Railway Ministry drafting a new land license fee policy to break the deadlock over Concor sale

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

Containers being handled at Tughlakabad inland container depot (ICD) of Container Corporation of India   -  Kamal Narang

The policy is being worked out in the wake Railway Ministry’s reluctance to accept Finance Ministry’s suggestion to cut the fee collected from Concor by half

Ministry of Railways is in the advanced stage of framing a new land licensing fee policy for facilities built on railway land as the government pushes to break the deadlock over a key issue that has halted the process of privatising Container Corporation of India Ltd (Concor).

The policy is being worked out in the wake of reluctance by the Railway Ministry to sign off on a suggestion by the Finance Ministry to cut by half the LLF collected from Concor for running terminals on Railways’ land, a government official said.

The stand-off has held up plans by the Department of Investment and Public Asset Management (DIPAM) to invite expression of interest for the privatisation of Concor approved by the Union Cabinet in November.

“Our EoI is also waiting for a clear policy on LLF. We also don’t want confusion for other private players who are already operating in the market. Our point is you should look at it as a sector, it’s not merely a Concor disinvestment issue,” Tuhin Kanta Pandey, Secretary, DIPAM told BusinessLine.

“The Railways have agreed; their policy is at a very advanced stage,” Pandey added.

The Railway Ministry, according to sources, has pushed themselves into a corner by revising the mode of collecting land licence fee on Concor.

From April 1, it has decided to collect the land licence fee at the rate of 6 per cent per acre of the market value of land. The license fee would rise by 7 per cent annually on previous year’s value.

This followed persistent demands from the private container train operators to create a level-playing field between all those who have signed concession agreements with the Ministry for running container trains.

Some 25 of Concor’s 64 CFSs/ICDs including its flagship facility at Tughlakabad near Delhi are running on land leased from Indian Railways at concessional market rates. Till March, the land license fee for the lease was paid by Concor at the rate of ₹1,175 per loaded twenty-foot equivalent unit (TEU). In FY20, the land license fee pay-out was about ₹140 crore.

The current concessional market value of Indian Railways land leased to Concor, according to calculation based on the February 2005 Railway Board letter, is about ₹7,500 crore. On this, the 6 per cent land license fee works out to about ₹450 crore a year.

The current market value of the Railways land would be in the range of ₹14,000-16,000 crore. Thus, for Concor and its private owner post disinvestment, the annual land license fee at the rate of six per cent would rise to about 1,000 crore, rendering the terminals unviable.

Fearing that the steep hike in land license fee would impact Concor’s profitability, valuation and fetch lower realisation for the government during the sale, apart from depressing bidder interest, the finance ministry suggested that the license fee be cut to 3 per cent.

“If the suggestion to levy licence fee at the rate of three percent is accepted by the Railway Ministry, it will give a big undue favour to one party leaving the existing players out of competition,” the CEO of a container train operating company said.

The Railway Ministry did not respond to an e-mail seeking comment.

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Published on October 08, 2020
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