The Hindu : Tamil Nadu News : Sethu project launch in June third week

Online edition of India's National Newspaper
Saturday, May 21, 2005

Tamil Nadu

Tamil Nadu

Sethu project launch in June third week

Staff Reporter

Work will be completed in three and half years, says Union Shipping Minister

CHENNAI: The foundation stone for the Sethusamudram Ship Channel Project will be laid in the third week of June, according to T.R. Baalu, Union Minister of Shipping, Highways and Road Transport.

Prime Minister Manmohan Singh, United Progressive Alliance Chairperson Sonia Gandhi and Dravida Munnetra Kazhagam president M. Karunanidhi are expected to participate in the function to signal launch of work on the project that will be completed in three and a half years.

Addressing presspersons here on Friday, a day after the Union Cabinet Committee on Economic Affairs approved the Rs. 2,427.40-crore project for creating a navigable channel between India and Sri Lanka, Mr. Baalu said the project would not have any adverse impact on the environment or on the marine ecology in the Palk Straits.

The Minister attributed the momentum gained by the project to the people of Tamil Nadu and pointed out that the first proposal for the Sethusamudram canal dates back to 1860. The State-owned Dredging Corporation of India (DCI), which was going to get a portion of the channel deepening work on nomination basis, would be the first to begin the work after the function.

Special purpose vehicle

Noting that Sethusamudram Corporation Limited, a special purpose vehicle (SPV), had been created with the Tuticorin Port Trust (TPT) Chairman, N.K. Raghupathy, as its Chairman and Managing Director, he said the Centre would be contributing Rs.495 crores to the Rs.971-crore equity of the company.

The TPT and the Shipping Corporation of India with Rs.50 crores each and four major ports on the east coast and DCI with Rs. 30 crores would take equity in the SPV, whose debt equity ratio would be 1.5:1. An amount of Rs. 226 crores was to be raised either through a public issue or private placement of the shares or a combination of both and from the channel users. Stating this, Mr. Baalu said the Centre would provide guarantee to the debt component of Rs. 1,456 crores, nearly 50 per cent of which was to be raised in the domestic market.

Internal rate of return

On the post-tax internal rate of return of 10.2 per cent, as against the benchmark level of 12 per cent, he said the IRR was worked out when the interest rates were hovering around 18 per cent. In the present regime of lower rates, the project would be viable, he said.

However, in the first nine years after commissioning of the project, an additional fund flow of Rs. 764.80 crores was estimated to be required to offset the negative cash flow. This amount would be raised through issue of zero coupon bonds to the Centre and the ports and public sector undertaking that were equity partners in the project.

Stating that 3,055 ships were likely to use the SSCP in the first year of its operation , Mr. Raghupathy said the SPV was likely to generate profits from the 10th year. The Minister, however, estimated the company to make profits from the 13th year.

Invitation

Asked whether Chief Minister Jayalalithaa would be invited for the foundation stone laying function, Mr. Baalu said not only the Chief Minister, but also all the authorities concerned would be invited by Mr. Raghupathy. About the objections raised by Sri Lanka to the project, he said all the issues were clarified to a few visiting delegations from Sri Lanka.

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