Objectives, Functions and Defents in the State Trading Corporation of India


In India, the State Trading Corporation (STC) was set up in May 1956 as an entirely state- owned organisation. Its basic aim is to stimulate India’s foreign trade, by enlarging the scope of Indian exports and facilitating essential imports.

Objectives of STC:

Following are the important objectives of State Trading Corporation:


1. To enlarge exports,

2. To facilitate trade (imports) in specific commodities,

3. To augment the revenue of the State,

4. To bring about greater economic equality,


5. To regulate trade (imports and exports) in certain commodities, and

6. To regulate and overcome difficulties of trade with communist countries.

Functions of STC:

To fulfil the objectives as stated above, STC has the following functions to carry out:


1. Improving overall trade, domestic as well as international.

2. Augmenting the national resources of the country for promoting trade.

3. Undertaking of trading generally with State trading countries and private foreign traders too.

4. Exploring of new markets for traditional export items and developing exports of new items.


5. Stabilisation of price and traditional distribution by importing at the Government’s instance any commodity in short supply.

6. Handling of such internal trade as promotes foreign trade.

7. Ensuring the quantity and quality of various commodities to foreign buyers at competitive rates.

8. Assisting in the settlement of trade disputes between exporters and importers in different countries wherever, India is directly concerned.


9. Implementation of all trade agreements entered into by the Government of India with other nations.

In practice, however, the STC in India has currently acted:

1. As a direct trader in mineral ores.

2. As a servicing agent for bringing together importers and exporters in the world market, assisting them in implementing their contracts and solving their disputes.

3. As a distributing agent to the Government in various commodities like cement and fertilizers.

4. As an agency for promoting new lines of trade such as exports of shoes, handicrafts, woollen fabrics, etc.

It is thus, claimed that the STC has succeeded in diversifying and supplementing India’s foreign trade

It has all striven wherever, possible in securing better terms of trade and economies in handling imports and distribution of essential raw materials.

Defects of STC:

It is disheartening to note that the State Trading Corporation has the following defects in its working as found by the Economist Intelligence Unit (EIU) London and by other critics:

1. It is generally, observed that deliveries from STC side have been constantly behind schedule.

2. STC is found to be extremely slow in taking decisions and actions.

3. STC could not work fruitfully with buyers and producers to solve the technical problems involved in foreign trade.

4. STC lacks a business point of view. Its activities are governed by bureaucratic attitudes and systems.

5. Periodic changes in staff of STC seem to have affected the efficiency and continuity of functions.

6. STC has been crowned with failure in executing foreign orders fully and carefully, e.g., Russian shoe order in the fecent past.

7. STC is entrusted with the task of canalisation of imports of important raw materials in the belief that it would be able to secure supplies at a lower cost through bulk buying. But, the Corporation has not been able to arrange the import of raw materials at competitive prices and supply them to industry at the right time. Thus, under this system of canalisation, in many cases, industry has had to pay higher prices than under direct imports. In fact, the higher costs of canalisation are attributed to the heavy commission charged by the STC, its failure to buy the materials at the right time and its inability to locate the correct source of supply.

We may thus, conclude that since STC has a significant and increasing role in the planned economy of the country with its socialist goal, its working, functioning and attitudes must be revised and reorganised. Further, the STC should concentrate more on promoting the export of new items on a long-term basis, as there is an urgent need to develop new markets for our foreign trade. It should also help the private sector to export items that are difficult to sell. It must work hard for diversification and rationalisation of our exports. Its fundamental task should be to impart dynamism to our export drive. Under the new wave of liberalisation, however, STC is gradually losing its importance.

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