MMTC, STC, PEC likely to be merged

Move to take on global competition.

The commerce and industry ministry is contemplating a merger of State Trading Corporation of India Ltd, MMTC Ltd and PEC Ltd into a single trading house to compete with global giants like Mitsubishi and Itochu.

The ministry will shortly appoint a consultant to examine the viability of a merger and suggest ways to re-engineer the role of the state-owned trading companies. The merged entity will have a turnover of over Rs 25,000 crore.

Companies including McKinsey, Ernst & Young, Accenture and Tata Consultancy Services have already made presentations to the ministry in this regard.

"We are finalising the terms of reference for the study. We are yet to take a view on whether the advisers will only conduct the study or complete the re-engineering process," a ministry official said.

Officials said the study would take a view on whether the government should stay in the business of operating a trading house and if so, was there any need to have three separate trading houses rather than a single large one.

"If Indian trading companies have to make a mark in the global arena, they have to become bigger, as size matters," an official said.

The study will also examine global risks for Indian trading companies as also the nature of trading activities to be undertaken by them. The ministry has been considering revamping the operations of STC and MMTC for some time now, following a clear decision not to disinvest government stakes in the two companies.

MMTC posted a net profit of Rs 107 crore on a turnover of Rs 15,138 crore in the last financial year.

The government holds 99.33 per cent in the firm.

During 2004-05, STC reported a net profit of Rs 27 crore on a turnover of over Rs 10,000. The Centre holds 91.02 per cent in the company while public holding is 4.68 per cent. Banks and financial institutions hold the rest.

The company has lined up several diversification initiatives, including assembly and sale of mobile phone handsets. PEC Ltd, a 100 per cent government-owned company, achieved a turnover of Rs 600 crore during 2004-05.

TEAMING UP

The commerce and industry ministry will shortly appoint a consultant to examine the viability of a merger

The merged entity will have a turnover of over Rs 25,000 crore

McKinsey, Ernst & Young, Accenture and Tata Consultancy Services are in the fray for the adviser's position

A study will take a view on whether the government should stay in the business of operating a trading house