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concor: India cuts railway license fees and clears bridges to privatize Concor

The Union cabinet on Wednesday lowered rail land license fees to 1.5% from 6% for certain uses. The term of the lease has also been increased to 35 years from the current 5 years.

This decision will accelerate the sale of the Centre’s stake in Container Corporation of India.

The development is believed to be in line with NITI Aayog’s recommendation to keep rail land rental charges for containers below 3%.

The move should facilitate the strategic divestiture of government-owned Concor, making the deal more lucrative for players.

The reduction announced in LLF was requested by private actors and the proposal was presented to Cabinet for approval, ET had reported earlier.

Concor, under the aegis of the Ministry of Railways, deals with the transport and handling of containers.

The Company is also engaged in the operation of logistics facilities, including dry ports, container freight stations and private cargo terminals. It has 61 container depots, 26 of which are on railway land leased on a license fee per container basis.

The Board of Railway Commissioners, in its policy dated March 19, 2020, had notified an LLF scheme for the industrial use of its lands and extended it to Concor. Under this policy, carriers were required to pay 6% of the land value in the first license year, which increases by 7% each year.

It was unclear whether the same fees would apply once the PSU was sold.

DIPAM officials said many potential buyers pointed out that the fee was too high and asked for a reduction to 3%. However, the deal was stalled as the railroads were reluctant to reduce the fee.

The ministry is working on a detailed proposal which will be sent to Cabinet for approval. The government can then issue an expression of interest for Concor.

In November 2019, the Cabinet had approved the strategic sale of 30.8% of the company’s capital as well as management control over the government’s 54.80% stake in the company. The government plans to retain 24% of the capital after the sale.

The Center has budgeted ₹65,000 crore of the divestment proceeds for the current financial year. It expects to raise ₹8,000 crore from the Concor divestiture at current valuation.