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hydro-carbons, metals and minerals and fertilizers. It was set up in 1956 primarily with a view to
undertake trade with East European Countries and to supplement the efforts of private trade and
industry in developing exports from the country. The Corporation is registered as an autonomous
company under the Companies Act, 1956 and functions under the administrative control of the
Ministry of Commerce & Industry, Government of India.
The company has one subsidiary, namely STCL Ltd (formerly known as Spice Trading
Corporation of India Ltd). As its trading activities have diversified a number of subsidiary
corporations, namely handicraft and handloom export corporation of India ltd. Projects and
Equipment Corporation of India Ltd., India Motion Pictures, Export Corporation Ltd., State
Chemicals and Pharmaceutical Corporation of India Ltd., Cashew Corporation of India Ltd.
have been formed to look after the specific areas of trading operations. The state trading
corporation has opened offices in many countries of the world so as to enable it to make
effective marketing and obtain better terms of trade. State Trading Corporation had 13 branch
offices in India as of March 31, 2012. During the year early years, the company dealt with the
East European countries, but now they trade with almost all the countries of the world. The
company was developed vast expertise in handling bulk international trade. During the year
1994-95, the company started trading items rice, wheat, coffee, Indian-made foreign liquor,
sandalwood and oil and during the year 1995-96, they entered into new area of business like
direct import of fertilizers, non-ferrous metals and kerosene oil. In domestic trading, they
expanded their activities in areas like rice, wheat, coffee, cashew, tobacco and rubber. During the
fiscal year ended March 31, 2012 (fiscal 2012), the Company entered into a number of new
areas of business, such as stock and sale of soya seed, mustard seed, desi chana and retail sale of
State Trading Corporation brand tea in domestic market.
1.2 Functions
The Main Functions of the State Trading Corporation are:
1. To explore new markets for existing as well as new products.
2. To promote exports difficult to sell items and promotion of long-term export operations.
3. To diversify and increase Indias export trade.
4. To undertake exports and imports where bulk handing is advantageous.
5. To undertake import and /or internal distribution of commodities in short supply with a view
to establishing prices and rationalizing distribution.
6. To hold or assist in holding exhibitions in India and elsewhere of the products and articles in
which the company is interested.
The STC is also acting as an agent of the Government of India is controlling production,
distribution and export and import of a number of commodities such as cement fertilizers etc.
1.3 Objectives
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
Indias export trade and promotion of long term export operations and difficult to sell item are the
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.
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1992 - The Company was nominated by the Govt. of India as its agency for sale of 47000 MTs of
crude degumming 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-canalised 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. 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. Equity shares
subdivided on 31.1.1992. 150, 00,000 bonus shares issued in prop. 1:1.
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
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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, Ministry of Commerce as Part time Director on the
board of the company.
2005 -STATE Trading Corporation of India Ltd (STC) has signed a MoU with the Commerce
Ministry for 2005-06 to indicate its physical targets and other performance parameters for the
next fiscal.
2006- Government permits STC to export 1.5 lakh sugar STC to roll out regional brands
2008- The Company has issued Bonus Shares in the Ratio of 1:1.
2010- State Trading Corporation of India Ltd has informed BSE that Government of India,
Ministry of Commerce and Industry, Department of Commerce Vide its order dated January 13,
2010 has appointed Shri P. K. Chaudhery, Additional Secretary, Department of Commerce as
Director on the Board of STC with immediate effect vice Shri R. Gopalan.
2011-Shri Udai N. Abhyankar, Former IFS Officer Board of Director of The State Trading
Corporation of India Ltd.
2012 -39th rank in terms of net sales among Top 500 Companies by Financial Express
(Feb2012). Won award for Gentle Giant Miniratna - I (Largest Non-Manufacturing Company)
at the Third DSIJ PSU Awards 2011 ceremony held at New Delhi. It was honored rank 32 in
terms of net sales among Top 1000 Companies by Business Standard (Mar2012).
Press Information Bureau
Government of India Ministry of Commerce & Industry
18-April-2013 14:17 IST
Indias Foreign Trade: March, 2013
Exports (including re-exports)
Exports during March, 2013 were valued at US $ 30849.65 million (Rs. 167836.31 crore) which
was 6.97per cent higher in Dollar terms (15.65 per cent higher in Rupee terms) than the level of US
$ 28839.36 million (Rs. 145123.41 crore) during March, 2012. Cumulative value of exports for the
period April-March 2012 -13 was US $ 300570.58 million (Rs 1635261.02 crore) as against US $
305963.92 million (Rs 1465959.40 crore)registering a negative growth of 1.76 per cent in Dollar
terms and growth of 11.55 percent in Rupee terms over the same period last year.
