Govt set to flag off Concor sale process with land license fee rejig

P Manoj Mumbai | Updated on July 08, 2020 Published on July 08, 2020

Vexed land issue resolved to create a level playing field between Concor and private box train operators, avoid controversy

The revision in land license fee levied on Container Corporation of India Ltd (Concor) for running facilities built on Indian Railways’ land pose multiple challenges but it will at least help the government start the privatisation process of the state-run rail hauler without attracting charges of leasing land to a private party at concessional rates.

Till FY20, 41 of the rail hauler’s 84 inland container depots (ICDs) including its flagship facility at Tughlakabad near Delhi were running on land leased from Indian Railways for which it paid a land license fee of ₹1,175 per loaded twenty-foot equivalent unit (TEU).

Norm revised

Beginning April 1, the annual land license fee will be calculated at the rate of 6 per cent per acre of the industrial land value where the terminal is located, according to a circular issued by the Railway Ministry.

“With this decision, Indian Railways has brought Concor on par with private container train operators,” said an industry executive.

Government officials said that Indian Railways and Concor are yet to thrash out a consensus on the circle rate - the rate at which the government recognises the land value for a particular site – for calculating the land license fee for some of its terminals.

“The Railways have given a calculation; Concor has its own calculation and both are not matching,” said a government official.

Concor previously leased land from the Indian Railways at a concessional rate, stoking fears among private container train operators that the new private owner of Concor would gain undue benefit from buying Concor apart from helping it become a dominant player as well as a private monopoly.

In comparison, terminals run by private container train operators are mostly built on land purchased from the market.

“Until now, Concor was charged concessional land license fee by the Indian Railways. But, from now on, it will be paying what we pay,” the industry executive said. The revised mode of collecting land license fee will continue post privatisation.

Land leasing unlikely

The re-working of the land license fee, though, will render an earlier plan redundant. The Railway Ministry’s proposal centred around asking Concor to take the land on long term lease for 99 years by paying an upfront fee, estimated at about ₹9,000 crore.

“I don’t think that is happening anymore,” said the government official. “With the revision in the land license fee, the need to go for long-term leasing of land would go away,” he added.

The decision to revise the land license fee and drop the long-term leasing plan, though, is considered risky by experts.

Risk for private players

“The private entity that succeeds in buying Concor would still be under the threat that the land can be taken back by the Railways anytime. That is the condition of licensing,” an executive with a transaction advisory firm said. Potential buyers would look at it from this point of view also, he said. If that happens at a facility such as Tughlakabad, then Concor would lose half its business, he said.

Concor’s land license fee pay-out is estimated to jump from the FY20 level of ₹110 crore to about ₹900 crore with the revision in charges. This will impact its share price and result in lower realisation for the government during the sale.

“With the cost going up, the price has come down. So, the deal will also take place at a lower valuation, if it happens,” the transaction advisory executive said adding that the steep license fee could dampen bidder interest.

To reduce its land license fee outgo, Concor has surrendered 16 terminals built on Railways’ land, stating that the “sudden abnormal increase in land license fee” had further hurt the viability of these already under performing facilities.

It has also surrendered 26.58 acres of land at its Tondiarpet facility in Chennai, 4.15 acres at Milavittan in Thoothukudi and plans to return Railway land at Fatuha near Patna.

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Published on July 08, 2020
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