State Trading Corporation | Objectives | Evaluation | Weakness

Incorporation of  State Trading Corporation (STC)

The State Trading Corporation (STC) was established by the Union Government in May 1956. It was incorporated under the Indian Companies Act, 1956. Initially, it was designed as the sole import export agency by the Govt. of India.

State Trading Corporation - Incorporation, Objectives, Evaluation, Weakness

Image: State Trading Corporation – Incorporation, Objectives, Evaluation, Weakness

Initially, it dealt with bilateral trading partners, largely in the socialist block. It has now become a wholly owned holding company of the Projects and Equipment Corporation of India Ltd. The Cashew Corporation of India Ltd; the Handicrafts and Handlooms Export Corporation of India Ltd.

Prior to October 1963, STC looked after the foreign trade of minerals and metals. But with the establishment of Minerals and Metals Trading Corporation of India Ltd (MMTC) in October 1963, the STC has handed over the trading activities in minerals and metals to the newly set up corporation.

Objectives of the STC

The objects of the STC as specified in its memorandum of association are given below:

1. Organizing and undertaking trade in socialist countries as well as other countries in commodities entrusted to the company from time to time by the Government of India; undertaking the purchase, sale and transport of such commodities in India or elsewhere in the world.

2. Undertaking at the instance of the Union Government of India import or internal distribution of any commodity in short supply with a view to stabilizing prices and rationalizing distribution.

3. Implementing such special arrangements for imports, exports, international trade and or distribution of particular commodities as the Union Government may specify in the public interest.

4. Checking the declining trend in exports or to boost export by introducing new products in new markets.

5. Assisting export oriented organizations in their export and financial and organizational activities.

Evaluation of STC

The State Trading Corporation has played a significant role in achieving its objectives for which it was created. Its functioning may be evaluated on the following lines:

1. Turnover

In the initial stage, the STC’s efforts were guided by the policies of the government. But later it developed the non-canalized exports of marine products, garments, engineering goods, food products, textiles, etc.

2. Range of products

The STC deals in a wide variety of goods. It includes nearly 300 items such as agricultural items, consumer items, construction materials, software, miscellaneous engineering goods, processed foods, leather and leather products, meat and marine products. However, other products include edible oil, cement, explosives, natural rubber, standard and glazed new prints. It has dealings with more than 84 countries.

3. Other related fields

Apart from dealing in a wide range of commodities, the STC has concentrated on the following activities:

1. Diversification

The STC has taken steps to add new items to its export basket like orthopedic shoes, sports shoes upper, compressors, H.D pipes etc.

2. Market expansion

The STC has spearheaded the national efforts to cultivate new markets for Indian commodities and manufactured goods. The STC has established itself in the new markets on long term basis.

3. Export Oriented Units

The STC has promoted 100 percent export oriented production unites mainly with foreign collaboration and equity participation and 100 percent buy back arrangements.

4. Strong supply base

The STC has developed a reliable supply base for the manufacture of quality goods in association with state undertakings, cooperative organizations and others in selected and identified sectors.

5. Facilitating function

The STC brings together both the buyer and the seller and assist them in fulfilling business contracts. It helps government departments and industrial concerns in procuring supplies of plant and machinery abroad. It also settles disputes in trade that arise between Indian and foreign parties.

6. Trade with socialist countries

Originally, the STC was formed with the objective of developing foreign trade with socialist countries. So, it has improved trade relations with countries of socialist bloc and at the same time, stepping up its operations with non-Communist countries.

7. Marketing expertise to small industry

The marketing expertise offered by the STC to industry has been advantageous to the industry in developing its trade. Without the support of STC, small industrial units will be unable to participate in foreign trade.

Weaknesses of STC

The Indian Institute of Management, Ahmadabad has identified certain weaknesses on the part of the STC.

1. STC was formed with its own objectives. But the management of the STC has rarely taken decisions independently.

2. The STC management has not followed clear cut criteria for the choice of the new products.

3. The STC has not developed much expertise to locate and develop sources of supply for exportable products.

4. Not much expertise is developed to utilize the sources of supply abroad.

5. The STC lacked expertise in operating as an agent, in processing indents and tenders and in transportation and distribution.

Steps taken by STC to improve performance

State Trading Corporation has taken the following steps to improve its performance:

1. The STC has added new items to its export basket like moccasins, orthopedic shoes, sports shoe uppers, compressors, HD pipes, coca beans, peacock feathers, and clutch and security bags.

2. The STC has taken efforts to identify new markets for Indian commodities and manufactured goods. Moreover, it has established itself in the new markets on a long-term basis.

3. The STC has developed a strong production base and manufacture quality goods. With the help of state undertakings, cooperative organizations and other sectors, the STC has a reliable supply base.

4. The STC has established 100 per cent export oriented production units.

Their product range includes leather products, processed fruits and vegetables, meat and marine products, sports goods and engineering goods.