Imports
Imports during March, 2013 were valued at US $ 41164.71 million (Rs.223954.98 crore)
representing a negative growth of 2.87 per cent in Dollar terms and a growth of 5.01 per cent in
Rupee terms over the level of imports valued at US $ 42380.68 million ( Rs. 213265.08 crore)
in March, 2012. Cumulative value of imports for the period April-March, 2012-13 was US $
491487.22 million (Rs. 2673113.08 crore) as against US $ 489319.50 million (Rs. 2345463.25
crore) registering a growth of 0.44 per cent in Dollar terms and growth of 13.97 per cent in
Rupee terms over the same period last year.
MTs of thermal coal to NTPC during the year. The company also entered into oilseeds market
and purchased soya bean and mustard seeds worth Rs 29 crore.
The Corporation also procured, for the first time, about 10,000 MT of castor seeds valuing Rs 15
crore for sale in the domestic market. During the year 2007-08, the company signed an offset
agreement with CFM, Boeing and GE for monitoring offset obligation of USD 69 million, 1.25
billion and 100 million respectively. They acquired a plot of land at Paradip port for facilitating
iron ore exports a plot of land at Paradip port for facilitating iron ore exports and also applied
for allotment of plot at Haldia Port. The company started tea operations in Nilgiri district of
Tamil Nadu. They also launched domestic sale of tea in own brand 'Tohfa' to Gujarat State Civil
Supplies Corporation for supply through PDS. During this period, the company signed a MoU
with company specializing in Research & Development activities on improving the yield of
Jatropha plants for production of bio-diesel. The company is in the process of starting trial
cultivation of bio-engineered, high yielding of jatropha in Namibia on an area of about 25
hectares. They are in talks to grow crop in Indonesia as part of a move to raise output of the biodiesel feedstock. The company through their subsidiary STCL Ltd set up a Chilli Processing
plant at Byadagi in Karnataka. They also set up two more plants for pepper processing and
Chilli Sterlisation in Siddapur, Karnataka and Chhindawara, Madhya Pradesh respectively. The
company in a joint venture with NAFED and STCL Ltd is setting up a Food Testing Laboratory
at Chindwara in Madhya Pradesh.
Awards
The company got second rank among trading companies of India and achieved first runner up
position in the Multi Category sector under the large exporters' category for the D&B-ECGC
Indian Exporters' Excellence Awards. The company was selected for Memorandum of
Understanding Excellence Award for the year 2006-07 by the Department of Public Enterprises.
Also, the company was awarded 'International Trade House of the year Award (2007-08)'
sponsored jointly by DHL and CNBC TV18.
COMMODITIES
2.1 Agro- Commodities
Grains
International trading in food grains and other products has been one the major activities of the
State Trading Corporation, since its inception.
Wheat
The State Trading Corporations import / export of wheat depend upon the Government of India
regulations and policies. State Trading Corporation is exporting wheat from Food Corporation of
India (FCI)/Central Pool Stock since August 2012 from Mundra, Chennai and New Mangalore
Ports. A quantity of about One Million mega tonnes of Indian milling wheat has been exported
during Financial Year 2012-13. The exports are made by initiating global bids. Destination ports
to which exports were made during 2012-13 include Bangladesh, UAE, Qatar, Malaysia,
Tanzania, Mozambique, South Korea, Djibouti, Philippines, Thailand and Indonesia etc. meet
domestic shortages. During 2006-08, the State Trading Corporation imported about 6.8 million
tons of wheat on behalf of the Government of India to meet domestic shortages.
The wheat imported by State Trading Corporation is also required to satisfy phytosanitary
requirements, insecticides and pesticides limits, weed seed limits and other quality parameters.
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large private grain producers and traders handle the remaining 40 percent of Kazakhstans
exports.
The other two large wheat exporters, the United States and the European Union (EU), accounted
for 31 and 17 percent, respectively, of world wheat exports. Neither uses an STE to export
wheat, but both countries governments have regulated their wheat exports. The United States
maintains a government corporation, the Commodity Credit Corporation (CCC), which it
reported to the WTO Council on Trade in Goods in 1995 and 1996, including lists of the
programs which it administers and the commodities procured and exported under its programs.
The United States also reports its export subsidies to the WTO Committee on agriculture in
accordance with its commitments to cap and reduce export subsidies under the Uruguay Round
Agreement on Agriculture. The CCC operates as the financing agent for U.S. export programs,
including the Export Enhancement Program (EEP), which operated for wheat from 1985 through
1995. Under the EEP, the CCC paid generic certificates redeemable for commodities in CCC
inventories (until November 1990) and cash bonuses (after November 1990) to private exporters,
allowing them to sell wheat to targeted countries at prices below the exporters costs of
acquisition. The CCC did not itself export the wheat. The EU continues to approve export
subsidies to private sector exporters through the European Commission, Grains Management
Committee, which also issues orders for the export of grains from intervention stocks in EU
member countries.
