Thursday, July 25, 2024

CONCOR to Surrender 10% of Land at Tughlakhabad Facility to Reduce LLF Payout

Container Corporation of India Ltd (CONCOR), a state-run logistics and transportation company, is taking strategic measures to reduce its land license fee (LLF) payout on running terminals owned by the Indian Railways. One of the key initiatives involves surrendering approximately 10 percent of the land at its flagship facility located in Tughlakhabad near Delhi. This move is expected to result in an annual savings of approximately Rs 30 crores for the company while not impacting its core business operations.

Ajit Kumar Panda, the Director of Projects and Services at CONCOR, clarified that this land surrender will not affect the company’s business operations or the volume of cargo it handles. He stated, “We are not losing any volumes due to this; we are not handing over any area at Tughlakhabad which is linked to our business.” The land in question, if accepted by the Indian Railways, will enable CONCOR to save a significant portion of its LLF, which currently amounts to around Rs 300 crores for the Tughlakhabad facility.

The Tughlakhabad inland container depot (ICD) is CONCOR’s largest facility, covering 195 acres in the heart of Delhi, and plays a vital role in the company’s logistics operations. It handles over 3 lakh twenty-foot equivalent units annually and has been a consistent revenue earner for CONCOR. The decision to surrender a portion of the land is driven by the need to balance rising LLF costs, which have been increasing by 7 percent annually. By giving up unused land, CONCOR aims to reduce its LLF and maintain profitability.

The LLF is a significant financial obligation for CONCOR, especially considering that the company currently operates 61 inland container depots (ICDs), with 26 of these terminals situated on land leased from the Indian Railways. These 26 terminals contribute more than half of the company’s annual revenue. The LLF is calculated as a percentage of the industrial land value per acre, and it has been steadily increasing.

The decision to surrender land at Tughlakhabad comes after extensive negotiations with the Indian Railways to determine the LLF for the facility. The final LLF agreement resulted in an additional Rs 100 crore increase over what was paid in the previous fiscal year.

According to Mohammed Azhar Shams, the Director of Domestic Operations at CONCOR, the company had acquired the extra land at Tughlakhabad a few years ago with the hope of utilizing it for additional business in the future. However, the land is currently not being commercially utilized, and CONCOR is paying LLF for this unused area. Shams explained, “We are giving LLF on that also, but that area is not being commercially used at this point in time, so we are surrendering that.” This strategic move is part of CONCOR’s broader efforts to reduce LLF costs while ensuring that it does not compromise its core services.

In addition to the Tughlakhabad facility, CONCOR has been closely monitoring other developments and investments in its network. For instance, the terminal at Khatuwas has been making significant progress, and Dadri is being connected directly to the Dedicated Freight Corridor (DFC). As a result, some land and infrastructure developments that were initially planned for commercial use in the near future are not expected to be used as anticipated. Surrendering such areas is viewed as a prudent step to reduce LLF expenses.

CONCOR’s commitment to optimizing its operations and managing LLF costs is in line with its overall strategy to maintain profitability while adapting to changing market conditions and regulatory requirements. The company’s ability to effectively navigate LLF negotiations and make strategic decisions regarding land usage underscores its dedication to delivering efficient and cost-effective logistics solutions to its customers while ensuring sustainable financial performance.

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