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Concor Challenges
CONCOR PPP PREPARATIONS
There are still some obstacles to overcome before launching the Container Corporation of India (CONCOR) PPP. Felicity Landon tracks the project
There has been no shortage of interest in the upcoming privatisation of the government-owned Container Corporation of India – companies such as Adani, DP World, PSA International, Vendanta Group, Gateway Distriparks and Allcargo Logistics are known to be keen to get their hands on a stake in the logistics operation, and there is also said to be strong interest from various investment bodies.
The Government of India has been trying to privatise the company, whose activities encompass rail, terminal and warehouse operations, since 2019, when the Cabinet approved divestment of a 30.8 per cent shareholding, along with the transfer of management control. The government’s current stake is just under 55 per cent.
So, what’s the hold-up? The answer lies in the deliberations over a new land licensing fee policy for Indian railways, a situation which has effectively been blocking Concor’s privatisation as the contentious policy has moved between railway and finance ministries.
The policy includes moving away from a fee previously based on the number of TEU to a fee based on a percentage of the land’s market value, with the value to be increased by seven per cent annually. This has raised costs considerably for Concor where it uses railway land for its warehousing and terminal operations, and that in turn could make Concor less attractive to investors. It has been reported that Concor was expecting an additional bill of Rs 460 crore due to the higher fees but in fact received a bill for Rs 1,276 crore from the railways ministry.
Land leasing policy is the main obstacle to overcome ‘‘
Concor operates a network of more than 60 terminals, including inland container depots (ICDs), export-import container depots and domestic container depots. Most are rail linked, with rail being the main carrier for freight but first and last-mile transport by road also provided. It has been reported that 26 of Concor’s container terminals are on railway land.
Investors have noted that any potential bid would depend on the land licensing charge.
At Concor’s earnings conference call for Q3, fiscal year 2022, held at the end of January, V. Kalyana Rama, Chairman and Managing Director, was asked if there was any update on the land lease policy to be approved by the ministry.
“As of now there is no update,” he replied. “Still the work is in progress. Earlier we have given our workings and now it is the ministry and the government, there are other ministries involved so they are working on this.”
This is clearly a tortuous process – as far back as March 2021, Piyush Goyal, Railways Minister said his ministry had cleared the new policy.
Meanwhile, there was positive news from Concor at its January conference call. Kalyana Rama said: “We had another very good quarter in Q3. The overall top line is one of the best ever for Q3. Only just little short of Q4 last year when we got the highest ever top line.
“This quarter we ended with 1919 Crores and there are good margins maintained even though there are issues about container availability and the import/export trends.”
There had been four per cent growth in volumes compared to the same period the year before, he said. The combination of international and domestic growth was “encouraging”. He predicted that Concor would handle four million TEU this year (2022) for the first time.
Kalyana Rama also predicted a significant increase in bulk commodity movements in containers. “We did a little bit of movement, about 4 lakh (400,000) tons of food grains last year, but we were doing a lot of experiments with the movement of cement in bulk in containers that we completed outright. We are now going for commercial exploitation of this. We are expecting a good market in this,” he said. “Next year this will be a reality, the movement of cement in bulk in containers. The market available in the first year will be anywhere between 5 million and 10 million tons.”
Concor was preparing the containers and equipment required, he said, “so that when the demand comes, we would like to pick up the entire demand without losing any market demand there.”
Concor started operations in 1989 with just seven ICDs. Its operations today include warehousing, container storage and repair, packing and unpacking, coastal shipping, air cargo, Customs bonded depots, and a ‘hub and spoke’ distribution service for domestic customers.
All of its operations are backed by a digitalised Single Window facility which coordinates with Customs, sea ports, railways, hauliers, consolidators, forwarders and shipping lines.
The Indian government reportedly received Rs 67 crore in dividends from Concor for Q3 (ending December) of fiscal year 2021-22.
8 The Government