Average for 1994-97 marketing years
Kazakhstan (3.0%)
East Europe (3.0%)
Others (6.1%)
Argentina (8.1%)
Australia (13.1%)
Canada (20.2%)
Wheat exports (Source: USDA, Economic Research Service).
EU (16.2%)
U.S. (30.3%)
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STE imports account for between one-third and one half of 1993-94-1997-98 global wheat
imports. Twelve countries account for just over half of world wheat imports, which are far less
concentrated than exports.
China and Japan import wheat through monopoly agencies, while STEs in Egypt, Morocco,
Pakistan, Turkey, the Eastern European countries, and others co-exist with private traders.
Indonesia Badan Urusan Logistik (BULOG) opened trade in wheat to private traders in 1998,
following in the footsteps of Israel, Mexico, the Republic of South Korea, the Philippines, and
others who opened their wheat imports to the private sector in the 1980s and 1990s. Algeria state
import agency has been an import monopoly in the past, but recently began to allow private
traders to import wheat. Pakistan banned private sector imports in June 1999 after allowing
private firms to import since late in 1991.
Rice
The STC is a regular supplier of rice to various destinations in Africa, Middle East, South East
Asia, Caribbean countries etc. However, export of rice is subject to Government of India
regulations and policies. In the recent years, the STC has exported large tonnage of rice to
Bangladesh, Myanmar, Madagascar and other African and South East Asian countries. STC also
supplies Rice under the World Food Programme.
World Report on State Trading of Rice
Rice, a staple food commodity for many Asian countries, is heavily regulated by government
policies to restrict exports and imports, which STEs often administer. STEs account for about
half of world rice exports and nearly a third of rice imports. Private traders export rice from
Thailand, the largest rice exporting country with over one-quarter of world rice exports, but
rice exports from Vietnam, the second largest rice-exporting nation (14 percent share of world
exports from 1994 through 1998), are handled by state agencies and are restricted by the
Government of Vietnam. Rice producers in New South Wales, Australia, use an STE to export
their rice, and the Chinese Government controls rice exports. Australia and China have global
rice market shares of 3 and 6 percent, respectively. Imports by Indonesias BULOG accounted
for 12 percent of world rice imports from 1994 through 1998. BULOG lost its exclusive
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authority to import rice in 1998, but continues to import rice as needed. Other importoriented rice STEs are the Philippines National Food Authority (4 percent of world imports),
Chinas China National Cereals, Oils and Foodstuffs Corporation (COFCO) (4 percent), the
Iranian Government (5 percent), and Malaysias Bernas (3 percent).
Pulses:
India is a regular importer of pulses. STC undertakes import of pulses under various schemes of
the Government of India as announced from time to time for supply to state governments and / or
sales in the open market also imports on commercial account. State Trading Corporation imports
various types of pulses like black mapte, green moong, chick peas, dun peas, lemon tur, yellow
peas, etc. In addition, the imported pulses need to comply with Indian Phytosanitary Norms and
should be free from live infestation.
Oilseeds and Extractions
STC purchases various oilseeds from Mandies (wholesale markets) at the time of harvesting.
These are either sold back in the domestic market at an appropriate time or are crushed by taking
the crushing capacity on lease. The extractions are exported while the oil is sold domestically.
The seeds/oils in which STC deals include Soya bean, Sesame, Ground Nut, Rape seed and
Mustard seed.
Coarse Grains
Maize
The STC imports significant quantities of maize (for popcorn) under Tariff Rate Quota (TRQ)
based on specific requests received from actual users from time to time.
Tea
The STC has been in tea business for more than three decades. Presently, tea operations of STC
are centralized at Coimbatore / Bangalore Branch. The entire tea operation viz purchase of
leaves, processing, blending, storage, inspection and dispatch is monitored and inspected by
experienced professionals to maintain high standards of quality and freshness. The tea produced
by STC is sold in the domestic markets and is also exported. The STC has also forayed into retail
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sales by launching the retail packets of tea in 250gms under the brand State Trading
Corporation Tea for sale in domestic market. The distribution is being expanded to Karnataka,
Andhra Pradesh & Kerala, the response is very good. A retail outlet for selling tea in retail
packing was also opened in the office premises of State Trading Corporation Bangalore. The
Corporation also plans to expand the operations in North India and in other states by supplying
North-East Tea.
