Commerce ministry to close State Trading Corp, Project and Equipment Corp

The commerce ministry has decided to close down debt-ridden STC as well as PEC, and it will prepare a note to seek Cabinet approval for the same, sources said.

At a recent high-level meeting in August, it was decided to immediately initiate the process of winding up of both the public sector units under the administrative control of the ministry, they added.

It was also agreed upon that the ministry will prepare a comprehensive note for the Cabinet for closure of both State Trading Corporation (STC), and Project and Equipment Corporation of India (PEC) within a definite time frame, given their precarious financial position.

According to STC's annual report for 2018-19, the company is facing "severe liquidity crisis" as all the lender banks have reported STC's account as NPA due to non-payment of interest on the banking limits availed by the company".

Therefore, at present, the company has no banking limits, funded or non-funded, available with it.

The company has reported a net loss (after tax) of Rs 881 crore during 2018-19 as compared to net profit (after tax) of about Rs 38 crore in 2017-18.

The net loss reported in 2018-19 was mainly due to write-offs amounting to about Rs 626 crore made in the books of accounts.

"Out of the total dues of about Rs 1,906 crore (as on 31.12.2018) crystallized with the lender banks, an amount of Rs 1,100 crore has already been paid by STC to the lender banks," as per the report.

The balance amount is also proposed to be paid partly through sale of its immovable properties and partly out of the trade receivables to be realised by the company, it added.

The lender banks had filed petitions against STC in DRT/NCLT and the proceedings are on.

The company is in the process of entering into master restructuring agreement with the lender banks towards settlement of their dues.

The total outstanding for STC with the banks is Rs 1,906 crore as on December 2018, while in case of PEC Rs 1,390 crore due to banks have been declared as non-performing asset.

Further, sources said it was decided that STC and PEC management should consider transfer of pending contracts/business to other PSUs or organisations of the government.

The STC has been asked to expeditiously implement the voluntary separation scheme (VSS) process with the available resources, while the PEC was told to initiate the VSS.

The STC was set up in 1956 as a trading arm of the government to undertake trade with east European countries.

PEC was incorporated as a subsidiary of STC in 1971 to handle canalised business of the export of railway and engineering equipment. It became an independent firm in 1997.