Commerce ministry approves STC closure, says govt official

The closure of STC will now be discussed by the alternative mechanism for a final go-ahead.

India’s Commerce and Industry ministry has approved the closure of State Trading Corporation of India Limited (STC), a Public Sector Undertaking (PSU) under its administrative control, a senior government official told Moneycontrol.

“STC is already approved for closure,” the official told Moneycontrol. After the Commerce Ministry’s approval, the closure will now be discussed by the alternative mechanism (AM) for a final go-ahead. The AM is a panel of Finance Minister Nirmala Sitharaman, Minister of Road Transport and Highways Nitin Gadkari and the minister from the line ministry, which in STC’s case is Piyush Goyal. Instead of the cabinet, the AM (alternative mechanism) is empowered to make a decision on matters relating to winding up of PSUs.

The government currently holds a 90 percent stake in STC and thus also falls well short of the minimum public shareholding norm, wherein a listed company must have a public stake of 25 percent.

Closure of PSUs is more difficult than disinvestment as it leads to huge job losses, the official said. The government has approved the closure of about 21 loss-making PSUs but very few closures have been completed.

Once the AM approves the closure of STC, the Finance Ministry’s Department of Public Enterprises will step in. The DPE looks at the process for closure of PSUs.

In 2019, Commerce Minister Piyush Goyal had said that STC should be shut as it had bad loans with banks due to non-payment. The merger of MMTC and STC was also considered but was not pursued.

The Centre had offloaded a 1.02 percent stake in STC in 2013 through the Offer For Sale (OFS) route after approval from Cabinet Committee on Economic Affairs (CCEA).

STC was established in 1956 to oversee various imports and exports. The government had earlier assessed the need for these canalising agencies in the Department of Commerce and found them to be unnecessary. Canalising agency refers to the channelling of imports and exports through a designated product-specific enterprise.

The financials

In terms of earnings, STC reported zero revenue in FY22 and FY23 as its business activities had been suspended since November 2020, as directed by the ministry. However, in FY23, it reported a net profit of Rs 32.89 crore, a turnaround from a net loss of Rs 93.97 crore in FY22. This was primarily due to increased rental income and reduced operating costs, including a reduction in manpower. Before FY23, the company had experienced losses from FY14 to FY22. As of March 31, 2023, STC had a negative net worth of Rs 1,028.67 crore, and accumulated losses of Rs 1,156.04 crore.

According to its annual report for FY23, STC is working with lender banks to finalise a One Time Settlement (OTS) of their outstanding dues. STC has paid Rs 1,100 crore to lenders, and identified immovable properties worth around Rs 300 crore are to be transferred to the banks as part of the OTS.

However, there have been deviations from the original terms of the OTS agreed upon during the 2019 meeting, leading to delays in concluding the OTS. A case filed by a consortium of lender banks is ongoing in the Debt Recovery Tribunal (DRT). The last DRT hearing was on July 26, last year.