Govt plans to merge smaller trading firms with MMTC

After oil, defence and construction sectors, the government is likely to consider merging of state-owned companies in the trading space. 

Officials said a proposal to wind up State Trading Corporation (STC) and Project & Equipment Corporation of India (PEC), and merging their assets with the bigger Metals and Minerals Trading Corporation of India (MMTC), could be considered. MMTC is the largest exporter of minerals from India and also the country’s largest bullion trader. 

A formal Cabinet note on the proposal could be initiated as early as this month. All three companies come under the commerce and industry ministry. 

STC and PEC are engaged in export and import of multiple commodities in bulk — rice, wheat, sugar, pulses, edible oils, fertiliser, coal, bullion, wheat, sugar, pulses and more. STC was set up in 1956, primarily at the time to undertake trade with East European countries, besides supplementing private trade and industry in developing of export. 

PEC was incorporated as ‘The Project and Equipment Corporation of India Limited’ in 1971, as a subsidiary of STC, to handle canalised business of the export of rail and engineering equipment, and turnkey projects. In 1991, it became an independent company and its name was changed to simply PEC Ltd in 1997. It later diversified into export and import of agricultural commodities, industrial raw materials, manufactured goods and bullion.

The Centre owns a 90 per cent stake in STC and all the equity in PEC. And, 90 per cent in MMTC. 

The government has planned a number of mergers and acquisitions (M&As) among public sector undertakings (PSUs). In his 2017-18 Budget speech, Finance Minister Arun Jaitley had said the government saw “opportunities to strengthen” public sector undertakings through consolidation, M&As. 

He gave the example of oil and gas. “We propose to create an integrated public sector oil major, which will be able to match the performance of international and domestic private sector oil and gas companies.”

A takeover is being planned for Hindustan Petroleum, to perhaps make it a subsidiary of Oil and Natural Gas Corporation. And, construction company NBCC has already bought Hindustan Steelworks Construction, making it a subsidiary, earlier this month. 

There are also plans to merge smaller PSUs in the construction space such as Hindustan Prefab, Engineering Projects India, NPCC and HSCC with the larger NBCC. 

Additionally, as reported earlier in Business Standard, the government is considering mergers of similarly placed state-owned defence sector companies. The first among these could be of Mazagon Dock Shipbuilders and the smaller Goa Shipyard.