The Hindu : Front Page : Sethusamudram gets the green signal

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Friday, May 20, 2005

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Sethusamudram gets the green signal

P.Sunderarajan in New Delhi and N. Ravikumar in Chennai

The Centre has cleared the proposal to dredge a ship channel across the Palk Straits, an idea conceived 150 years ago

A ``100-year-dream'' of the people of Tamil Nadu is poised to come true with the Indian Government approving the implementation of the Sethusamudram Ship Channel Project off the Tamil Nadu coast at a cost of Rs. 2,427.40 crores.

The project, cleared by the Union Cabinet's Committee on Economic Affairs on Thursday, envisages dredging of a ship channel across the Palk Straits between India and Sri Lanka. This will allow ships sailing between the east and west coasts of India to have a straight passage through India's territorial waters, instead of having to go around Sri Lanka — a saving of 424 nautical miles (780 km) and up to 30 hours in sailing time.

The project also has obvious benefits from the national security perspective: Naval and Coast Guard vessels can travel directly from east to west and vice versa much faster.

Originally proposed by a Britisher, Commander A.D. Taylor of the Indian Marine in 1860, it was periodically dusted off the shelves but saw no real progress till the Government of India set up the Sethusamudram project committee under Sri Ramaswamy Mudaliar in 1955. The committee report, backing the project, was however put in cold storage till it was revived again in 1999. Thursday's announcement in that sense is the realisation of an idea conceived nearly 150 years ago.

A `special purpose vehicle' called the Sethusamudaram Corporation, with a debt equity ratio of 1.5:1, will implement the project. The Central Government will bear the bulk of the equity at Rs. 495 crores, followed by the Tuticorin Port Trust and Shipping Corporation of India (Rs. 50 crores each), and Dredging Corporation of India, Chennai Port Trust, Ennore Port Limited, Visakhapatnam Port Trust and Paradip Port Trust (Rs. 30 crores each). The balance equity of Rs. 226 crores would be raised through means such as public issue, private placement and user charges.

The Central Government will provide guarantee for the domestic and foreign debt raised for the project and give the Corporation an interest free non-plan loan of Rs. 390.05 crores.

The PSUs and port trusts — the other equity partners in the project — will provide a loan of Rs. 374.75 crores in proportion to their equity holding to offset the negative cash flow of the Corporation during the first nine years of operation, beginning 2009-10.

The project involves dredging of 82 million cubic metres, for which global bids will be invited.

To get the project off to an early start, a stretch of channel involving dredging of 12 to 13 million cubic metres in the Palk Straits adjoining the Bay of Bengal will be shortly assigned to the Dredging Corporation of India. Payment to DCI will be benchmarked to the rate of the competitive bidding.

Union Finance Minister and CCEA spokesperson, P. Chidambaram, pointed out that the project would fulfil a "100-year dream" of the people of Tamil Nadu.

He said the project had been thoroughly studied by CSIR's National Environmental Engineering Research Institute (NEERI) and it found that it would have no environmental impact.

"All apprehensions have been addressed," he said.

Environmentalists had alleged that flora and fauna would be destroyed, and that the livelihood of fishing communities would be affected by the project.

N.K. Raghupathy, Chairman of Sethusamudram Corporation Limited, said genuine concerns of fishing community and environmentalists had been addressed through proper design of the channel.

He told THE HINDU, that it had been decided to spend Rs.60 crores from the project cost on local area development.

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