quite praiseworthy. As an international marketing agency, its
services relating to negotiating, contracting, financing, product development, quality
control, market intelligence, shipment and settlement of trade dispute has been quite
significant

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 State Trading Corporation of India Limited

In addition to earning foreign exchange for the country, it has added stability to
the industrial sector. STC continuously looks for new product and new markets. STC has
excelled in marketing groups of the manufactures of engineering equipment, drugs and
pharmaceuticals to bid for international business. STC has done commendable work in
promoting difficult –to-sell products overseas. STC imports scarce commodities through
the foreign exchange earned under different marketing strategy.

After the introduction of the policy of economic liberalization in 1991, STC has
reoriented its strategies by putting emphasis on:

1. To provide new areas of exports for diversification

2. To achieve economies of scale through high volume exports
3. To buy and sell directly to cut down overhead costs and achieve competitiveness.
4. To practice professionalism and specialization in its operations by employing best
talents.
5. To upgrade information technology to obtain latest commercial intelligence.
6. To undertake financial planning and result –oriented trade investment.

With a global vision in effective management, result oriented approach, strong belief in
productivity and accountability, STC is future ready to take advantage of the
opportunities in the 21st century and help propel India towards the new frontiers in world
trade.

Performance Indicators

Annual Turnover: 2004-05 Rs 9522 Crore (US$ 2123 million)

Net Profit: 2004-05 Rs 25 Crore (US$ 6 million)
Equity Rs 30 Crore (US$ 6.7 million)
Net Worth (as on 31.3.2005) Rs 320 Crore (US$ 71 million)

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 State Trading Corporation of India Limited

FUNCTIONS OF STC

The primary function of an STC is to procure all important items like steel, food,
iron ore etc. from the farmers in the agricultural sector and then sell or release them at
reasonable rates to the consumers in different parts of country whenever there is a
shortage of these items / products.

The main objective of doing this was to provide benefits to both the consumers as
well as the sellers i.e. to make available high quality products to consumers at cheap
rates and to get sellers a fair and competitive price that they deserve. Before STC was
setup, the sellers especially the farmers were exploited by the international buyers by
purchasing at very low rates.

This happened mainly due to the lack of knowledge by the farmers about the
market conditions.

E.g.:
1) Andhra Pradesh is a master producer of tobacco and rice.
2) Kerala – Rubber
3) Maharashtra – Cotton

Andhra Pradesh produces rice as cheap as Rs. 2/- per kg., so, the Government of
India in order to deal with any type of shortage or scarcity stores it in warehouses and
then releases it subsequently.

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 State Trading Corporation of India Limited

OBJECTIVES OF STC

1. To arrange for exports where bulk handling and long term contracting are
advantages.
2. To promote the production of non-traditional items and open up new fields for the
export of traditional items.
3. To provide development finance for the production of export-oriented goods and
boost exports of small-scale sector.
4. To facilitate bulk purchasing for bulk selling abroad.
5. To undertake internal trade as and when the situation warrants it and to ensure
adequate and regular supplies at reasonable prices of essential commodities to meet
local demand.
6. To facilitate the implementation of trade agreement and bilateral deals.
7. To organize production to meet export demands and to help production units to
overcome difficulties of raw materials and other essential requirements.
8. To act as a vehicle for the implementation of government trade policies and trade
plans.
9. To undertake price support operations to support operations to protect the interest of
growers.
10. To organize and affect exports from and imports into India of all such goods and
commodities, as the corporation may, from time to time, determine.
11. To organize and affect the purchase, scale and transport of such general trade in
such goods and commodities in India and abroad.
12. To do all such other acts and things, this may be helpful in achieving the above
objectives.
13. Exploration of new markets for existing and new products, expansion and
diversification if India’s export trade and promotion of long term export operations
and difficult to sell item are the specific objective in relation to export promotion.

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 State Trading Corporation of India Limited

STC’S EXPORTS

STC exports a diverse range of items to a number of destinations throughout the

world. Exports by STC vary from traditional agricultural commodities to sophisticated
manufactured products.

