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Nomenclature not to hit STC, MMTC divestment

Harish Damodaran

P. Manoj

NEW DELHI, April 9

THE Government's move to designate the State Trading Corporation of India Ltd (STC) and MMTC Ltd as `State Trading Enterprises' (STE) under Article XVII of GATT will not in any way hamper their proposed privatisation.

The latest Export & Import Policy has permitted imports of bulk items such as wheat, rice, coarse cereals, urea, copra, coconut oil, diesel and aviation turbine fuel only through designated STEs.

STC and MMTC have accordingly been designated as the STEs for urea import. Besides, STC has been notified as the STE for imports of copra and coconut oil.

The EXIM Policy has also retained MMTC's monopoly over exports of iron ore (above 64 per cent ferrum content) and manganese and chrome ores.

All that the Government has apparently done, then, is to change the status of these corporations from being `canalising agencies' to designated product-specific `STEs' functioning under the World Trade Organisation (WTO) framework.

The issue being debated is whether the new STE nomenclature is consistent with the plans to privatise the two parastatals, which are among the 31 public sector undertakings (PSUs) specifically identified by the Centre for disinvestment through `strategic /block/trade sales'.

The Cabinet Committee on Disinvestment (CCD) had on October 6, 2000 approved disinvestment of Governmental equity in both these corporations to 26 per cent through global competitive bidding. Currently, the Centre holds 91.03 per cent stake in STC and 99 .33 per cent in MMTC Ltd.

According to officials, STC and MMTC can continue to enjoy their designated STE status, even in the event of privatisation.

This is because STEs under Article XVII of GATT 1994 are defined as ``Governmental and non-Governmental enterprises, including marketing boards, which have been granted exclusive or special rights or privileges, including statutory or constitutional powe rs, in the exercise of which they influence through their purchases or sales the level or direction of imports or exports''.

Thus, an enterprise need not strictly be State-owned in order to be covered by Article XVII and subjected to WTO rules on STEs. Even a private corporation that receives some special right or privilege from the State - something not generally available to other private sector entities - and that as a result of this is in a position to influence the level or direction of trade is considered to be an STE.

The WTO rules essentially require member-countries to `notify' the concerned designated STE along with the products that they import on an exclusive/privileged basis. This, in turn, is a `transparency-related' measure, which enables members ``to judge th e extent to which STEs serve as a substitute for quantitative restrictions, tariffs and subsidies'' and ``to assess the possible trade distortion resulting from the operations of notified STEs''.

``There is no conflict between designating STC and MMTC as STEs, on the one hand, and privatising them, on the other,'' the officials said, adding that the formal disinvestment process in the two parastatals would be initiated after the resolution of all `related issues' by the Commerce Ministry.

During 1999-2000, STC recorded a profit after tax of Rs 23 crore on a total turnover of Rs 1,163 crore, including Rs 662 crore from imports, Rs 445 crore from exports and Rs 56 crore from domestic sales.

The Corporation's exports included castor oil/seed (Rs 120 crore), cashew and coffee, with imports mainly comprising edible oils (Rs 174 crore on own account and Rs 191 crore on Government account). STC also carried out market intervention operations in tobacco and rubber on the Government's behalf.

MMTC's total turnover amounted to Rs 4,697.14 crore in 1999-2000, including Rs 1,153.84 crore from exports, Rs 3,526.77 crore from imports and Rs 16.53 crore from domestic trade.

Canalised ore exports touched Rs 953.8 crore, with imports valued at Rs 2,556.1 crore for precious metals, Rs 85.4 crore for urea and Rs 187.2 crore for other fertilisers.