The Ministry of Shipping is expected to put in place an arbitrator to help state-owned Dredging Corporation of India recover its dues worth about Rs 425 crore from the stalled Sethusamudram Ship Canal project.

The Rs 2,427-crore project, which was pushed through by former Shipping Minister T.R Baalu, has been hanging fire the last over four years, after it ran into legal problems.

It is currently pending before the Supreme Court but industry players nurse little hope of its revival.

“We have asked the Government for an arbitrator. We hope that an arbitrator, not below the rank of a joint secretary in the Shipping Ministry, will be appointed by this month end,” DCI Chairman and Managing Director D.K. Mohanty told Business Line.

The project was aimed at creating a shorter shipping lane between the east and west coasts of the country by constructing a channel between the Indian mainland and Sri Lanka.

It essentially involved dredging a new navigable sea route connecting the Gulf of Mannar and the Bay of Bengal through the Palk Straits and Palk Bay.

Mohanty said DCI had undertaken a total dredging of 23 million cubic metres for the project before work was halted by a Supreme Court order on petitions filed by individuals and environmental groups.

Sethusamudram Corporation of India, the SPV formed to implement the project, now owes DCI about Rs 425 crore for the dredging work.

DCI also has some equity in the SPV, having invested Rs 30 crore in it. The other equity holders include Shipping Corporation of India and cash-rich ports such as Chennai, Paradip, Ennore and Visakhapatnam.

“We cannot approach the court to recover the dues as both the companies are government-run. We hope to get back some of the dues through arbitration,” Mohanty said.

In fact, a section of the industry has also punched holes in the economic viability of the project. “As far as ports are concerned, it will mostly help Tuticorin port. And the actual saving in shipping time also does not involve any significant economic gains,” a senior official from the ports sector said.

(This article was published on March 8, 2013)
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