Cabinet nod soon: Railways to cut land lease fee by half, move to aid ConCor sale

The ministry of railways has circulated a draft Cabinet note on the lease policy for industrial use of railways land, a move that will bring down the railways’ land licensing fee (LLF) to 2-3% from the current level of 6%.

The much-awaited policy, which may also extend the land lease period from 5 years to 35 years or more, will facilitate the privatisation of state-run Container Corporation (ConCor). The ConCor stake sale process will begin as soon as the new land-use policy of railways is approved by the Cabinet, a senior official told FE.

At last Wednesday’s closing price of Rs 697.65, the Centre’s 30.8% stake was worth Rs 13,092 crore on the BSE. On November 20, 2019, the Cabinet had given its nod to sell 30.8% out of its 54.8% holding in ConCor, a railway PSU, along with management control to a strategic buyer.

However, the sale process, which was planned to be completed within FY21, has spilled over to this financial year due to lack of clarity on LLF. The new land-use policy could encourage commercial use of these land parcels along rail tracks.

In April 2020, the railways notified a LLF regime for industrial use of its land, and extended it to its very own Concor. Until then, Concor had been paying land lease rentals to the transporter on a per-container (20-feet equivalent unit container) basis, which entailed much lower outgo. The LLF being charged by the transporter now is 6% of land value in the first year of licence; the rate will increase at a rate of 7% annually to factor in inflation.

The new regime has proven to be expensive for Concor – while it paid Rs 120 crore as land rentals to the railways in FY20, it paid Rs 520 crore in FY21.