Why has the Indian Government Decided to Shutdown Once Profit Making State Owned Trading Companies?
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According to the Indian government, PSUs like State Trading Corporation (STC), Project and Equipment Corporation of India (PEC) and Metals and Minerals Trading Corporation (MMTC) are not falling within the profit figures currently. Following this, the government has decreed to the discontinuation of these trading companies in the business.
Recent Sensex records stated that shares of MMTC Ltd. fell down to by 16.6 percent whereas STC fell over 19.6 percent. STC has been notified in facing severe liquidity crisis.. This came up after all the lender banks have informed about the STC’s account as a bad loan due to non-payment of interests by the company to the banks. In the current scenario, the company has no funding or banking limits.
MMTC: Metals and Minerals Trading Corporation of India was once one of the highest earners of foreign exchange for India and India’s largest PSU trading body. It was not just a trading company but was used to manufacture agro and industrial products. Incorporated in 1963, its main objective was to export minerals and import essential metals.
According to ET, MMTC plunged to 14 per cent to Rs 21.25, down Rs 3.50 on the BSE. Eyeing the declining percentage in the records of MMTC, the government concluded to the shutdown.
STC: The State Trading Corporation of India used to deal in export and import operations of the nation. Formulated in 1956, the company was responsible for undertaking trade with the East European countries and supplement the efforts of private trade. While the government wholly owns PEC, it has about 90 percent stake in MMTC and STC.
ET reports tell, STC plunged to 6 per cent to Rs 112.50, down Rs 21 on the BSE, which has led to the drastic fall in the figures and closure of STC in the Indian trading.
STC faced the net loss of INR 881crore in 2018-19 as compared to the profit of INR 38 crore in 2017-18. Adding into this, in the month of March, public sector lender Syndicate Bank presented insolvency proceedings against STC for the amount of INR 625 crore.
Since 1991’s economic liberalization, the government opened the doors for the Indian companies to trade along with the import and export business across the country and world, which provided the platform to the capable firms to enter into business with ideas and escalate the Indian trade. Following this, competition in the trading sector increased leading to the opening up of the nation’s economy.
In a recent economic downturn, the government has been notifying and keeping abreast itself with all the trade and business records affecting the economy. It has been observed that central public sector enterprises’ investment in the state level entities have been under the government’s scanner. Figures state that there are around 500 state levels SLPEs, out of which 200 are under the government radar targeted as loss making firms to the economy. To combat the challenges, the government has intended to close down the firms affecting the economy in distress.