The idea of STATE TRADING was first evolved during Second World War when a supply department was set up under the control of Shri M.S.A. Haider on the pattern of United Kingdom Commerce Corporation in the U.K.
Both these organizations worked together till the war was over.
Again in 1949, the Ministry of Commerce considered a proposal for setting up a corporation for international trade. The proposal was given a serious thought after the devaluation of rupee in September 1949. The government appointed a committee to consider the question of state trading in India under the Chairmanship of Dr. P. S. Deshmukh.
The committee submitted its report in 1950 but due to changes in economic conditions of the country, the government again set up a Three Member Committee in 1956 under Shri S. V. Krishna Murti Rao. The committee recommended the setting up of the State Trading Corporation in India. Consequently, the State Trading Corporation of India was set up in 1956.
On the recommendation of the Deshmukh Committee chaired by Dr. P. S. Deshmukh and the review committee headed by Shri S.V. Krishna Murti Rao. The Government accepted the proposal of establishing the State Trading Corporation a registered body under Indian Companies Act.
Establishment of the State Trading Corporation (STC)
The State Trading Corporation (STC) was set up by the Government in May 1956 incorporated under the Indian Companies Act, 1956. It was designed as the sole import export agency as may be decided by the Government of India from time to time. Initially, it was established to deal with bilateral trading partners largely in the socialist block. It has now become a wholly owned holding company of the Project and Equipment Corporation of India Limited.
The Cashew Corporation of India Ltd., The Handicrafts and Handlooms Export Corporation of India Ltd. Before October 1963, the foreign trade of minerals and metals was also with STC but with the establishment of the Minerals and Metals Trading Corporation of India (MMTC) Ltd. w.e.f. October 1, 1963, this part of trading activities was handed over to the newly set up corporation.
Management the State Trading Corporation (STC)
The State Trading Corporation is a registered company under Indian Companies Act and managed by a Board of Directors including both executive and non-executive directors. It is headed by a Chairman.
Objects of the STC
The main objects of the STC are as follows:-
- To organize and undertake trade in socialist countries as well as other countries in commodities entrusted to the company from time to time by the Government of India and to undertake the purchase, sale and transport of such commodities in India or elsewhere in the world.
- To undertake at the instance of the Union Government of India import and/or internal distribution of any commodity in short supply with a view to stabilising prices and rationalizing distribution.
- To implement such special arrangement for imports/export, internal trade or distribution of particular commodities as the Union Government may specify in the public interest.
- To arrest the declining trend in exports or to boost export by introducing new products in new markets.
- To assist small exporters in their export trade.
- To assist export-oriented organizations in their export and financial and organizational activities.
Workings of STC
The State Trading Corporation has completed 54 years of its existence. It has played a commendable role in achieving its objectives for which it was established.
Its workings can be evaluated by the facts written below:
- The Turnover of the STC
The turnover of the STC over the years has increased. Before 1971-72 the turnover was quite insignificant but after that the increase was significant. The exports reached to the highest peak during 1980-85 and started declining afterwards.
In the beginning the STC efforts were guided by the policies of the Government. But in latter years it has developed the non-canalized exports such as of items marine products, garments, engineering goods and products and textiles.
- Important Products
It deals in nearly 3000 commodities including agricultural and consumer items and items of construction materials, software, miscellaneous engineering items, fresh and processed food, leather and leather products, meat and marine products. The major imports of STC are edible oils, cement, explosives, natural rubber standard and glazed newsprint. Its trade is stretched over 115 countries.
Progress in Other Fields
The STC has taken various steps in different fields. These are:
- It has diversified its product range and continued to add new items to its export basket like orthopedic shoes, sports shoe; upper compressors. H.D. Pipe etc.
- Trying to spearhead the national effort to identify new markets for Indian commodities and manufactured goods and establish itself in these markets on long-term basis.
- It has established 100 per cent export oriented production units mainly with foreign collaboration and equity participation and 100 per cent buy-back arrangements.
- It has developed a reliable supply base for production of quality goods in association with the state undertakings, co-operative organisations and other in selected and identified sectors. If necessary STC shall undertake investments for development of such production base.
- It has taken steps for improvement in quality grading, packing etc.
- The STC also performs serving functions thereby bringing, buyers and sellers together and assisting them in fulfilling business contracts. It assists Government departments and industrial concerns in procuring supplies of plant and machinery from abroad. In some cases, it settles trade disputes amicably between Indian and foreign parties.
- The original idea of its setting up was to develop foreign trade with socialist countries. It has therefore improved relations with countries of socialist block but at the same time, its operations are wider with non-communist countries.
- The STC marketing expertise has been of particular advantage to small industries because they are unable to participate in foreign trade without STC support.
Weaknesses of the State Trading Corporation (STC)
There are certain inherent weaknesses of the STC, pointed out in a study conducted by Indian Institute of Management, Ahmedabad were:
- Though the objectives of the STC were quite clear and well defined but it has not taken any major entrepreneurial decision of its own so far.
- There seems to be no guidelines for the choice of new products to be exported and new markets to sell its products.
- Not much expertise has been developed to locate and develop sources of supply for exportable products and also for procuring imports from sources of supply abroad.
- Much of the expertise is in operation as an agent, in processing indents and tenders and transportation and distribution not in merchandising, procurement and marketing.
- The set back in the exports of non-canalized items can be attributed to the STC’s failure to develop an appropriate supply base and take adequate promotional step among importers.
The other weaknesses which are also important are:
(a) It is guided by the bureaucrats who lack business experience and initiative, businessmen with practical knowledge should replace them.
(b) The interlocking of the activities of the Government of India and the STC makes possible the concealment of inefficiency under intricate official procedure. There is an urgent need of coordinating the trade of Private Traders and the STC.
(c) Moreover, the STC offices abroad have not been in a position to create an impact.
On the whole, the STC has developed a sound infrastructure for development of exports through it about 20 branches in India and 18 overseas offices and a large force of trained marketing personnel. Foreign offices provide market intelligence and can pursue the STC business matters with the various parties concerned.
With this sound infrastructure, STC should not only act as a casualising agency but should also make efforts to create an image of an effective trading house on lines of Japanese trading houses. It should provide new dimensions and leadership as the biggest export house in the country. It has stepped forward towards achieving its objectives of boosting exports.