Besides negotiating, contracting and shipping, STC seeks to introduce new

products, explore new markets and undertake wide ranging ancillary functions such as
Product Development, Financing, Quality Control and Import of machinery and raw
materials for export production.

STC makes purposeful use of its world-wide connections, abundant experience,

up-to-date information about the market trends and long term perspective on various
commodities to ensure competitive prices, right quality and adherence to delivery
schedules to the buyers abroad.

Principal Items of Export

Agricultural Commodities Manufactured Products

Wheat Jute Goods

Cashew Chemicals, Drugs & Medical
Coffee Disposables
Rice Engineering & Construction Materials
Tea Consumer Products
Tobacco & Rubber Textiles and Garments
Sugar Leatherwear
HPS Groundnut Processed Foods
Spices Iron Ore
Steel Raw Materials

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 State Trading Corporation of India Limited

STC’S IMPORTS

STC imports a number of essential commodities to cover the domestic shortfalls

and hold the price line. STC serves the national objective by arranging timely imports at
most competitive prices. In the process, the Corporation makes best use of its strength in
handling bulk imports, vast infrastructure and above all an experience of over four
decades in fulfilling the needs of the industry.

Principal Items of Import

Agricultural Commodities Manufactured Products

Hydrocarbons
Edible oils
Gold & Silver
Sugar Minerals/Metals
Petro-chemicals
Wheat
Fertilizers
Fatty Acids Scientific Instruments
Hospital/ Police equipments
Pulses
FMCG Goods
IT Products

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 State Trading Corporation of India Limited

SERVICES OF STC

While undertaking import and export operations, the Corporation renders following
services:

1. To the Overseas buyer

STC acts as an expert guide for buyers interested in Indian goods. For them, STC
finds the best Indian manufacturers, undertakes negotiations, fixes delivery schedules,
and oversees quality control - all the way to the final shipment to the entire
satisfaction of the buyer.

2. To the Indian Industry

The Indian manufacturers, whose products sail the seas via STC, benefit a lot
from its expertise. STC helps thousands of Indian manufacturers to find markets
abroad for their products. STC assists the manufacturers to use the best raw materials,
guides and helps them manufacture products that will attract buyers abroad. Some of
the other services offered by STC to the Indian manufacturers include:

• Financial assistance to exporters on easy terms.

• Taking products of small scale manufacturers to international trade fairs and
exhibitions.
• Import of machinery and raw material for export production.
• Assistance in the areas of marketing, technical know-how, quality control,
packaging, documentation, etc.
• Supply of imported goods in small quantities as per convenience of buyers.
• Market intervention on behalf of the Government.

3. To the Indian Consumer

The Indian consumers also benefit from STC's expertise and infrastructure. STC
imports essential commodities for them to cover shortfalls arising in the domestic
market. During the last one decade, STC imported sugar, wheat and pulses to meet
domestic requirements at a very short notice.

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 State Trading Corporation of India Limited

ANALYSIS

History And Progress Of STC

1956 - The Company was incorporated as a private limited company on 18th May, 1956
and converted into a Public Ltd. Company on 31st January 1992. The Corporation was
formed to organize and affect exports from and imports into India of all such goods and
commodities as it may from time to time determine.

1959 - 1,00,000 shares subscribed for by the Govt. of India.

1963 - On 26th September, the State Trading Corporation was bifurcated by the
establishment of the Minerals and Metals Trading Corporation of India, Ltd. The new
Corporation took over all the assets and liabilities pertaining to the minerals and metals
trade as on 1st October.

1969 - 3, 00,000 bonus shares issued.

1975 - 5, 00,000 bonus shares issued.

1977 - 2, 00,000 bonus shares issued.

1978 - 3, 00,000 bonus shares issued.

1992 - The Company was nominated by the Govt. of India as its agency for sale of 47000
MTs of crude solvent extracted soya bean oil received under the auspices of USAID.

- The Corporation entered into MOUs with a few selected industrial houses for making
available to the Corporation, their products for exports. STC was to render their
marketing assistance.

-A Trade Development Cell (TDC) was set up with the intention of developing non-
canalized trade including merchanting trade.