2.2Precious Metal
Bullion
The STC is one of the agencies nominated by the Government of India to import gold, silver
and other precious metal into the country. The STC imports Gold in 100gms and 1 Kg bar from
LBMA members as well as silver for traders / jewelry manufacturers.
Typical Specifications for Gold & Silver:
GOLD
SILVER
15 kg
1 kg Bars
28 kg to 31 kg
Purity : 0.9999
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2.4 Fertilizer
Urea Fertilizer Grade
The STC as one of the nominated canalizing agencies is regularly importing Urea on behalf of
the Department of Fertilizers, Ministry of Chemicals & fertilizers, Government of India by
issuing the global tenders. In last three years STC has imported 4 Million Tonnes of Urea valued
at Rs 8500 crores.
Technical Grade Urea
The STC supplies Technical Grade Urea as an industrial chemical to various industries i.e. actual
users as well as Indian traders who have valid authorization for such imports from Department of
Fertilizers. These imports are done based on (i) Back to back basis, or (ii) Through limited
tenders issued to STCs empanelled Associate Suppliers.
2.5 World Report on State Trading in Other Grains
The profile of world barley exporters closely resembles that of world wheat exporters, although
the United States holds a much smaller share of world barley trade. The Canadian Wheat Board
and Australian state-level STEs handled 38 percent of world barley exports from 1993-94
through 1997-98. Other smaller exporters (the Eastern European countries, Russia, Syria, and
Turkey) exercise some degree of state control over their barley exports. The U.S. and EU barley
export regimes are similar to those countries export arrangements for wheat. The EU, the largest
barley exporter, held a 30-percent share of world barley exports over the 5 year period, while the
United States accounted for only 8 percent of world barley exports. STEs in China and Japan
held 10 and 9 percent, respectively, of world barley imports over the same period.
The EU Commission has the exclusive right to determine the amounts of export subsidies,
without which exports of wheat cannot take place; to authorize sales from intervention stocks;
and to grant export and import licenses required for trade of some commodities.
However, the Grains Management Committee does not directly purchase or sell commodities.
Intervention agencies in EU member countries, acting as agents of the Commission, purchase
products for intervention and sell them with the authorization of the Commission. Private traders
carry out all exports and imports. The EU also agreed to reduce its export subsidies for wheat
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coexists. If imports are conducted by private firms only, the import arrangement
is private. The coexists category can be applied to many countries where trade has
been opened to private trade, but where the STE may import under certain conditions.
Ex. Japan allowed private firms to import feed wheat through a simultaneous buy-sell tender
system in the Japanese 1999-2000 (April/March) fiscal year. It opened import tenders for feed
barley to private importers for the first time in 1999.
Ex.Indonesia terminated Badan Urusan Logistik (BULOG), Indonesias import STE, monopoly
import authorities over several agricultural commodities in September 1998.
Ex. Pakistan opened trade to the private sector in 1991, but government pricing policies
restricted trade until 1998, when the private sector imported 1 million tons of wheat. However, in
June 1999, Pakistan imposed a ban on private sector wheat imports.
Ex. Saudi Arabias Grain Silos and Flour Milling Organization (GSFMO) handled 27 percent of
world barley imports from 1993-94 through 1997-98. Saudi Arabia allowed private traders to
import barley for the first time in 1998.
World Report on State Trading of Dairy Products
The chief dairy export STE, the New Zealand Dairy Board, handles about 30 percent of world dairy
product exports. Smaller dairy export STEs, the Australian Dairy Corporation, the Canadian Dairy
Commission, and the Polish Agricultural Marketing Agency handle some, but not all, of their
countrys exports. The largest dairy exporter, the EU, does not use an STE to export dairy products,
but the EU Commission administers export subsidies for private sector sales of dairy products,
particularly butter, milk powder, and cheese. Mexicos Compania Nacional de Subsistencias
Populares (CONASUPO) largely handled Mexicos milk powder imports, which accounted for
about 31 percent of global nonfat dry milk imports from 1993 through 1997, until private firms
began to import large quantities of milk powder in 1998. After announcing that it would close
National Company of Popular Subsistence (CONASUPO) on
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March 31, 1999, the Mexican Government permitted another federal agency, LICONSA, to
import milk powder for the governments social programs, and began auctioning import permits
for milk powder to the private sector July 7, 1999. U.S. private firms export U.S. dairy products,
although the CCC exported dairy products from its inventories prior to 1996. The CCC also
continues to approve direct export subsidies on sales of eligible dairy products under the Dairy
Export Incentive Program (DEIP).
