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Shubhra Tandon

Mumbai, Oct 14 Even as environment, security and political concerns continue to plague Sethusamudram Ship Channel Project, the shipping industry too seems to be divided on the economic benefits of the project.

While coastal shipping operators are upbeat on the prospects that the project would open up for them, large shipping lines operating ocean services see the project not addressing their concerns. Shipping industry representatives largely agree that the proposed draught of 10 metres is insufficient for the movement of bigger vessels. “The draught should be a minimum of 12 metres to support a 50,000 DWT vessel,” said a source.

Some shipping analysts are also sceptical about the traffic projections. The traffic projection by Sethusamudram Corporation Ltd that 3,055 ships would sail through the proposed Sethusamudram channel annually is too ambitious, according to Mr S.K. Shahi, Chairman and Managing Director, SKS Logistics, a major coastal ship operator. “We do not expect this kind of traffic movement happening in the next 10 years” he told Business Line.

But the silver lining to this grim picture is that coastal ship owners are excited with the proposed tariff . As per the Financial and Economic Viability Analysis of the project put out by L&T Ramboll, on a “pessimistic estimate,” the charges for a vessel size upto 10,000 DWT would be Rs 11 per GRT, Rs 6 per GRT for 20,000 DWT and so on.

Mr Shahi said: “The Sethusamudram Channel will definitely have savings for coastal shipping as there will be some savings on fuel and time costs. But then they will be levying 12 per cent service tax too.”

The project report by L&T also suggests an increase in the coastal shipping activities in the region as coastal vessels could transport cargo from or to the various ports in peninsular India.

But sounding a note of caution on the upbeat sentiment of coastal liners is another section of the shipping industry that feels that government is not addressing some vital issues.

“There is no clarity as to whether fishing activities would continue in the area or not, if yes, then shipping cannot happen there. Secondly, for security reasons ships are supposed to sail 200 miles away from the Sri Lankan coast, which the channel does not address,” says spokesperson of an Indian shipping company.

Some players in the industry have also raised questions on the timeline for completion of the project. “As of now the tariff rates look attractive but with Axis Bank (The project’s banker) raising doubts on the viability of the project given the cost escalation since 2004, one really has to see whether these rates would be applicable by the time the project is complete,” says another industry player unwilling to be named.

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