State-owned Container Corporation of India (Concor) will lease for 35 years from the Indian Railways the land on which it has built 24 of its 64 inland container depots (ICDs) by paying upfront 99 per cent of the market value of the land in a development that will remove the largest stumbling block to the planned privatisation of the country’s biggest rail hauler of containers.
Concor will have to pay as much as ₹3,500 crore upfront for the long-term lease of the land parcels. The rail hauler is expected to finance the upfront payment through a mix of borrowings and internal funds.
Following the deal, Concor will pay only a nominal annual lease fee of about ₹1,000 a year to the Railways, according to an agreement being thrashed-out by the two sides, government sources briefed on the matter said.
“The joint inspection of the site is over, and the local market value of the land for most of the terminals has been mutually agreed. In 1-2 places, there is a slight difference in valuation. This will also be frozen in a day or two,” the source said.
Alongside the long-term lease of land, Concor has also decided to surrender two more terminals that were built on Railway land. This includes a facility in the western region and an empty container park at its flagship ICD at Tughlakabad, where it pays a “whopping amount” as licensing fee currently.
“This will give the potential buyer of Concor a very clear idea of the liability on land licensing for the next 35 years,” the source said, noting that it will help the government to float Expressions of Interest for the privatisation of Concor.
The government has decided to privatise Concor by selling 30.8 per cent of its 54.8 per cent stake in the company to a private firm. But the Railways’ land on which it had built the inland depots was seen as a big hurdle to the transaction due to fears of political controversy.
Till FY20, the land license fee (LLF) for the land leased from Indian Railways for running terminals and depots was paid by Concor on a per-container basis that rose annually in tandem with the percentage increase in net profit of the company. In FY20, the LLF was billed at ₹1,175 per twenty-foot equivalent unit (TEU).
Beginning April 1, 2020, the Railways Ministry decided to charge the annual LLF from Concor at 6 per cent of the industrial land value per acre where the terminal is located, which will escalate by 7% annually.
The revised mode of collecting the LLF from April 1, 2020, jacked-up Concor’s pay-out on this count to ₹590 crore in FY21 from ₹140 crore in FY20, even after surrendering some 16 terminals built on Railway land to reduce its outgo.
Syndicated news from The Hindu Business Line