In a move that will help accelerate urbanisation, multi-modal connectivity and infrastructure development, the Union Cabinet on Wednesday approved a steep 75% reduction in the railway land licencing fee (LLF), along with a much longer lease period, for specified end uses. The decision will also aid the proposed privatisation of Container Corporation of India (Concor).
If the land is used for cargo business – Concor is a major lessee – or integrated development of public service utilities like electricity, gas, water supply, sewage disposal, urban transport, etc, the LLF will now be 1.5% of the land value, down from 6%. Also, the lease period in such cases will be 35 years, instead of 5 years. The new policy has also eased the right of way (ROW) to make asset creation easier for investors.
Following the Cabinet decision, the Concor stock rose 8.58% on Wednesday to close at Rs 726.65 on the BSE.
Uncertainty surrounding LLF policy and the high lease cost were hurdles in the Concor disinvestment. At the current market prices, the government’s proposed 30.8% stake in Concor is worth about Rs 13,636 crore.
While Concor will benefit from new lower costs on new parcels of land it will take on lease, it and other commercial users of railways land will also have the option to switch to the new licensing regime after a competitive bidding process for plots currently in their possession.
The government estimates that about 300 PM Gati Shakti Cargo Terminals would be developed over the next five years and about 0.12 million jobs would be generated thanks to the move.
Among the civilian government agencies, the Indian Railways is the largest landholder with 1.134 million acres. Of these, about 0.1 million acres are vacant (surplus) land. Though aggressive land monetisation was advocated by many, including the DK Mittal committee, to boost the resources available with the national transporter (it barely make any operational surplus) for new investments, the progress has been tardy. State governments’ refusal to give right of way has often stymied commercial development of surplus railway land.
The approval of the much-awaited LLF policy will facilitate the implementation of PM Gati Shakti – National Master Plan for multi-modal connectivity, for integrated planning and coordinated implementation of infrastructure connectivity projects, the government said in a statement.
“Rationalising the railway land lease policy will accelerate investment in the sector and reverse the decades-long modal shift to the road. It will bring in higher quality infrastructure to steadily reduce India’s logistics costs and make our manufacturers more competitive globally,” said Ajit Pai, strategy lead partner, Government and Public Sector, EY India.
Among others, railways land will be offered for optical fibre cables and other smaller diameter underground utilities by levying a one-time fee of Rs 1,000 for crossing the railway track. The policy also provides for use of railway land at a nominal cost for setting up solar plants on railway land. It also encourages the development of social infrastructure (such as hospitals through PPP and schools through Kendriya Vidyalaya Sangthan) on railway land at a nominal annual fee of one rupee per sq metre per annum.
It was only in April 2020 that the railways notified an LLF regime for industrial use of its land, and extended it to its arm Concor for annual LLF at 6% with a 7% escalation each year. Until then, Concor had been paying land lease rentals to the transporter on a per-container (20-feet equivalent unit container) basis, which entailed a much lower outgo.
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.
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.