- Tea Trading Corporation of India Ltd. is the only subsidiary of the corporation. The
Cashew Corporation of India Ltd. (CCI), wholly owned subsidiary of STC was merged
with the Corporation as per notification dated 21st April.

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 State Trading Corporation of India Limited

- The Corporation has introduced link, barter and parallel deals as an instrument
of export promotion to augment exports and arrest the downward trend in the export of
certain commodities to specific destinations.

1993 - The Corporation sold the oil recently from crushing operations under its own
brand name Ragini and Darpan.

1994 - The Corporation entered into an agreement with COMARK, a multistate

cooperative federation of about 3000 coffee growers for handling their entire exports and
part of domestic marketing.

- As on 31st March, the Corporation, had disinvested 23, 93,200 shares to various
Mutual Funds/Financial Institution comprising 9% of the equity capital of the
Corporation.

- The Corporation decided to enter into joint venture in order to develop captive
supply source for exports. Five projects in the area of core competence viz. aquaculture,
footwear, Mushrooms, and bio-technology were identified.

1995 - With a view to developing captive sources supply for exports, the corporation
entered into joint ventures with two aqua culture units - Bluegold Maritech International
Ltd. & Richfield. Aquatech Ltd. Also, the Corporation finalised three more joint ventures
two in the field of grey fabrics and one in mushrooms involving a total investment of Rs 4
crores.

1996 - The STC ventured into import of gold/silver and export of jewellery in terms of
present export/import policy. It has set up vaults at New Delhi, Mumbai & Ahmedabad.

- The Company entered into a MOU with Srilanka Pharmaceuticals Corporation

(SPC) Colombo by which STC would act as the modal agency for their purchases of
drugs and pharmaceuticals from India.

- Another MOU was entered into with Haffkeme Bio Pharmaceuticals, Mumbai by
which STC would act as the sole exporting arms of all Haffkeme products especially
serums and vaccines; A distributor was appointed at Turkey for serums and vaccines
manufactured by Haffkeme.

2002 - STC ties up with Power Finance Corporation to reduce the end cost of power.

2003 - STC appoints Mr A S Arora, AS&FA, Minitry of Commerce as Part time

Director on the board of the company.

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 State Trading Corporation of India Limited

Present Scenario

In the present scenario everything has become open i.e. whoever wants to import
can import and whoever wants to export can export. As said before everything was in the
hands of Government, but today, there is no doubt that the role of STC has declined as
STC has become one of the players in export-import field.

In the 1950’s and the 1960’s there were many restrictions on the export-import of
items, i.e. they were canalized through STC. If someone wants to export or import any
product or commodity then the person had to take a license or certificate from the STC,
but today many of the restrictions have been dissolved.
Currently the import of edible and coconut oil is canalized through STC.

Also, the Government of India has communicated to STC that there would be
shortage of wheat in this year, so STC is purchasing it in bulk and storing it to be released
during crisis time. To meet with this shortage STC has decided to import 5 lakhs tones of
wheat. For this purpose they have invited tenders from various countries.

STC is also financing many companies i.e. helping them and borrowing loans at
low interests, opening the L/Cs for import transactions etc. For this purpose the STC
charges a particular amount of fees depending on the product value, i.e. it may be 1%,
1.5% of the L/C value. Some of companies are ISPATH, ESSAR Steel, ESSAR Oil etc.

STC also has a tie-up for supply of pharmaceuticals (medical, health care
products) to Bangladesh, Turkmenistan, Sri Lanka etc.

