Concor to surrender 10 under-performing depots built on Railways land

Privatisation-bound Container Corporation of India Ltd (Concor) will surrender at least 10 under-performing container depots built on land leased from the Indian Railways (IR) at concessional rates.

The move is aimed to reduce the financial burden as the government gives finishing touches to a plan directing the state-run rail hauler of containers to buy land owned by IR, on which it has built close to half of its 86 inland container depots (ICDs).

According to a rough calculation, the land purchase will cost Concor about ₹8,000 crore, which will be funded mainly through debt. The firm had cash of about ₹2,800 crore as of December 2019.

Resolving the land issue is key to the planned privatisation of the Navratna PSU, to address allegations of transfer of IR land to a private entity at low rates.

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

Hindustan Infralog Pvt Ltd (HIPL), a joint venture between Dubai-based port giant DP World Ltd and India’s National Investment and Infrastructure Fund (NIIF), Adani Ports and Special Economic Zone Ltd (APSEZ) and PSA International, the world’s biggest container port operator by volumes, are expected to bid for the government’s stake in Concor. PSA is fully owned by Singapore’s sovereign wealth fund Temasek.

At current the market price, the government’s 30.8 per cent stake in Concor could fetch at least ₹18,000 crore.

Including its flagship facility at Tughlakabad near Delhi, 41 of Concor’s 86 ICDs are running on land leased from IR, for which it pays a land licence fee of ₹1,175 per loaded twenty-foot equivalent unit (TEU).

In effect, Concor pays land licence fee on 40-45 per cent of its overall volumes because they are handled at facilities built on IR land.

For the last three years, the land licence fee rate has been linked to the company’s percentage increase in profit after tax (PAT). In FY20, it was raised to ₹1,175 per loaded TEU from ₹1,015 per loaded TEU in FY19.

The 10 ICDs identified for surrendering are those that are not bringing in much business to Concor, a government official briefed on the plan said.

Concor will buy the IR land on which it runs the remaining facilities at 6 per cent of the circle rate — the rate at which the government recognises land value for a particular site, the official said. “Where there is not much traffic, there is no point buying land, paying 6 per cent of the circle rate and keeping it idle,” he added.

99-year lease

The land transaction will be in the form of a 99-year lease. “It will be tantamount to Concor buying IR land at 6 per cent of the land value; that itself will be huge — it comes to about ₹8,000 crore, funded mainly through debt,” the officer said.

The debt servicing will devolve on the new owner of Concor. But, if the privatisation attempt fails for any reason, Concor will have to assume the debt service obligations, eroding its profitability and consequently hurting the dividend payout to the government.

“Concor is being asked to buy IR land so that no one should say the land has been transferred to a private company at a cheaper rate,” the official said.

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