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Indicative List Of Items / Equipments Being Imported By State Trading Corporation For
Various Central& State Government Ministries & Departments
CATEGORY
EQUIPMENTS
Medical Equipments
Police / Security Equipments Pistols, Sub-Machine Guns, Rifles ,Full range of Bomb Disposal
Equipments & accessories, Explosive Detectors, Portable X-rays,
Digital scan, Dust Enlarger, Bullet Proof Jackets, Helmets, Shields
Fire Arm Training Simulator, Kits and equipments for Finger Prin
Bureau, etc.
Intelligence/Surveillance
Equipments
Avionics
Laboratory Equipments/
instruments
Tourism Equipments
Sports Equipments
Agricultural Equipments
Multimedia Equipments
Snow Cutter & Blower Imported by STC for Mechanical Engineering Department,
Government of J & K in action in interior parts of Kashmir.
Import of Arms for State Police Departments
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State Trading Corporation has been supplying Bullet Proof Jackets & Bullet Resistant Helmets to
Security Personnel stationed at vital installations and centers of High importance in India. ISRO
Headquarters, Bangalore, BARC Trombay, Mumbai International Airport, Tarapur Atomic Power
Station in Maharashtra, Rashtriya Ispat Nigam Ltd, SAIL, NTPC, HPCL are our few esteemed
customers. With state-of-the-art manufacturing facilities of our Associate Manufacturer for Body
Armouring solutions i.e. TATA Advanced Materials Ltd, Bangalore State Trading Corporation
has provided customized solutions of Bullet Proof Jackets & Bullet Resistant Helmets for the end
User Departments understanding their threat level perception. With use of special Composite
Solutions, STC along with its manufacturing associate is trying to achieve more cost effective
solutions, meeting the prescribed threat level and saving the lives of Security Personnel.
State Trading Corporation is also supplying the Customized Ballistic Protection Kevlar Carpet
Kits to TATA Motors for the armored version of TATA Safari which is being supplied to Elite
Forces protecting the lives of VVIPs.
2.7 World Reports on Imports
Japan Food Agency and Indonesia Badan Urusan Logistik (BULOG) topped the list of importoriented STEs from 1993 through 1995 at valued more than $1 billion annually on an average.
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WTO, Chinas leaders have agreed to expand import access for many sensitive agricultural
commodities, including soybean oil, wheat, corn, rice, cotton, and barley; to designate and
expand shares of the proposed Tariff Rate Quotas (TRQs) for private sector importers; and to
open state trade shares of the TRQs to private importers of wheat, corn, and rice if the state
traders do not fill the TRQ during the year.
The Republic of South Korea designated STEs to administer some of its WTO TRQs to serve the
following objectives:
(1) To stabilize domestic markets faced with low priced imports;
(2) To fulfill Koreas Uruguay Round Agreement market access commitments; and
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(3) To use the revenue from differences between domestic and import prices for public
objectives such as research and market development of artificial honey and cocoons which were
removed from Koreas list of state trading items in June 1996, and silk was removed from the list
in June 1997. It is worth noting that the WTO Agreement on Agriculture disciplines export
subsidies in terms of total expenditures and not on a per unit basis as with tariffs.
3.3 Why Do Countries Pursue State Trading of Agricultural Products?
Both developed and developing countries establish state trading enterprises to attain domestic policy
objectives. Countries cite support for domestic producers, price stabilization for producers or
consumers, and the assurance of reasonably priced food supplies as major policy objectives for STEs
in their reports to the WTO. Among developed countries, support for domestic producers appears
somewhat more frequently as an objective of state trading, while among developing countries, the
assurance of reasonably priced food supplies for consumers ranks high. Governments of developed
countries attempt to boost domestic producer prices by granting exporter STEs monophony power to
procure domestic production and by giving them exclusive authority to export. Importer STEs may
be established to increase producer returns by restricting imports. To stabilize producer prices, an
STE may purchase or sell stocks, pool returns for domestic and/or export sales (for STE exporters),
or charge markups on imported products
(STE importers).
In developing countries, STEs may administer domestic food policies that hold retail prices below
producer and/or world price levels. In these cases, producers are taxed to subsidize consumers. Price
stabilization policies in developing countries may subsidize both consumers and producers (and all
of the participants along the marketing and processing chain for the supported commodities). The
STE controls the procurement, distribution, marketing, and processing of the covered commodities
either by procuring, processing, and distributing the products itself or, more frequently, by
contracting with or licensing traders and processors. Generally, the STE has authority to choose its
suppliers, customers, and processors. Other reasons countries pursue state trading include achieving
economies of scale in trading operations (for example, transportation, insurance, foreign market
development, and quality control improving terms of trade, and fulfilling international commitments
on quantity, price, and credit
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To study the market impacts of state trading activities, one approach would be to examine the
effects that such enterprises have on domestic and international prices. For instance, a state trader
that restricts imports into a country will increase domestic prices in the same way an import tariff
does. Similarly, an STE that expands exports will have an effect on domestic price that resembles
an export subsidy. Thus, one can explain the market effects of STEs by expressing their impacts
on prices in terms of tariff or subsidy equivalents.
