Why Is The Indian Government Planning To Shut Down MMTC, STC & PEC?

More than a year after the Union Commerce Ministry decided to denotify MMTC, STC, and PEC as canalising agencies for imports and exports, it seems that the closure of these three public sector companies is near.

What Do MMTC, STC & PEC Do?

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Metals & Minerals Trading Corporation (MMTC) was incorporated in 1963 primarily to regulate the international trade of minerals and metals. Over the years, MMTC diversified its business portfolio keeping in view national requirements and new business opportunities, and new product lines like agro-commodities, fertilisers, precious metals, and coal were added to the product profile of MMTC.

The State Trading Corporation (STC) was set up on May 18, 1956, primarily with a view to undertaking trade with East European countries and supplementing the efforts of private trade and industry in developing exports from the country. STC played an important role in the country¡¯s economy. It arranged imports of essential items of mass consumption (such as wheat, pulses, sugar, edible oils, etc.) and industrial raw materials into India and also contributed significantly to developing exports of a large number of items from India.

Project & Equipment Corporation (PEC) (formerly The Project and Equipment Corporation of India Ltd.) was carved out of the STC in 1971¨C72 to take over the canalised business of the STC¡¯s (State Trading Corporation of India Ltd.) railway equipment division, to diversify into turn-key projects, especially outside India, and to aid and assist in the promotion of exports of Indian engineering equipment. Thereafter, on March 27, 1991, PEC Ltd. became an independent company directly owned by the Government of India. PEC Limited also has a subsidiary, Tea Trading Corporation Limited, which is under liquidation.

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Why Are The Three Companies Being Shut Down?

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In September last year, the government announced that it would denotify the State Trading Corporation (STC), Project & Equipment Corporation (PEC), and Metals & Minerals Trading Corporation (MMTC) as canalised or nominated agencies for all businesses in the EXIM policy, the Piyush Goyal-led commerce and industry ministry said,as per the ET report.

"The utility of CPSEs viz MMTC, STC and PEC Limited has been examined and it has been decided that there is no need for any canalising agency in this department," the department of commerce said in an office memorandum dated September 6 last year, adding that a proposal for the closure of the three agencies is under consideration in line with the New Enterprise Policy for CPSEs in the non-strategic sector.

The three PSUs are under the administrative control of the commerce and industry ministry, which is studying their work.

When Will MMTC, STC & PEC Shut Down?

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While there is no set timeline yet regarding how soon the three companies would get shut, the Ministry has stated that the utility of the three central public sector trading companies was examined, and it was of the view that there is no need for any canalising agency in the department of commerce, as per the IANS report.

The issue pertaining to the closure of the three central public sector undertakings has also been examined by the Niti Aayog.

The Ministry had also stated, "that keeping in view the guidelines of Department of Public Enterprises on New Enterprise Policy for CPSEs in the non-strategic sector, the proposal for closure of MMTC, STC, and PEC is under consideration".

The Securities and Exchange Board of India (SEBI) had cancelled the licence of MMTC Ltd. in August as a stock broker for its involvement in illegal 'paired contracts' in a case related to National Spot Exchange Ltd. (NSEL). MMTC reportedly traded in "paired contracts", which did not have regulatory approval.

How Are MMTC, STC & PEC's Shares Performing?

MMTC's share price has jumped more than 125% this year till date, whereas STC's shares too have soared more than 81% this year till date. PEC's shares, on the other hand, are down more than 7% this year to date.

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