The Cabinet Committee on Economic Affairs (CCEA) has approved the proposal for implementation of Sethusamudram Ship Channel Project  at a cost of Rs.2,427.40 crore consisting of a capital cost of Rs.2,233 crore and financing cost of Rs.194.40 crore including Interest During Construction (IDC) component of Rs. 126.80 crore.  M/s. Sethusamudram Corporation Limited will be the nodal agency for raising resources, and implementing the project through Tuticorin Port Trust.

The financial structure of the Special Purpose Vehicle (SPV) will be as under, keeping the debt equity ratio as 1.5 : 1

Total project cost                                   : Rs.2,427.40 crore

Equity                                       : Rs. 971.00 crore

Domestic currency (About 50 per cent)

and balance foreign exchange debt   : Rs.1,456.40 crore

The equity contribution in SPV by different agencies will be:

The Government will extend guarantee to the domestic and foreign debt to be raised for this project. Interest free non-plan loan assistance of Rs.390.05 crore will be provided by the Government and the remaining Rs.374.75 crore by the other ports and PSUs that are equity partners in the SPV in proportion to their equity holding for offsetting the negative cash flow, over a period of the first nine years of operation starting from the year 2009-2010.

In the interest of starting the project at the earliest, a stretch of the channel involving dredging work of 12 to 13 million cubic meters in the Palk Strait area adjoining the Bay of Bengal will be assigned to the Dredging Corporation of India, a Mini-Ratna PSU, under the Ministry of Shipping, Road Transport & Highways on nomination basis.

Sethusamudram Ship Channel Project envisages dredging of a ship channel in the shallow portion of sea to connect the Gulf of Mannar and the Bay of Bengal through Palk Bay so that ships, depending on draught required, moving between East and West Coast of India could have a continuous navigable sea route around the peninsula within India’s own territorial waters. This will save upto 424 nautical miles (one nautical mile is equal to 1.852 kms.) of distance and upto 30 hours of sailing time for ships between East and West Coast.

RK:DS:LV