Sethusamudram Shipping Canal Project: A Case Study

Introduction

Need for Canal•Currently the ships coming from the west coast of India and other western countries with destination in the east coast of India and also in Bangladesh, China etc. have to navigate around the Sri Lanka coast.

•The existing waterway is shallow and not sufficient for the movement of ships. This is due to the presence of a reef, known as Adams Bridge, located south east of Rameswaram near Pamban, which connects the Talaimannar Coast of Sri Lanka.

•In order to reduce the steaming distances between the east and west coasts of India and to improve the navigation within the territorial waters of India a number of proposals were considered, to cut a ship Channel called Sethusamudram connecting the Gulf of Mannar with the Palk Bay.

•Government of India appointed Tuticorin Port Trust (TPT) as a Nodal Agency for developing the Sethusamudram Ship Channel Project (SSCP) and entrusted the work of Preparation of Detailed project report to L&T-RAMBOLL Consulting Engineers (LTR), Chennai.

History

Has had viability issues throughout its planning history.

Preliminary Design

 By adopting a minimum sight distance of 2.5 km for the SSCP (same as that of Panama Canal), minimum inter arrival time between ships required is 10 minutes (for vessel speed of 8 knots). The inter-arrival time for the year 2025, works out to 90 minutes, is well above this minimum limit. So with two-way channel, the year 2025 traffic can be handled without any congestion. The recommended channel dimensions are as below.Channel Type: Two WayChannel Width: 300 mChannel Depth: -12 m CDSight distance: 2.5 KmPermitted Draft of Vessel: 10 mBeam: 33 mLOA: 215 mDesign Speed: 8 knot

Dredging Requirements and Disposal

•The details of channel and dredging quantities computed for each segment are as below:

Segment Length (Km) Dredge Quantity (Million Cu.m)Adam’s Bridge 35 48.0Palk Bay 78 No dredgingPalk Strait 54 34.5TOTAL 167 82.5

•It is estimated the maintenance dredging to be 2 million cu. m.in the first year reducing to 1.4 million cu. m. in 5 years and remaining constant thereafter.

•The dredged materials from Adam’s Bridge area is proposed to be dumped off-shore into sea in the Gulf of Mannar at location of 20-30 m natural depth within Indian territorial waters. The Dumping location is assessed to be 25-30 km away from Adams’s Bridge.

Economic Viability

SSCP Official Report Conclusions

•Financial success

•Maximum saving of 36

hours

•Saving of 335 nautical

miles

Distance Saving?

Distance saved depends on the starting point◦ Kanyakumari and Tuticorin (297 – 373 nm)◦ Europe and Africa (215 – 70 nm)

60% are non-coastal ships

Time Saving?Open sea speed: 12 knotsCanal speed: 8 knotsAdditionnal two hours of pilotage in the Canal

From Tuticorin : 22 hours savedFrom Europe: 8 hours savedFrom Africa: 4 hours saved

Profitable?

As the SSCP aim is to make profit, its levy must leave a margin after meeting the cost of amortization of the capital and the annual revenue expenditure incurred on maintenance dredging and provision of the pilotage service. The likely pilotage charge to be levied by the SSCP has not been made public, but an approximate figure can be guessed by extrapolating similar charges currently levied by the Chennai and Tuticorin Port Trusts:

The approach channel to Chennai port has a length of 7km. A 36 000 tonne coal ship calling at Chennai has to pay approximately Rs 21.75 a tonne, or a total of RS 7,83lakhs, as pilotage charges, averaging RS 1.11 lakhs per km.

Tuticorin’s approach channel is only 2,4km long and an identical coal ship calling at this port is levied RS 17 a tonne or a total of RS 6.12 lakhs, towards pilotage, working out to RS 3lakhs per km.

Profitable?

Both capital and recurring cost will be much higher for the SSCP than for Chennai and Tuticorin ports, and its levy pilotage per km is likely to be substantially higher than that of over the latter if it has to have a 9% return on the capital.

it is also important to remind that when using the canal, a ship has to use the more expensive marine diesel oil (MDO), compared to open sea when it can use the less expensive intermediate fuel oil (IFO).

A Concrete ExampleSavings made by a 20,000 dead

weight tonne (DWT) ship are calculated.

Two different kinds of voyages: one coastal and the other non-coastal

Savings are calculated in time charter rate

A Concrete Example(contd.)

20,000 DWT saves almost four times the amount when making a voyage that is coast to coast, when compared to voyages that start in Europe and Africa

fuel savings shows us that the total fuel savings for both coastal voyages and non-coastal voyages are similarly different:

◦ The DPR uses a consumption figure of 29.2 kg/km of fuel for a 20,000 DWT ship

◦ By calculating the fuel used for coastal as well as non-coastal voyages, we can see that coastal voyages (Kanyakumari and Tuticorin) on average save almost ten times more when using the canal as non-coastal voyages (Aden and Mauritius)

The 20,000 DWT coastal ships (the ones that were covered in the DPR) save on average $ 17,962 by using the canal. Non-coastal ships (the ones that were not covered in the DPR) save on average $ 3,989 by using the canal

A Concrete Example(contd.)

A Concrete Example(contd.)•Non-coastal ships save just 28% of the amount saved by coastal ships by using the canal, but are to be charged the same (or very similar) tariff and constitute over 60% of the revenue stream of the SSCP.•In dollar terms, the DPR hopes to charge up to 50% of the calculated savings as a tariff for using the canal. The saving as calculated by the DPR for a 20,000 DWT ship will give a canal tariff of around $ 8,981. •On average, non-coastal ships, that constitute 70% of the projected users, will lose $ 4,992.1 if they use the canal at the current tariff structure.

