The government is expected to change the railway land use policy and cut the industrial land licence fee (LLF) from 6% to 3.5%. By making the deal more advantageous for stakeholders, the policy is likely to encourage the strategic disposal of state-owned enterprises Container Corporation of India Ltd (Concor).
The planned cut of LLF was requested by private participants, and a senior government official stated that the idea would soon be sent to Cabinet for approval, reported The Economic Times. The Ministry of Railways is also expected to extend the lease length from the current 5 years to 20 years.
Indian Railways has agreed to reduce the land licence fee for post-Concor divestment to 3.5%. The Ministry of Railways is also likely to extend the lease period to 20 years from the current five years.
A meeting last week attended by officials from the Department of Investment and Public Asset Management (DIPAM), the Railway Ministry, Concor, and NITI Aayog resulted in an agreement on the proposed changes.
Now, according to reports, the Ministry of Railways is preparing a detailed proposal, which will be submitted to Cabinet for approval and after that, the government can issue an expression of interest for Concor.
Regarding the policy change, Lalit Chandra Trivedi, who is an ex-officer of the Indian Railway Service of Mechanical Engineers, and the Chairman of the Rail Division of the Indian chapter of the Institute of Mechanical Engineers, spoke to News18.
“It’s a long-sought-after demand for accelerating disinvestment process. If approved by the government it is likely to give a big boost to the disinvestment process. Presently because of high LLF, the valuation of embedded land becomes so high that it deters entrepreneurs from acquiring businesses,” he said. “I think government’s business is governance and not to run businesses which can be more efficiently run by private enterprise.”
The proposal aims to reduce the land licence fee to 3% and extend the lease period to 20%, he added.
“Both steps are in the right direction. This initiative shouldn’t be restricted to Concor alone but needs to be extended to other sectors,” said Trivedi. “We should not be shy of shedding businesses from government’s control in areas where private enterprise can boost efficiency and is therefore in the national interest.”
However, it is noteworthy that railways’ LLF policy initially applied to land leased for commercial purposes such as opening retail outlets like shops, bookstores, kiosks, and so on, but it was expanded to container business (industrial use) in FY21.
Concor operates in the transportation and handling of containers under the authority of the Ministry of Railways. It also operates logistics facilities such as dry ports, container loading stations, and private cargo terminals.
It currently has 61 container depots, 26 of which are on rail land that is leased on a per-container basis.
When compared to other private container terminal operators, the company benefited from the earlier model of LLF payment. Previously, payment was based on Concor’s volumes.
It should be also noted that Concor has not acquired any land from railways since 2005, instead, it purchased land along rail tracks from farmers at lower prices.
The Cabinet approved the strategic sale of a 30.8% stake in the company, as well as management control of 54.80% of the company’s share capital, in November 2019. Following the divestment, the government intends to keep its 24% stake.
For the current fiscal year, the Centre has budgeted Rs 65,000 crore in divestment proceeds. Based on the current valuation, the divestment of Concor is expected to raise Rs 8,000 crore.
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