State-owned Container Corporation of India (Concor) to lease land on which it has built 24 of its 64 inland container depots (ICDs) for 35 years to Indian Railways by prepaying 99% of market value ground in a development that will remove the biggest obstacle to the planned privatization of the country’s largest container rail carrier.
Concor will have to pay up to 3,500 crore upfront for the long-term rental of the plots. The rail carrier is expected to finance the upfront payment through a mix of borrowing and internal funds.
As a result of the deal, Concor will only pay a nominal annual rent of around 1,000 per year to the railways, according to an agreement being worked out by the two sides, government sources briefed on this said. subject.
“The joint site inspection has been completed and the local market value of the land for most terminals has been mutually agreed. In 1-2 places, there is a slight difference in rating. It will also be frozen in a day or two, ”the source said.
Along with the long-term lease of the land, Concor also decided to divest two other terminals which were built on railway land. This includes a facility in the western region and an empty container yard at its flagship ICD in Tughlakabad, where it is currently paying a “huge amount” as a license fee.
“This will give the potential buyer of Concor a very clear idea of the responsibility on land licenses for the next 35 years,” the source said, noting that it would help the government launch expressions of interest in the privatization of Concor.
The government decided to privatize Concor by selling 30.8 percent of its 54.8 percent stake in the company to a private company. But the railroad land on which he had built the inland depots was seen as a major obstacle to the transaction due to fears of political controversy.
Until FY20, the Land License Fee (LLF) for land leased to Indian Railways for the operation of terminals and depots was paid by Concor on a per container basis, which increased each year in line with the percentage increase in the company’s net profit. In FY20, LLF was billed at 1,175 per twenty foot equivalent unit (TEU).
As of April 1, 2020, the Ministry of Railways has decided to charge Concor’s annual LLF at 6% of the value of industrial land per acre where the terminal is located, which will increase by 7% per year.
LLF’s revised mode of collection from April 1, 2020, increased Concor’s payment to this account to 590 crore in FY21 from 140 crore from ₹ to FY20, even after divesting some 16 terminals built on railway land to reduce expenses.