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Tuesday, Sep 28, 2004

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SCI defers decision on investment in Sethusamudram project

N.K. Kurup
Amit Mitra

Mumbai , Sept. 27

THE board of directors of Shipping Corporation of India (SCI) has deferred a decision on the proposal to invest Rs 50 crore in the equity capital of the Rs 2,000 crore Sethusamudram ship canal project.

At the board meeting of SCI last week, some members are understood to have questioned the rationale of SCI investing in the project. These members, it is learnt, are of the view that the project is unlikely to bring any major benefit to SCI. The board has decided to seek the project's feasibility report and its cost-benefit analysis, a source familiar with the development said.

The Government had asked SCI, Dredging Corporation of India and five major ports to part fund the Rs 500 crore equity capital of the Special Purpose Vehicle (SPV) being set up to implement the proposed Sethusamudram project.

The board of SCI, however, granted in principle approval to a token investment of Rs 1 crore in the equity of SPV called Sethusamudram Corporation Ltd., the source said.

Since the Union Government owns nearly 80 per cent of the SCI's equity, the company's board will be unable to reject a government proposal. But SCI being a listed PSU, the board may be trying to ensure that its investment decisions are based on sound corporate governance, said an SCI source.

The project involves creating a navigable channel from the Gulf of Mannar to Bay of Bengal through the Palk Bay. The navigation route will originate from the Tuticorin new harbour and proceed to south east of Pamban island, pass through a canal created in Adams Bridge and run parallel to the International Medial Line.

This is estimated to reduce the voyage time of ships from East to West Coast by 400 nautical miles and save roughly 36 hours of sailing time.

The five ports — Tuticorin, Chennai, Ennore, Visakhapatnam and Paradip-— are understood to have agreed to the proposal to invest in the project. These ports are expected to benefit from the project as coastal cargo movement may get a boost. The environmental lobby has been opposing the project, which was mooted originally several years ago, on the ground that this coastal stretch harbours sensitive marine species.

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