State-owned Container Corporation of India (Concor) is looking to reduce its dependence on terminals built on land owned by the Indian Railways for handling cargo containers by as much as 15 per cent by 2024, a top official has said.
Currently, 41 of the rail hauler’s 86 inland container depots (ICDs) are operating on land leased from the Indian Railways for which it pays a land license fee of Rs 1,175 per loaded twenty-foot equivalent unit (TEU).
In effect, Concor pays land license fee on 40-45 per cent of its overall volumes because these are handled at facilities built on Indian Railways’ land.
“Wherever our depots are coming up, the markets are shifting. We shift our business to our own land where we don’t have to pay any land license fee,” V Kalyana Rama, Chairman and Managing Director of Concor, said on October 31 during an earnings call.
For the last three years, the land license fee rate has been linked to the company’s percentage increase in profit after tax (PAT). In FY20, the land license fee was raised to Rs 1,175 per loaded TEU from Rs 1,015 per loaded TEU in FY19.
“Next year again, we will have a review with the Railway Ministry on the land license fee,” Kalyana Rama stated.
The share of cargo containers handled at terminals built on land owned by the Railways will keep going down as more and more volumes are handled at Concor’s own terminals, he said.
“For instance, at Vizag, where the entire volumes are now getting handled in our own terminal. It used to be 100 per cent at the railway-based terminal, and now we have completely stopped handling cargo from that terminal,” he said.
Similarly, in Sabarmati, Concor has completely moved operations to its own terminal where the company doesn’t pay any land license fee to the Indian Railways.
In the National Capital Region (NCR) Delhi too, Concor is moving volumes to the outskirts of Dadri.
“So, these shifts keep happening. We have not kept any target, but a fair assumption, I can say, is in the next five years, we may come down to 30 per cent of our volumes on Railways’ land from 40-45 per cent,” Kalyana Rama added.
Concor’s terminals built on Railways’ land will likely become a thorny issue in the run-up to the privatisation of India’s largest rail hauler.
“Railways land is the biggest issue facing the strategic disinvestment of Concor. The deal cannot destroy the basic rules of the game laid down by the concession agreement signed between the private operators and the Indian Railways in 2007, which provides a level playing field to all. If that land goes into private hands, then it will be a completely destructive move,” said the chief executive of a private container train operating company.
Concor currently gets land from the Indian Railways at a concessional rate, compared to other inter-modal operators. If this is given on a platter to a new private operator, it will result in the economics of the business going squarely in favour of the new entrant, an industry consultant said.
“So, from a competition point of view, it’s a wrong move to privatise Concor unless the land lease terms are re-worked,” he stated.
“It will not only be in the best interest of Indian Railways to “re-work” the land lease terms post privatisation of Concor but would also be in the interest of the sector to bring everyone on par,” said another industry source.
The government has decided to sell 30 per cent of its stake in the company to a strategic partner, along with transfer of management control. The government currently holds 54.8 per cent stake in Concor.