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 State Trading Corporation of India Limited

Current Changed Scenario

As On (Months) 31-Dec-2008(3) 31-Dec-2007(3) % Change

Sales of
Products/Services 59844.80 47858.70 25.04
Other Income 1363.40 475.90 186.49
Total Income 61208.20 48334.60 26.63
Total Expenses 60417.00 47613.60 26.89
Stock Adjustments 0.00 0.00 --
OPBDIT 791.20 721 9.74
Interest 361.70 179.70 101.28
Depreciation 5.70 4.80 18.75
Extraordinary Items 0.00 0.00 --
Prior Period Adjustments 0.00 0.00 --
Provision for Tax 172.50 193.40 -10.81
After Tax Profit 251.30 343.10 -26.76
Equity Capital 600.00 300.00 100.00
Reserves 0.00 0.00 --

The above table shows the percentage (%) change in Sales, Income (revenue), Expenses, and Profit Tax

Future Scenario
The Government of India has ordered the STC to achieve a target of turnover of Rs.
20,000/- Crores by 2008. The details of the business during the last 3 years are as follows:

The corporation aims to achieve its target of Rs. 20,000 Crores by export or import of
traditional items, textiles, readymade garments etc.

For many of the major products separate corporations have already been formed and if
not will be formed, some of them are as follows:
• MMTC (Minerals and Metals Trading Corporation)
• PEC (Project and Equipment Corporation)
• Oil Trading Corporation
• Cotton Trading Corporation

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 State Trading Corporation of India Limited

OTHER STATE TRADING ORGANIZATIONS

IN INDIA

• The Handicrafts and Handloom Export Corporation of India (HHEC), a wholly

owned subsidiary of STC.
• The Minerals and Metals Trading Corporation of India Ltd. (MMTC).
• The Projects and Equipment Corporation (PEC) of India Ltd., a wholly owned
subsidiary of STC.
• The Cashew Corporation of India Ltd. (CCI) a wholly owned subsidiary of STC.
• Central Cottage Industries Corporation (CCIC), a subsidiary of STC.

1) Handicrafts and Handlooms Exports Corporation (HHEC)

The HHEC was set up in 1962 as a wholly owned subsidiary of the STC. It
undertakes the export of handcrafts (including woolen carpets), handlooms products
(inducting ready-to-wear garments) and gold jewelry. In 1976 the HHEC has started
its wholly owned subsidiary called the Central Cottage Industries Corporation of
India (CCIC).

2) Minerals and Metals Trading Corporation of India Ltd. (MMTC)

The Minerals and Metals Trading Corporation of India Ltd. is an independent
Corporation set up in October, 1963 in the public sector and occupies a prominent
position in India’s foreign trade. This Corporation was established through the
bifurcation of the STC and all activities of STC relating to minerals and metals were
transferred to this new Corporation.

MMTC is basically for expanding the exports of mineral ores (iron ore,
manganese ore, coal and cake, Ferro manganese) from the country and also for
importing and distributing some of the essential raw materials for the industry in
India.

3) The Projects and Equipment Corporation of India Ltd. (PEC):

PEC was established in 1971. Its main objective was to give support to the export
of engineering and electrical equipments and projects from India. It also exports
textile machinery and railway rolling stock. It undertakes commissioning and
execution of turnkey projects abroad. It employs professionally qualified personnel
and operates ideally located offices in various capital cities to serve the foreign
buyers. PEC has made a name for itself in the field of turnkey projects abroad.

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 State Trading Corporation of India Limited

4) Cashew Corporation of India Ltd. (CCI):

CCI was established in 1970 as the canalizing agency for raw cashew nuts. It
plays a vital role in locating overseas markets for cashew.

5) Central Cottage Industries Corporation Ltd. (CCIC):

CCIC was established in 1976, as a wholly owned subsidiary of HHEC. Its main
motto is to help in the development of cottage industries. It promotes the sale of the
products of cottage industries and handicrafts in India and overseas markets.

CANALYSING AGENCY

STC is opening as an important catalyzing agency for the export and import of
certain items. Canalization means that the item can be exported or imported through
the concerned the state agency like STC or its subsidiaries. Such canalized items
account agency like STC or its subsidiaries. Such canalized items account for a major
part of STC’s turnover. The canalized items for exports include sugar, castor oil,
molasses and groundnut extractions. Canalized items include edible oil, writing and
printing paper non-edible oil etc.

Associates desiring to take help from STC can obtain marketing assistance in the
form of distribution of samples, market surveys, product design, packaging advice,
assistance in tender participation and general sales promotion. Such associates must
route their export through STC.

