Lower land rentals to expedite sale of ConCor

State-run Container Corporation of India (ConCor) may have to fork out much lesser amounts as land rentals to Indian Railways soon, a move that would reduce its operational expenses significantly and expedite its planned privatisation. According to a proposal from the railway ministry to be considered by the Union Cabinet soon, land licensing fee (LLF) for industrial users of railway land will be halved to 3% of the value of land, with annual inflation adjustment of 3%, as against 7% now.

The new policy may extend the land lease period from 5 years to 35 years or more, according to sources.

In April 2020, Indian Railways notified an LLF regime for industrial use of its land and extended it to its very own Concor. Until then, Concor had been paying land lease rentals to the transporter on a per-container (20-feet equivalent unit container) basis, which entailed much lower rental outgo.

The new regime has proven to be expensive for Concor – from Rs 120 crore in FY20, the land rentals shot up to Rs 520 crore in FY21. According to an estimate, it may have to pay about Rs 450 crore as LLF charges in FY22 as it restructured some terminals. Concor reported a net profit of Rs 286.5 crore in Q3FY22 with total revenues at Rs 1,920 crore.

Out of 60 container depots operated by ConCor, 24 are situated on railway land.

Railways’ LLF policy was originally applicable to land let out for commercial purposes such as opening retail outlets such as shops, bookshops, kiosks, etc, but it was extended to container business (industrial use) in FY21.

According to sources, even though some sections in the government recommended that the annual land lease rentals to be paid by industrial users like ConCor be fixed at 2%, a consensus later emerged to align the rate to the one charged by the National Highways Authority of India for its wayside development, they added.

The new policy, which may extend the land lease period from 5 years to 35 years or more, will help kick-start the Concor stake sale process pending for about two years, another official said.

ConCor’s share price closed at Rs 579 last Friday, up 3.61% from the previous closing on the BSE. At Friday’s closing price, the Centre’s 30.8% stake in the multi-modal logistics company was worth about Rs 10,900 crore. On November 20, 2019, the Cabinet had given its nod to sell 30.8% out of its 54.8% holding in ConCor along with management control to a strategic buyer.

Even before the latest rate revisions, the cost of using railways land was higher for the company, than what it had to fork out to farmers and other land sellers.

The earlier model of LLF payment provided a certain advantage to the company compared with other private container terminal operators. The method of payment was based on Concor’s volumes (Rs 1,175/TeU).

Post-2005, Concor has not picked up any land from railways as it bought land along rail tracks from farmers at cheaper rates.
Among the civilian government agencies, railways is the largest landholder with 4.59 lakh hectares. Of these, 0.46 lakh hectares were vacant land, according to a CAG report in 2014.