The Hindu Business Line : STC eyes forward & backward integration in food, energy, mining

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New Delhi Jan. 28 The State Trading Corporation (STC) is seriously mulling over "backward and forward integration into the food sector and energy sectors and also into steel and mining," buoyed by all-round robust performance during the first three quarters of the current fiscal.

Disclosing this in an interview to Business Line here, the STC Chairman & Managing Director, Dr Arvind Pandalai, said that as per the memorandum of understanding (MoU) the Corporation signed with the Government, "We should have achieved a target of Rs 7,500 crore in all the three sectors, viz, exports and imports and domestic operations put together. Against this, we achieved Rs 10,588 crore — an increase of over 41 per cent on the proportionate target during April-December 2006 and an increase of 105 per cent as compared with the corresponding period of the previous fiscal."

Export Performance

He is confident that the corporation would clock up a good growth to post a turnover of Rs 15,000 crore in the current fiscal. In the first fortnight of January 2007 alone, the STC has increased its turnover by Rs 1,000 crore.

Stating that overall, the corporation has done much better than last year particularly due to strong export performance and high momentum gained in import, the STC Chief said major items of exports during the period under review include project exports worth Rs 1,379 crore, drugs and pharmaceuticals of Rs 279 crore, jewellery of Rs 76 crore and iron ore of Rs 32 crore.

Export turnover amounted to Rs 1,879 crore, an all-time high or up by 151 per cent from Rs 748 crore in April-December 2005, mainly driven by project exports. He said STC is now a cost-competent project exporter in the Philippines and "taking cue from this, we have taken our overseas steel operation by extending similar programme adjusted to the requirement of local markets in Bulgaria. We have also taken up project export in Nigeria."

Agreement

He said imports amounted to Rs 8,273 crore — up 107 per cent from Rs 3,998 crore in April-December 2005 mainly due to imports of wheat.

He said that out of the contracted 5.5 million tonnes of wheat import, the corporation had imported 4.7 million tonnes, with 0.3 million tonnes on the high seas and the balance of 0.4 million tonnes to reach by February 2006.

He said the corporation has entered domestic oilseed market and undertook mustard operation of Rs 400 crore.

In a bid to increase the profitability, the corporation used the NCDEX to do online trading of pulses and sugar. He said agreement has also been reached with Metal Scarp Trading Corporation for using its portals for e-auctions and reverse auctions "where the risk is covered and the company is making money transparently in trading online."

Employee Contribution

Pointing out that the corporation put the emphasis on profitable items in the trading portfolio rather than looking at the topline, the STC chief said the contribution per employee in the form of profit is more important than contribution by employee in the form of turnover as "in the latter you could do much large business without getting much benefit out of it."

He said the STC has signed an agreement with Bharat Earth Movers Ltd for "pooling our resources for the supply of heavy-duty equipment and wherever suppliers are not going to get payments in the form of LC or cash immediately, we would take the products from there and sell somewhere else and trading activity along with it. We have also introduced them to a lot of our other customers where this type of heavy-duty mining equipment would go and the benefits would be shared between us. We had a first round of discussions with international buyers."

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