3.5 Factors Influencing the Tariff or Subsidy Equivalent
Several factors influence the tariff/subsidy equivalent associated with a state trading agency,
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including the degree of control that the STE has over the domestic market, the STEs policy
objectives, the extent of the STEs international market power, and the range of privileges that
are exclusive to the enterprise. These factors not only influence the tariff equivalent associated
with the state trader but also determine the type of policy instrument the STE might use.
Degree of Control Over Domestic Markets
The principal factor that influences the magnitude of the tariff/subsidy equivalent associated with
an STE is its degree of domestic market power. In general, the greater the market power an STE
possesses, the more it can influence prices and the volume of products traded. An STEs
domestic market power depends on both the array of market activities that it controls as well as
the range of commodities that it regulates. An STEs control over four specific activities:
domestic marketing, procurement (i.e., sales and purchases), imports, and exports determine its
capacity to exercise domestic market power. There are several possibilities in this regard. At one
end of the spectrum is an STE that maintains complete control over each of these activities. All
transactions, whether in the domestic or international markets, have to be channeled through the
STE. The other extreme is an STE that has no control over any of these activities. Presumably,
the STE in this situation behaves no differently from a competitive private firm, and the
possibilities for an STE to influence the domestic market are very limited. Thus, an STE that
controls the full gamut of marketing activities will affect prices and the tariff/subsidy equivalents
much more than a state trader that controls only one of these activities.
Similarly, an STEs market power depends on its capacity to differentiate products and regulate
use of substitutes. Hence, the larger the number of substitute products over which an STE has
regulatory control, the greater its ability to manipulate the market and influence the tariff/subsidy
equivalent. This capacity is likely to be even greater if the STE controls upstream and
downstream marketing and processing activities and engages in transfer pricing as a
consequence of vertical integration.
Breadth of Policy Objectives
The policy goals of an STE influence the magnitude of its tariff/subsidy equivalent. For instance,
an STE importer that seeks to maximize its own profits can do so by exploiting consumers,
producers, or both. The tariff equivalent of the policy set in each case would be different. If the
26
objective is to maximize profits by taxing consumers, the tariff equivalent is the difference
between the world price and the higher price at which imports are sold to consumers.
Conversely, if the objective of the STE is to tax producers, the tariff/ subsidy equivalent is the
difference between the world price and the lower acquisition price offered to producers.
Extent of International Market Power
The tariff equivalent is defined as the difference between domestic and world prices, taking into
account all associated transaction costs and tariffs. Hence, the tariff equivalent attributable to an
STE also depends on the extent of its international market power. For instance, a few large
sellers dominate the global wheat market. Thus, an STE exporter with market power could hold
back sales in the international market to achieve higher world prices and increased total
revenue. As before, the tariff/subsidy equivalent of the STE is the difference between the
domestic price and world price, though the difference is likely to be lower because the state
trader could raise international prices as well. Similarly, an STE importer with international
market power could force purchases at lower prices by restricting purchases. The difference
between the domestic and international price is the tariff equivalent, and the gap is likely to be
greater with international market power because of the STEs ability to lower world prices. In
general, the greater the international market power that a state trader enjoys, the more it can
influence the tariff/ subsidy equivalent.
Range of Exclusive Privileges
The range of exclusive or special privileges available to an STE can substantially affect the
tariff/subsidy equivalent. Special privileges might include the financial benefits that accrue to an
STE as a result of governmental association, such as underwriting of producer payments, interest
rate subsidies, tax benefits, and preferential foreign exchange rates, or nonfinancial privileges
such as the authority to establish long term trade agreements with other governments. These
privileges, in general, are likely to be affected by the ownership structure of the STEs; that is,
the extent of managerial control that the government exercises over the enterprise. For instance,
an STE that is owned by the government and has been established to provide income and price
stability may behave differently than an STE owned by producers determined to maximize
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profits. Or, an STE that is owned by the government and is guaranteed against bankruptcy is
likely to follow different trading practices than a commercial firm operating without
government assistance. Exclusive privileges, particularly financial support, allow STEs to
undertake pricing risks beyond what a commercial enterprise might, especially if the state trader
has goals other than profit maximization. Such privileges could lead to prices and tariff
equivalents different from those that would exist in the absence of such privileges. The greater
the array of privileges available exclusively to the STE, the more it can influence prices and the
tariff/subsidy equivalent.
