Railways eyes Rs 30,000-crore revenue with new land licensing fee policy

With its new land licensing fee (LLF) policy, the Ministry of Railways has identified a revenue potential of Rs 30,000 crore over the next five years, senior officials in charge of estimation said on Thursday.

The revenue will be realised through augmented freight volume brought through GatiShakti cargo terminals.

On Wednesday, the Cabinet Committee on Economic Affairs (CCEA) approved the revised railway land lease policy to 1.5 per cent of the land’s market value, from the earlier 6 per cent. The annual increment in lease has been reduced from to 6 per cent, from 7 per cent.

The CCEA announcement also highlighted the Centre’s intent to build 300 GatiShakti cargo terminals, which saw an increase from an earlier plan to build 100.

Sources in the rail ministry said the plan was expanded in anticipation of higher private sector participation due to the new land policy. The Ministry of Railways is expecting Rs 100 crore of annual revenue per terminal, based on expected freight growth upon usage of these cargo terminals.

“At maximum potential, all GatiShakti cargo terminals will help the Railways generate Rs 60,000 crore. Since some locations may not be able to operate at maximum capacity at all times, we have taken a conservative potential estimate of Rs 30,000 crore, which may increase,” said a senior Railways official. 

Meanwhile, the ministry has set the wheels for these public-private partnership (PPP) freight terminals into motion.

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“We have received 93 applications for GatiShakti cargo terminals and around 65 expressions of interest to develop these cargo terminals. The only concern was policy uncertainty. Everybody wanted certainty of at least 35 years, extendable by another 35 years, to invest,” Union Minister of Railways Ashwini Vaishnaw said in a media briefing on Thursday.

There are currently more than 1,100 state-owned freight terminals, 88 private freight terminals, and 14 functioning GatiShakti cargo terminals, reveals ministry data. The earlier industrial land-use policy wasn’t favourable for investment in long-term infrastructure, such as freight terminals.

“After developing an asset for five years, if there’s renewal uncertainty, why would anyone invest?” Vaishnaw asked, explaining the rationale behind the move.

Sources also indicated that the current policy was causing a lot of leasable Railways land to go idle, notwithstanding the potential for terminal operations.

Policy not specific to Concor

Vaishnaw also emphasised that while Container Corporation (Concor) of India “could also benefit from the new LLF policy, it was not specifically designed for Concor’s disinvestment”. 

He said other public sector undertakings (PSUs), such as Food Corporation of India and Coal India, have a special lease provision where their licensing period is 30 years.

Vaishnaw added that these provisions will continue in the interests of operational continuity. However, should these PSUs want to avail of the liberalised LLF rates, they will have to enter into a new and transparent bidding process.

The minister also clarified that the parameters for the new bidding process will be based on terminal access charges and terminal charge. However, existing terminal operators will have the right of first refusal. The selected bidders - existing or new - are likely to have a revenue-sharing agreement, which is a standard clause in the model concession agreements of PPP projects, said a ministry official.

The new LLF policy was awaited by the market since the older provision was a hindrance to the strategic sale of the Centre’s stake in Concor. The company has 61 container depots, of which more than 26 are currently on Railways-owned land.

According to recent estimates, the Centre is likely to amass Rs 13,000 crore from the sale of its 24.8 per cent stake in the company, of its current ownership of 54.8 per cent.

On growth track

• New land licensing fee policy to facilitate development of 300 Gati-Shakti cargo terminals; each may generate revenue of Rs 100 crore per year
• Applications for 93 Gati-Shakti terminals received by railways
• Potential for private freight terminals to grow with liberalised rates
• New policy broad-based, not designed specifically for Concor disinvestment, says Railway Minister Ashwini Vaishnaw