30 C
Mumbai
June 7, 2023
News

Why selling CONCOR as a single entity will hurt the industry

The history of the container train business in India goes back to the inception of CONCOR, set up as a wholly-owned subsidiary under the Ministry of Railways (MoR) in 1988. The container train industry since then has gone through a transformation with an increasing focus on intermodal transport, both for domestic and EXIM cargo. The role of CONCOR has been crucial in shaping the industry. Over the years, 45.2 percent stake of CONCOR have been divested based on the strategic plans of the government. Currently, the government holds a 54.8 percent stake in CONCOR.

The plans to disinvest another 30.8 percent of stake valued about Rs 14,000 crore with controlling interest are in the advanced stage. The Department of Investment and Public Asset Management has conducted road shows recently to gauge the interest of potential buyers. The government is likely to release the Expression of Interest anytime soon.

The CONCOR disinvestment should involve breaking it into at least two, and provide opportunities for more than one player to acquire stake in the company.

The history of the container train business in India goes back to the inception of CONCOR, set up as a wholly-owned subsidiary under the Ministry of Railways (MoR) in 1988. The container train industry since then has gone through a transformation with an increasing focus on intermodal transport, both for domestic and EXIM cargo. The role of CONCOR has been crucial in shaping the industry. Over the years, 45.2 percent stake of CONCOR have been divested based on the strategic plans of the government. Currently, the government holds a 54.8 percent stake in CONCOR.

The plans to disinvest another 30.8 percent of stake valued about Rs 14,000 crore with controlling interest are in the advanced stage. The Department of Investment and Public Asset Management has conducted road shows recently to gauge the interest of potential buyers. The government is likely to release the Expression of Interest anytime soon.

Given the industry structure, the role of CONCOR, and the entry of 16 more players since 2006 when the sector was opened for privatisation, this article reflects on issues that surface time and again questioning the level playing field between CONCOR and other players.

Now that the CONCOR itself is going for privatisation through a major disinvestment, these issues have greater relevance as the control of the company will be shifting from public to private. Given CONCOR’s market share and assets (movable and immovable), selling the company as a single entity will give an unfair competitive advantage to the potential buyer, and create further distortions in the industry, which has one large player and many struggling small players.

The container train industry currently has 17 players. CONCOR, which was a monopoly player earlier, continued to have an inherent advantage over other players due to its large terminal base, container rakes/wagons, containers, and handling equipment — the most critical assets for the business. The differential and favourable terms that CONCOR enjoyed over the years have created a lack of a level playing field. It was due to these inherent advantages that CONCOR still dominates the industry with 64 percent of the market share. The terminals and movable assets of CONCOR are two major issues to be considered before disinvestment.

Strategic buyers are eyeing the strong terminal base of CONCOR that will give them a multi-fold competitive advantage over other players. The valuation of the company will greatly depend on the value of terminals. CONCOR has 61 terminals across India, 25 of which are built on land leased by the MoR. The land lease policy has gone through several changes over the years. In 1990, the MoR entered into a 30-year agreement with CONCOR that lease rentals would be based on the twenty foot equivalent units (TEUs) handled.

Related posts

After JNPA & MbPA, New Mangalore Port Authority inagurates PM Gati Shakti Multimodal Maritime Summit 2022

Littoral Wind

MV Werften files for bankruptcy leaving fate of 2000 workforce uncertain

Littoral Wind

SMP Kolkata to start city- Sagar night navigation operation soon

Littoral Wind

Leave a Comment