Shares of Container Corporation of India (Concor) soared as much as 13 percent in Wednesday's trading session after the cabinet cleared the railway land license policy under the PM Gati Shakti program today.

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Under the new policy, the timeframe of leasing railway land has been increased to 35 years from the earlier period of five years.

The cabinet has also lowered the land license fee for the Railways from 6% to 1.5% for new entrants. The existing players will have the option to switch to a new policy through a bidding process. 300 new cargo terminals are envisaged under the new railway policy.

Union Minister Anurag Thakur said that the amended policy will enable easier use of railway land and also attract more investors. The minister also said that the policy will be notified within 90 days.

Earlier in the day, government sources told CNBC TV18 that the LLF is not automatically being changed to 1.5 percent from the earlier 6 percent.

"Existing players will continue to pay 6 percent unless they decide to come into the bidding process for the new 1.5 percent base rate," sources said, adding that the new bidding process will also have some additional costs.

The 1.5 percent LLF will be applied via a bidding process and existing players will have the first right of refusal in case they participate in the process, according to the sources.

Concor shaved off almost Rs 50 from the day's high, ending 8 percent higher at Rs 723.30. The stock touched a 52-week high of Rs 766.70, post the news surfacing.

LLF a major overhang

The Land License Fee has been a major overhang on the fortunes of Container Corporation, not only for the financial impact, but also for its proposed potential divestment. There were reports earlier that the government may tweak the LLF to make CONCOR more attractive to private investors.

Brokerage firm Nomura mentioned last month that a favourable LLF policy could act as a "key catalyst" for Concor, and can add as much as Rs 150 per share to the share price on synergy benefits.

Concor had paid a Land Licence Fee of Rs 520 crore to the Railways in FY21, which declined 10 percent in FY22 to Rs 465.11 crore. The Railway Ministry had decided to charge the annual LLF from Concor at 6 percent of the industrial land value per acre where the terminal is located. The LLF was supposed to increase 7 percent annually.

First Published:Sept 7, 2022 3:20 PM IST