MUMBAI : The land license fee (LLF) paid by Container Corporation of India Ltd (CONCOR) to Indian Railways for running terminals on land leased from the national transporter declined 10.10% to Rs465.11 crore in FY22 from Rs517.39 crore in the previous year and is expected to drop further when the Cabinet clears a proposal to cut the rate of levy to 3.5% from 6%, company officials said.
“The LLF pay-outs will go down further,” said a company official. “Some positive things are going on… whenever the decision comes, that will be very beneficial to the company… it will not go beyond FY22 levels,” the official said, asking not to be named.
The Cabinet is expected to sign off on a proposal piloted by the Railway Ministry to cut the LLF rate from 6 per cent of the industrial land value per acre where the terminal is located to 3.5%, according to government sources.
Beginning April 1, 2020, the Railway Ministry decided to charge the annual LLF from CONCOR at the rate of 6 percent of the industrial land value per acre where the terminal is located, which will escalate by 7% annually.
Till FY20, the LLF for the land leased from Indian Railways for running terminals and inland container depots (ICDs) 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 the rate of Rs1,175 per twenty-foot equivalent unit (TEU).
The revised mode of collecting the LLF from April 1, 2020, jacked up CONCOR’s pay-out on this count to ₹517.39 crore in FY21 from ₹140 crore in FY20. CONCOR currently runs 64 inland container depots (ICDs) of which it has to pay LLF for 25 terminals because they are built on land leased from Indian Railways.
The change in the mode of collecting LLF had stalled plans by the Department of Investment and Public Asset Management (DIPAM) to float expressions of interest for privatising CONCOR.
In November 2019, the Cabinet decided to privatise CONCOR by selling 30.8 percent of its 54.8 percent stake in the rail hauler to a private firm along with transfer of management control.
The current market value of the Railways’ land would be in the range of Rs14,000 to Rs16,000 crore. Thus, for the private owner of CONCOR, the annual land licence fee at the rate of 6 per cent would zoom to about Rs1,000 crore, rendering the terminals unviable to operate.
Consultants tracking the sector reckon that the steep hike in land licence fee could impact CONCOR’s valuation and fetch lower realisation for the government during the sale, apart from depressing bidder interest.
To reduce the higher overall license fee outgo, CONCOR surrendered 17 terminals built on Indian Railways land from April 2020.
“On the basis of rates taken from land revenue department(s) and Company’s assessment thereof for terminals on Railway land leased to CONCOR, after surrender of 17 such terminals earlier, an amount of Rs465.11 crore has been provided as Land License Fee payable to Indian Railways in twelve months period ended March 2022 as per extant policy of Railways,” CONCOR said while announcing the fourth quarter and annual financial results for FY22 on 19 May.
“The company has no plans to surrender more terminals,” said the CONCOR official mentioned earlier.
“Actually, we projected Rs 450 crore as LLF for FY22 and with some provisioning we kept it at Rs465.11 crore to avoid giving any surprise in the balance sheet later because we are under divestment,” he added.