Govt cuts railways land licencing fee to 1.5%; paves way for Concor divestment

Liberalising the land leasing policy, the Union Cabinet today slashed the railways' land licensing fee to 1.5% from 6% earlier, which will pave the way for its strategic divestment of the state-owned Container Corp. of India Ltd. (Concor). The revised railways land policy allows long-term leasing of land for cargo-related activities for 35 years at 1.5% of the market value of land per annum.

A comprehensive policy document will be framed and implemented within 90 days of cabinet approval, says the railways ministry.

Amid the development, the Concor stock surged 8.58% today to ₹726.65, as compared to the previous session close of ₹669.20 on the National Stock Exchange. The PSU stock has risen by 17.26% in the year-to-date period.

The Cabinet decision of lowering the land lease fees for a larger time period will likely sweeten the divestment deal of Concor for prospective buyers. The government, which holds 54.80% of Concor, is likely to sell around 30.8% stake and cede management control in the PSU. It could retain the remaining 24% stake.

The Cabinet-approved policy allows leasing of railways land for a long-term i.e. 35 years from five years currently. The railways ministry says the decision will allow the leasing of railways land for implementing the PM Gati Shakti framework i.e. cargo-related activities, public utilities and the railways’ exclusive use.

The major reduction in railways land licensing fees is expected to attract more cargo, thereby increasing its modal share in freight transportation and reducing logistics costs. It'll also bring more revenue to railways and could generate 1.2 lakh jobs, says the government.

A majority of Concor terminals are rail-linked, with rail as the main carrier for haulage. As rail is price-competitive over long distances, the price advantage can be passed on to clients, thus allowing for flexible and competitive pricing. The rail link also plays a major role in decongesting ports and the road corridors that lead to these ports.

Concor, which started operations in November 1989 with 7 inland container depots (ICDs), now has a network of 61 terminals, of which 8 are export-import container depots, 3 strategic tie-ups and 17 exclusive domestic container depots and 33 terminals perform the combined role of domestic and international terminals.

Concor's terminals provide facilities such as warehousing, container parking, repair facilities, and even office complexes.

Meanwhile, the railways ministry says the move will also simplify approvals for utilities as envisaged in PM Gati Shakti Programme. It will not only help in the development of public utilities like electricity, gas, water supply, telecom cable, sewage disposal, drains, optical fibre cables (OFC), pipelines, roads, flyovers, but terminals, regional rail transport, urban transport, etc., as well.

The existing entities using railways land for cargo terminals will have the option to switch to the new policy regime after a bidding process.

Notably, the government aims to develop 300 PM Gati Shakti Cargo Terminals over the next five years. Also, for Optical Fibre Cables (OFC) and other smaller diameter underground utilities, a one-time fee of ₹1,000/- will be charged for crossing the railways track. The policy also provides for use of railways land at a nominal cost for setting up solar plants.

The policy also encourages the development of social infrastructure (such as hospitals through PPP and schools through Kendriya Vidyalaya Sangthan) on railways land at a nominal annual fee of Rupee 1 per sqm. per annum.

The government is hopeful of meeting the fiscal’s disinvestment target with the sale of stakes in key PSUs like Concor, Bharat Earth Movers Limited (BEML) and Shipping Corporation of India (SCI). In the current financial year, the government has raised ₹24,544 crore through disinvestment in PSUs. It plans to divest assets worth ₹65,000 crore in the current financial year and may rake in around ₹8,000 crore from the sale of Concor.

Concor’s net profit for the April-June quarter of FY23 stood at ₹297 crore, up 15.34% on a quarter-on-quarter basis. Its total income declined 3.10% to ₹2,062 crore from ₹2,128.56 crore during the previous quarter.