Companies

Concor is ready for 35-year lease, says CMD Kalyana Rama

P Manoj Mumbai | Updated on July 30, 2021

Lease to cost ₹3,500 cr

Leasing land from the Indian Railways for 35 years, on which it has built 24 of its 64 inland container depots (ICDs) by paying 99% of the market value upfront is much more “beneficial” to the company compared to the current arrangement, V Kalyana Rama, Chairman and Managing Director of Container Corporation of India Ltd (Concor) said.

The long-term lease of Indian Railways land is expected to cost about ₹3,500 crore.

Kalyana Rama’s views assume significance as it comes amid reported differences within the government on working out a solution for the Indian Railways land currently leased to Concor for running the ICDs, an issue that has stalled the process of privatising the State-run firm.

One section of the government favours a plan that involves leasing Indian Railways land to Concor for 35 years for an upfront consideration of 99% of market rates.

However, this proposal is not acceptable to another powerful section within the government that feels that it would raise the debt profile of Concor, thereby reducing its attractiveness to potential buyers.

Kalyana Rama says that his company is in “favour” and “willing” to take the Railways land on long-term lease.

Privatisation

“Concor is considering the proposal to lease Railway land for 35 years by paying upfront 99% of the market rates. For this, we will require about ₹3,500 crore debt. Following the long-term lease, we will not be paying any land license fee (LLF) to the Railways, that is in fact beneficial for the company,” Kalyana Rama told BusinessLine on Friday.

The government has decided to privatise Concor by selling 30.8 per cent of its 54.8 per cent stake in the company to a private company along with the transfer of management control.

But, the Railways land on which it had built the ICDs has become a hurdle in starting the privatisation process.

Till FY20, the LLF for the land leased from Indian Railways for running terminals and depots was paid by Concor on a per-container basis that rose annually in tandem with the percentage increase in net profit of the company. In FY20, the LLF was billed at the rate of ₹1,175 per twenty-foot equivalent unit (TEU).

Beginning April 1, 2020, the Railways Ministry decided to charge the annual LLF from Concor at the rate of 6% of the industrial land value per acre where the terminal is located, which will escalate by 7% annually.

The revised mode of collecting the LLF from April 1, 2020 jacked up Concor’s pay-out on this count to ₹590 crore in FY21 from ₹140 crore in FY20, even after surrendering some 17 terminals built on Railway land to reduce its outgo.

The new mode of collecting the LLF will continue till it is modified.

“Accordingly, on the basis of rates taken from land revenue department(s) and Company's assessment thereof after the surrender of 17 railway terminals earlier, an amount of ₹113.78 crore has been provided as LLF payable to Indian Railways in the quarter ended June 2021 as per the extant policy of Railways,” Concor said while announcing its April-June quarterly financial results on Thursday.

Concor reported a net profit of ₹259.23 crore in the first quarter of FY22 from ₹60.61 crore last year.

Published on July 30, 2021

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