The new land licensing policy drafted by the Ministry of Railways for the Cabinet’s consideration will apply to state-run Container Corporation of India Ltd (Concor) and other private container train operators setting up terminals on land leased from Indian Railways to create a level playing field.
According to the proposal, the Ministry of Railways will levy the annual land license fee calculated at the rate of 3 per cent of the industrial land value per acre where the terminal is located with effect from April 1, 2020. The land will be leased to Concor and private container train operators for 35 years.
To be approved by the Cabinet soon, the policy will help the Department of Investment and Public Asset Management (DIPAM) seek expression of interest for the privatisation of Concor. The process of calling for EoIs has been stalled mainly due to issues surrounding land licensing.
Beginning April 1, 2020, the Ministry of Railways decided to charge the annual land license fee from Concor at 6 per cent of the industrial land value per acre where the terminal is located.
Till FY20, the land license fee for the land leased from Indian Railways was paid by Concor at the rate of ₹1,175 per twenty-foot equivalent unit (TEU).
The revised mode of collecting land license fee was expected to continue post-privatisation of Concor to bring it on par with private container train operators.
Earlier model
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 at market rates.
Concor’s land license fee pay-out is estimated to jump from the FY20 level of ₹140 crore to more than ₹1,000 crore in FY21 with the revision in charges, a development that many feel would impact the company’s valuation during privatisation.
To reduce the higher overall license fee outgo, Concor has surrendered 16 terminals built on Railways land since April 2020.
DIPAM and private container train operators have harped on the need to frame a land licensing policy “keeping the entire railway logistics sector in mind” and “not merely to break the deadlock over the Concor disinvestment issue”.
“Indian Railways should have a clear policy on land licensing. We don’t want confusion on Concor disinvestment; we want private container train operators in the market also to be looked at,” a DIPAM official said.
It is not merely the land licensing fee issue; it is also the whole policy inclusive of leasing terms and conditions.
The policy will also address private container train operators who have leased small parcels of land from Indian Railways to connect their terminals to the nearest railway network. The land license fee for this is computed based on the circle rate - the rate at which the government recognise the land value for that site - and operators pay annual lease rentals at 6% of the circle rate.
Private container train operators had urged the Ministry of Railways to “re-work” the land lease terms post-privatisation of Concor in the sector’s interest and bring everyone on par.
“Privatisation of Concor cannot destroy the basic rules of the game laid down by the concession agreements signed between the private operators and the Indian Railways in 2007, which provides for a level playing field to all. We tolerated Concor’s dominant position all along because its land leases are very old and pre-dates the 2007 policy. But, going forward, if that land goes into private hands, then it will be a completely destructive move,” said the chief executive of a private container train operating company.