Improving efficiency: New railways land policy

Increasing railway land usage will boost activity

The Union Cabinet’s decision to revise the railway land policy is well-intended. One of the ways to improve economic outcomes is to use the available resources more efficiently. It has been argued for long that the Indian Railways holds excess land all across the country, which can be monetised to not only increase revenue for the national transporter, but also push up overall economic activity. The government’s decision is intended to rapidly move in this direction. For cargo-related activities, for instance, the land will be given for up to 35 years at 1.5 per cent of the market value per annum. Currently, land for such activities is leased only for five years at a much higher rate. The government expects the policy to enable the building of 300 PM-Gati Shakti cargo terminals over the next five years, which would potentially generate 120,000 employment opportunities.

The revised policy, in principle, will have multiple benefits. Longer-term leasing of railway land will provide visibility to entities looking to build cargo terminals. Lower cost would encourage more entities to set up such terminals. Although it is not clear at this stage as to how much land the railways will make available for this purpose and the kind of revenue it is expecting on this account, the development of more cargo terminals and efficient handling will help increase its freight revenues. The Indian Railways has lost freight business to road transport over the decades. Efficient handling of cargo could help it regain some of the lost ground. The movement of cargo by railways is also comparatively more environment friendly.

 

Further, better visibility and lower cost will help the government complete the strategic sale of Container Corporation of India or Concor. It had approved the privatisation of Concor in November 2019, but it could not be completed. Out of the 61 container depots that Concor operates, 26 are on railway land. Since the government has allowed existing operators to shift to the new terms, subject to some conditions, Concor will benefit significantly. It is currently paying 6 per cent of the market value and the outgo in the current fiscal is estimated to be between Rs 300 and 400 crore. The appeal of the company will increase as the sector now has greater visibility and the new owner would be in a better position to expand operations.

Besides the cargo business, the government has eased the norms for a host of other activities on railway land. It can be used for utilities such as electricity, water supply, gas, and urban transposition at 1.5 per cent of the market value per year. The policy is also open to the development of social infrastructure, such as hospitals in public-private partnership mode and schools by the Kendriya Vidyalaya Sangathan. Besides, railway land can be used for setting up solar plants at a nominal cost. The government aims to prepare a comprehensive policy document and implement the proposals within 90 days. In this context, the government will need to make sure that the policy is implemented transparently. The valuation of land will need to be tackled carefully because the policy will require dealing with a potentially large number of both public and private entities at multiple locations. Successful implementation of the policy would not only improve prospects for the railways but also help increase efficiency and overall activity in the country.