For effective marketing STC has opened branch office in many countries and has
associates in other parts of the world. These offices and their services extend to,
Sydney, Singapore, , Paris, Colombo, Berlin, Bangkok etc.

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 State Trading Corporation of India Limited

Advantages and Disadvantages

The biggest advantage of STC is that it stands global i.e. it has a huge presence in
international market. The same is not the case with an individual importer or exporter. An
example of this would be if STC orders say Tea from Libya, then even a fax is sufficient
for placing the order, as Libya knows that STC’s business is spread through out the world
and is backed by Government of India.

The disadvantages are that since it is a government organization, there are many
formalities required to be completed, which includes lot of paper work, high
administrative expenses, internally the employees have to answer many committees etc.
This does not attract an individual or a company as the procedure is quite simple and
convenient in the private would as compared to STC.

STC’s Items of EX – IM

STC mainly trades in Oil. And over all these years it has been benefited because
of the major price fluctuations.

The following are the major trade regions considered by the STC:

STC imports Oil mainly from Malaysia & Indonesia.

STC exports Sugar to Pakistan and Sri Lanka, Iron to Sri Lanka, Iron Ore to USA,
UK and Sri Lanka and Steel to UK, USA and Russia, Tea to Libya & Iran, Hair
(Wigs) to US and UK.

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 State Trading Corporation of India Limited

Conclusion

The significance of STC can be realized from the fact that before things were
privatized evens tycoons like Mr. Dhirubhai Ambani, was a regular visitor to STC office
as he used to import nylon / yarn through STC.

STC has also helped Azim Premji, Chairman of Wipro (Western India Producer of
Oil) as he used to export edible oil through STC.

Some other organizations that have been helped by STC include Liberty Oil Mills,
Soya Oil, Ruchi Oil and many other countries.

When the BJP Government was in force it had decided to privatize STC but with
Congress government coming into force the decision was aborted. But since privatization
is been increasing in the country from time-to-time there is still a big question on the
future existence of STC, i.e. it may be diluted or privatized is solely dependant on the
decision taken by the government.

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 State Trading Corporation of India Limited

Questionnaire filled by Pavan Malhotra (GM – STC)

(The following questions were answered during a telephonic conversation)

1) When was STC formed?

STC was formed in 1956 with collaboration of the BJP govt and shiv sena. We are
very glad that such a thing happened as it gave employment to many people and
now is contributing in the Indian economy for a bright future.

2) What is the biggest achievement of STC?

I think the biggest achievement of STC would be level of imports we got over a
period of 40years.It helped us improve our infrastructure and facilities which
helped us survive for so long and stay as one of the most important corporations in
the export and import field.

3) In which year STC recorded highest turnover?

It was in the year 2005-06 when we recorded the highest turnover. It was around
12000 crores.

4) Which country imports the most to India?

Well we get imports from all the parts of the world. No particular country can be
singled out as the level of imports keeps on changing and it has changes in the last
40 years.

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 State Trading Corporation of India Limited

5) How has STC helped the domestic market?

We imports essential commodities for them to cover shortfalls arising in the

domestic market. During the last one decade, STC imported sugar, wheat and
pulses to meet domestic requirements at a very short notice.

6) What about your tie ups or any partnerships?

We have tie ups for supply of pharmaceuticals (medical, health care products) to
Bangladesh, Turkmenistan, Sri Lanka etc.

7) Where are the branches of STC been opened?

For effective marketing STC has opened branch office in many countries and has
associates in other parts of the world. These offices and their services extend to,
Sydney, Singapore, Paris, Colombo, Berlin, Bangkok etc.

8) What’s the future target of STC?

Well out target has been to increase the turnover with every year passing by and
we are targeting 30,000 crores in 2011.

*** Thank you ***

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 State Trading Corporation of India Limited

Group Members:-
MMK – SYBMS – DIV (B)

Abhineet Arora 62

Vaibhav Kulkarni (Main) 88

Sagar Laungani 91

Mohit Mankani 93

Umakant Choudhari 118

For more information contact: vaimasters@yahoo.co.in

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