Rs 500 cr Budget support for Sethusamudram seen

The shipping ministry plans to ask for Rs 400-500 crore of equity support from the government for the Sethusamudram Canal Project.

"The finance minister had assured the government would be giving equity support for Sethusamudram in his Budget speech,"a top ministry official said.

He added, "With the cost of the project estimated to range between Rs 1,500 -2,000 crore, we expect the government to bear around a fourth of the cost."

The ministry would also ask the Dredging Corporation of India (DCI) and the oil companies operating their vessels between India and Sri Lanka, to contribute in the special purpose vehicle being formed to expedite the project, an official said.

"The government has already decided to include the five east coast port in the special purpose vehicle, but would like some private participation also," he said.

He pointed out, "Moreover, DCI's involvement makes sense because major part of the work in the project relates to dredging to give the canal a sufficient draught."

However, some ports have expressed reluctance to participate in the special purpose vehicle on the grounds of financial constraint.

The ministry official said that it was not necessary that the equity support should be provided in one year itself.

The ports could spread their contribution over the years, in instalments.

The Budget for 2004-05 has allocated just Rs 20 crore for the project, which is inclusive of expenditure to be incurred on river regulatory projects like dredging in various ports, particularly in Kolkata.

He said that the finance ministry had asked for a concept paper to be prepared on the issue that would explore issues like commercial viability and security issues and be distributed to various ministries like environment and defence.

For instance, aspects like even though the canal may make it easier for terrorists to travel across, it would also make it possible for the naval vessels to build a wall of security between the two nations, would be brought out in the paper. He said that the detailed project report was yet to be prepared, but roughly, the debt to equity ratio could be 1:1.5.

The Sethusamudram project proposes to create a ship canal to suit different drafts through dredging in Adam's Bridge and Palk Strait.

The proposed navigation route will originate from Tuticorin new harbour in the Gulf of Mannar and pass through the canal created in Adam's Bridge within the international boundary, thus saving time and distance for ships that otherwise had to travel around the peninsula.