Creating a Classification Scheme for STEs (One the basis of a single product)
The classification scheme helps policymakers to identify enterprises that have the greatest
potential to distort trade, to compare agricultural STEs in terms of their broad economic traits,
and to provide a framework for the development of a dynamic inventory of STEs as their
powers and institutional structures change.
Type I: STE operates without any controls on either domestic markets or international trade. In
other words, the STE is competing with private firms on a level playing field. Clearly, Type I
STEs have little, if any, capacity to affect the market, and their potential to distort trade is
negligible.
Type II: STE operates without any restrictions on external trade but maintains control over the
domestic market. Market controls may take the form of price regulation, supply control,
procurement, and domestic marketing. Domestic consumers (producers) can resort to
international markets for purchases (or sales), suggesting that domestic controls without trade
restrictions do not significantly violate competitive norms. The potential to distort trade for a
Type II state trader is low.
Type III: STE competes with private firms to procure and sell domestic production in the home
market, but maintains quantitative controls on external trade. These STEs have the potential to
moderately distort trade, but the actual extent of distortion would depend on factors such as the
extent of international market power, the range of exclusive privileges available to the firm and
the policy objectives of the STE. For example, the Canadian Wheat Board (CWB) does not make
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public information on transaction prices and quantities of individual wheat and barley sales.
Without these data, it is very difficult to establish meaningful domestic and export prices for
Canadian wheat since the CWB publishes only its pool prices derived from a combination of
domestic and export prices, importance (share) of external trade in domestic consumption and
production.
Type IV: STE imposes quantitative restrictions on imports or exports and maintains control over
the domestic market as well. These STEs are more able to distort trade than the other three
groups. But, whether a Type IV STE distorts trade much more than other types of STEs depends
on factors that influence the magnitude of the tariff/subsidy equivalents, similar to those
indicated for Type III STEs. Thus, a Type IV STE that has a small share of the global market
may distort trade less than a Type III STE that is a big player in world trade.
3.6 Counter Trade & Offset
State Trading Corporation has been a nodal agency to monitor counter trade commitments
arising out of purchases made by various departments of Government of India and has monitored
such offset transactions worth over 1 billion USD in the last two decades. The international
partners with who counter trade transactions were handled by State Trading Corporation in the
past include Bofors, Boeing, British Aerospace, General Electronic, Pratt & Whitney etc. Air
India and Indian (Erstwhile Indian Airlines ) have entered into purchase agreements with the
Boeing Company, USA, Airbus, France, General Electric Company, USA & CFM International,
France for supply of 111 aircrafts/ engines. These agreements have commitment from these
overseas manufacturers to fulfill offset obligations/ counter trade programme to the extent of
agreed percentages. In line with this STC has entered into agreements with these companies for
implementation and monitoring of such offset obligations/ counter trade programme.
3.7 E-portal
A Web-based e-portal for online monitoring of the Offsets programme has been developed to
digitalize the processes involved in counter-trade administration that were performed manually
between STC & Offset Partners (Boeing, Airbus, CFM & GE).
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pursuit of long term objectives. Thirdly, the centrally planned economies have emerged as
important export markets for a large number of developing countries including India. Since the
foreign trade of these countries is invariably conducted through State trading organizations, it is
found that government trading bodies are in a better position to negotiate with their counterparts
in the certainly planned economies.
Canalization of Imports:
State participation in imports is generally motivated by some other considerations. These
are: (1)To reap the advantage of bulk buying.
(2) To mop up any excess profit which the private sector firms might enjoy in import business
(3) To ensure proper internal distribution of the imported items and to maintain stable
domestic price level.
Advantage of Bulk Buying:
There are essentially three elements which can be associated with the advantage of
bulk purchase. They are:
(1)A bulk purchaser may get better discount and trading terms.
(2) Since the bulk purchaser will be monopolist, the possibility that prices of commodities in
short supply can be pushed up by competitive bidding by the Indian importers, is eliminated.
(3)Since the international markets of many importable items are monopolistic, state trading
will give rise to countervailing power which may mitigate to some extent the ill effects of the
monopolistic market structure.
There may be other purposes behind the state participation in the field of foreign trade. Another
few important purposes could be:
1. State trading agencies are considered to be rational tools and potentially powerful
weapons for preserving the foreign exchange equilibrium and safeguarding the external
Balance of Payment of the country.
1. By monopolizing foreign trade, state trading strengthens the bargaining power of the
state.
