Cabinet nod soon: Railways to cut land lease fee by half, move to aid ConCor sale

The brand new regime has confirmed to be costly for Concor – whereas it paid Rs 120 crore as land leases to the railways in FY20, it paid Rs 520 crore in FY21.

The ministry of railways has circulated a draft Cupboard be aware on the lease coverage for industrial use of railways land, a transfer that may convey down the railways’ land licensing price (LLF) to 2-3% from the present stage of 6%.

The much-awaited coverage, which can additionally prolong the land lease interval from 5 years to 35 years or extra, will facilitate the privatisation of state-run Container Company (ConCor).

The ConCor stake sale course of will start as quickly as the brand new land-use coverage of railways is accredited by the Cupboard, a senior official advised FE.

Ultimately Wednesday’s closing worth of Rs 697.65, the Centre’s 30.8% stake was value Rs 13,092 crore on the BSE. On November 20, 2019, the Cupboard had given its nod to promote 30.8% out of its 54.8% holding in ConCor, a railway PSU, together with administration management to a strategic purchaser.

Nonetheless, the sale course of, which was deliberate to be accomplished inside FY21, has spilled over to this monetary 12 months resulting from lack of readability on LLF. The brand new land-use coverage might encourage business use of those land parcels alongside rail tracks.

In April 2020, the railways notified a LLF regime for industrial use of its land, and prolonged it to its very personal Concor. Till then, Concor had been paying land lease leases to the transporter on a per-container (20-feet equal unit container) foundation, which entailed a lot decrease outgo. The LLF being charged by the transporter now’s 6% of land worth within the first 12 months of licence; the speed will improve at a fee of seven% yearly to think about inflation.

The brand new regime has confirmed to be costly for Concor – whereas it paid Rs 120 crore as land leases to the railways in FY20, it paid Rs 520 crore in FY21.

In line with an ICICI Securities be aware, ConCor is anticipated to pay Rs 450 crore as LLF costs for FY22, because it intends to give up two extra rail terminals and in addition rightsizing of present terminals (together with its flagship Tughlakabad terminal). The administration can also be engaged on another path with Indian Railway to buy the 24 terminals it operates on the IR land for 35 years (at 99% of the present market worth), which is anticipated to vary at ~Rs 6,000-7000 crore), to be funded by a mixture of money on its books (~ Rs 2,500 crore) and exterior debt, it mentioned.

In line with official sources, the railways might make first-year LLF fee 2-3% and annual inflation fee can be a extra sensible 5% or the common annual retail inflation. Earlier railways ministry was reluctant to cut back LLF considerably from 6%.

Concor has over 60 inland container depots and a few 24 of those are located on the railway land. Even earlier than the most recent fee revisions, the price of utilizing railways land was greater for the corporate, than what it needed to fork out to farmers and different land sellers.

Railways’ LLF coverage was initially relevant to land let loose for business functions similar to opening shops similar to retailers, bookshops, kiosks, and so on, nevertheless it was prolonged to container enterprise (industrial use) in FY21.

The sooner mode of LLF fee offered sure benefit to the corporate in contrast with different non-public container terminal operators. Earlier methodology of fee was based mostly on Concor’s volumes (Rs 1,175/TeU).

Publish-2005, Concor has not picked up any land from railways because it purchased land alongside rail tracks from farmers at cheaper charges.