The Container Corporation of India Ltd (CONCOR) is “not eager” to move 26 terminals it runs on land leased from Indian Railways to the new liberal licensing policy approved by the Union Cabinet last September and has decided to stick to the existing regime for the time being, Chairman and Managing Director V Kalyana Rama has said.
CONCOR currently runs 61 inland container depots (ICDs) of which 26 terminals are built on land leased from Indian Railways (IR). These 26 terminals account for more than half of the annual revenue of the company.
The State-run rail hauler currently pays land lease charges at the rate of 6 percent per annum on the market value of industrial land with annual escalation of 7 percent, for terminals run on Railways land.
The Cabinet decided that the land lease charges will be levied at 1.5 percent of the market value of land per annum with annual escalation of 6 percent.
The terminals now operating on Indian Railways land will have to go through a tendering process to avail the benefit of lower lease charges, in which the existing operator will have a so-called right of first refusal if it is not the highest bidder.
“Our business is now well set. We are not eager to just move to the new land licensing policy because that policy has got a lot of variables,” Kalyana Rama told ET Infra on Tuesday.
“We have to first surrender these terminals and subject them to bidding. So, somebody can come and start bidding along with us; we have only the right of first refusal to match the highest bid and retain the terminal/s. Suppose if somebody bids and it is in a position that I can’t leave it, then what,” he explained.
The bidding for terminals run by CONCOR on IR land is expected to take place not for the fixed 1.5 percent land lease charges per annum approved by the Cabinet, but on Terminal Charges for railway wagon traffic and Terminal Access Charges (TAC) for non-railway wagon traffic.
The bid is likely to be decided on the highest revenue an entity is willing to share with IR with respect to two variables – one, the TC for railway wagon traffic which are currently charged at Rs40 per ton and the second is TAC for non-railway wagon (private wagon) traffic, currently set at Rs1,60,000 per train. These rates are liable to be changed for bidding purposes.
Industry sources said that the bidding process also runs the risk of non-serious entities quoting exorbitant rates which will then have to be matched by CONCOR by exercising the right of first refusal, if it chooses to continue running the terminal/s. The higher rates could hurt CONCOR’s margins.
“This will spoil the sport for CONCOR,” an industry official said.
CONCOR is expected to pay land lease charges of Rs380-390 crore for FY23 though it has estimated the payout at Rs450 crore for the full year.
“As of now, we are continuing with the existing policy of 6 percent lease charges per annum on the market value of industrial land with annual escalation of 7 percent. Whereas in the new policy there are certain variables. So, at this moment, we are not taking any decision on migrating to the new land leasing policy. We will be evaluating the new policy and depending on that, will take a decision at the right time,” Kalyana Rama added.
CONCOR’s consolidated net profit for the October-December quarter rose 3.37 percent to Rs294.20 crores from Rs284.61 crores last year.
The company’s consolidated revenue from operations for the third quarter of FY23 rose 3.43 percent to Rs2,004.46 crores from Rs1,938.03 crores a year earlier, it said in a regulatory filing on Monday.