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3. State may participate in international trade for stabilizing the prices of essential
raw materials and for diversifying the countrys foreign trade.
4. State may also establish monopoly over foreign trade for providing protection to the
domestic industries against unfair foreign competition.
5. State trading explores greater and new export outlets and earns profit for financing
the development projects in the country.
6. State trading is a powerful tool for the elimination of malpractices adopted by the
private traders in the sphere of foreign trade.
Advantages of State Trading
The rationale of state trading in foreign trade lies in the benefits which it confers on the
countries. The principle advantages of state trading are:
1. The development of a proper vision of international trade and a continuous watch.
2. For safeguarding the national interests are possible only through a state- owned
trading agency.
3. State trading can bridge the gap between the demand price and the cost price
because the state is usually aware of the demand and supply situations and can
suitably adjust the price of the products in which it trades so as to minimize the gap
between the demand and supply of the goods handled by the state trading agency.
Thus, state trading in strategic commodities can serves as an effective concomitant
of comprehensive development planning programme in a backward
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4. State trading coordinates the entire countrys trading machinery and assumes
added responsibility for rationalization and institutionalization of trade policies.
Among the benefits of state trading the inculcation of a sense of financial discipline is more
important. By making its management more efficient and careful, state trading minimizes the
cost of inputs and maximizes output.
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One of the main problems relating to State trading in the context of a rules-based international
trading system is the lack of transparency of the existence and activities of State trading
enterprises. While the obligation to notify such enterprises has been on the books that is to
say, in the General Agreement since 1947, and the first deadline for such notifications was
February of 1958, compliance with this obligation has been, until only very recently, very poor.
This situation, coupled with the fact that the relationship between governments and State
trading enterprises and the activities of the latter may give rise to trade distortion, means that a
significant area of potentially WTO-inconsistent practices may be escaping WTO scrutiny and
regulation. Much more needs to be known about State trading enterprises so that Members can
assess the impact of their operations on international trade, and, perhaps, as time goes on,
develop further the disciplines necessary to regulate this area of trade.
Possible Negative Trade Effects
State trading enterprises may be used as a vehicle for implementing a number of trade policy
measures which are not consistent with WTO provisions. The most common is a violation of
market access obligations. For example, a State Trading Corporation might be used to provide
protection for the domestic market in a given product by setting resale prices of imports at very
high levels, thus negating tariff concessions bound in WTO Schedules and violating Article II of
GATT 1994. The provision of subsidies to State Trading Corporations which are mainly
involved in exporting may run afoul of export subsidy disciplines. Even in cases where the
objective of the government acting through the State Trading Corporation is not intentionally
trade-distorting, the State Trading Corporations operations may nevertheless distort trade. For
example, the protection of public health, which is a frequently stated rationale for the
maintenance of monopolies on alcohol and alcoholic beverages, may seriously distort trade in
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those products. It is only when the activities of State trading enterprises can be examined that
their impact on trade can be analyzed and, ultimately, more effective rules developed.
Defects of STC:
It is disheartening to note that the STC has the following defects in its working as found by
the Economist Intelligence Unit (EIU) London and by other critics:
1. It is generally, observed that deliveries from STC side have been constantly behind schedule.
2. STC is found to be extremely slow in taking decisions and actions.
3. STC could not work fruitfully with buyers and producers to solve the technical
problems involved in foreign trade.
4. STC lacks a business point of view. Its activities are governed by bureaucratic attitudes and
systems.
5. Periodic changes in staff of STC seem to have affected the efficiency and continuity of
functions.
6. STC has been crowned with failure in executing foreign orders fully and carefully, e.g.,
Russian shoe order in the recent past.
7. STC is entrusted with the task of canalisation of imports of important raw materials in the
belief that it would be able to secure supplies at a lower cost through bulk buying. But, the
Corporation has not been able to arrange the import of raw materials at competitive prices and
supply them to industry at the right time. Thus, under this system of canalisation, in many
cases, industry has had to pay higher prices than under direct imports. In fact, the higher costs
of canalisation are attributed to the heavy commission charged by the STC, its failure to buy the
materials at the right time and its inability to locate the correct source of supply.
We may thus, conclude that since STC has a significant and increasing role in the planned
economy of the country with its socialist goal, its working, functioning and attitudes must be
revised and reorganised. Further, the STC should concentrate more on promoting the export of
new items on a long-term basis, as there is an urgent need to develop new markets for our
foreign trade. It should also help the private sector to export items that are difficult to sell. It
must work hard for diversification and rationalisation of our exports. Its fundamental task
should be to impart dynamism to our export drive. Under the new wave of liberalisation,
however, STC is gradually losing its importance.
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