Cabinet may consider lowering rail land rentals this week

The new rental policy to energise Gati Shakti, help privatisation of ConCor.

railways land
Among the civilian government agencies, the railways is the largest landholder with 1.134 million acres.

The Union Cabinet may give its nod this week to a proposal to cut land licensing fee (LLF) for industrial users of railway land to “2-3%” of the value of land as against 6% now.

The approval of the much-awaited LLF policy will facilitate implementation of PM Gati Shakti – National Master Plan for Multi-modal Connectivity, essentially a digital platform to bring 16 ministries including railways and roadways together for integrated planning and coordinated implementation of infrastructure connectivity projects.

Among the civilian government agencies, the railways is the largest landholder with 1.134 million acres. Of these, about 100,000 acres were vacant land. Railways is keen to accelerate the pace of commercial exploitation of land utilization for various public and private sector projects.

The new LLF policy will also pave way for privatisation of Container Corporation of India (ConCor), which may have to fork out much lesser amounts as land rentals to Indian Railways. The new policy may extend the land lease period from 5 years to 35 years or more.

“The proposed LLF policy has undergone many changes. The new LLF could be 2-3% or even less,” a government source told FE. The rental rate may increase at a rate of about 3% annually to factor in inflation.

It was only in April 2020 that the railways notified a LLF regime for industrial use of its land, and extended it to its arm 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 – from Rs 120 crore in FY20, the land rentals shot up to Rs 520 crore in FY21. It paid Rs 465 crore as LLF charges in FY22 as it restructured some terminals. Out of 60 container depots operated by ConCor, 24 are situated on railway land.

Railways’ LLF policy was originally applicable to land let out for commercial purposes such as opening retail outlets such as shops, bookshops, kiosks, etc, but it was extended to container business (industrial use) in FY21.

ConCor’s share price closed at Rs 608.2 last Friday, down 1.68% from the previous closing on the BSE. At Friday’s closing price, the Centre’s 30.8% stake in the multi-modal logistics company was worth about Rs 11,400 crore. On November 20, 2019, the Cabinet had given its nod to sell 30.8% out of its 54.8% holding in ConCor along with management control to a strategic buyer.

Post-2005, Concor has not picked up any land from railways as it bought land along rail tracks from farmers at cheaper rates. The government wants to lower the rates to give a boost to commercial activities along rail tracks.

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