•Thus, many from the shipping industry opine that ships will go around Sri Lanka rather than have to go through a canal with draught restrictions and with a need for a pilot to embark and disembark from the ship:

• If the company charges the total savings made by the ship (around $ 4,000), the pre-tax internal rate of return (IRR) of the project falls to just 4.5%.

• if the SSCP charges 50% of the amount saved by these ships, the pre-tax IRR falls to just 2.6%!

Environmental Viability

Impact on Marine Ecosystem•The proposed SSCP site is located in a globally significant marine ecosystem– the Gulf of Mannar Biosphere Reserve, one of world's richest marine biological resources. It has 3,600 species of plants and animals that make it India's biologically richest coastal region.

•It is specially known for its corals, of which there are 117 species belonging to 37 genera. Out of the 14 species of seagrasses under six genera known from Indian seas, thirteen species occur in the Gulf of Mannar Biosphere Reserve. And 5 species of sea turtles have been recorded here –olive ridleys, green turtles, hawksbills, leatherbacks and loggerheads.

•A total of 61 species of algae are distributed among the three major groups - green algae (14 genera and 28 species), brown algae (eight genera and 13 species), and red algae (17 genera and 20 species). Of the 14 species of seagrasses under six genera known from Indian seas, 11 species are known to occur in the Palk Bay.

•The proposed canal has the potential to have very significant consequences on some of the most important marine biodiversity areas of mainland India. The Gulf of Mannar and Palk Bay regions have some of India’s richest coral reef ecosystems and are also home to some of the most extensive and diverse seagrass meadows in the country.

Impact on Marine Ecosystem(contd.)•The Palk Bay is considered to be one of the biggest sediment sinks along the east coast, and in order to keep the canal open, a certain level of dredging will have to be maintained through the operating life of the canal. These activities will introduce dramatic changes in the marine environment of the Gulf of Mannar and Palk Bay.

Key Environmental Issues(contd.)

1. Technical aspects in Project Design, EIA and related studies

It has been stated that the navigation channels of ports on the east coast of India face three major and persistent problems:(1) Problems due to sedimentation, (2) Problems due to tropical cyclonic disturbances,(3) Issues related to dumping of dredged material.  Thus, to arrive at an environmentally sound and well-designed channel, the Sethusamudram Ship Canal Project should have been backed by a complete scientific understanding of the several parameters and factors in the project area, including sub-surface geology, sedimentation process and transport regime in the project, impacts of monsoon, cyclones, storm surges etc., impacts of dredged disposal and impacts on biodiversity and fisheries.

Key Environmental Issues(contd.)

2. Sub-Surface Geology, Sedimentation and Disposal

The kind of dredging that is required in this region and its impacts on the environment were not estimated scientifically.

The SSCP’s EIA should have included information about suitable dredged material disposal sites, since the project is located in an ecologically sensitive area and this activity involves obvious environmental implications.

In fact, the Detailed Project Report (DPR) observation on the NEERI Techno Economic Feasibility Assessment Report (TFEAR) is that “the annual maintenance dredging in the Adam’s Bridge area is mentioned to be 0.1 million cu.m in the NEERI report, which is not substantiated by scientific assessments or calculations.”

Key Environmental Issues(contd.)

3. Loss of Scheduled / Protected Species

The dredging activity for the canal will result in the loss of corals, sea fans, sponges and holothurians which are all protected species under the Indian Wild Life (Protection) Act, 1972.

There is no evidence that the project authorities even took measures to inform the State Board for Wildlife, or the Chief Wildlife Warden of Tamil Nadu, or the Central Government of the loss of these species by the project activities.

Political & Religious Issues This bridge is the site of Rama's Bridge, making it a

religious monument of significance to the Hindus.

While the age of the Ram Setu may be a matter of discussion, it commands high importance as a religious symbol in the minds of majority of Hindus.

Nevertheless, the Govt. of India through Mr. Nariman submitted before the Supreme Court of India on 22 July 2008 that “Kamba Ramayanam say that the bridge was destroyed by Lord Ram so that no one can cross over to Sri Lanka and ships can sail through. The Telugu version of Ramayana also says Lord Ram destroyed the bridge.”

Conclusion

There are serious flaws in the way the project

has been studied by the government.

The economical viability for the ships is not

proved, and may prove to be hardly reachable.

The project does not seem to be profitable for

the investors.

The cost for the government, users and

environment seems to be too high.

References Review of the Environmental Impacts of the Sethusamudram Ship Canal Project,

Sudarshan Rodriguez Ashoka Trust for Research in Ecology and the Environment (ATREE)

“Sethusamudram Canal:An Expensive Voyage?”, Jacob John.

SETHUSAMUDRAM SHIP CHANNEL PROJECT, Executive summary.

Ramesh, R. 2004a. A Critique on the Methodology of NEERI EIA for the Proposed Sethusamudram Ship Canal Project. Doctors for a Safer Environment (DOSE), Coimbatore. 23 pp.

Rajendran, C.P. 2005a. Assessing the Stability of the Sethusamudram Shipping Canal. Journal of Geological Society of India. Vol. 66. No.3 367-370 pp.

Rajendran, C.P. 2005b. Sethusamudram Shipping Canal Project and the eternal silence of the

Ramesh, R. 2004b. Sethusamudram Shipping Canal Project and the unconsidered high risk factors: Can it withstand them? Doctors for a Safer Environment, Coimbatore. 73 pp.

Ramesh, R. 2005a. Is the Sethusamudram Shipping Canal Project Technically Feasible? Economic and Political Weekly, January 22, 2005.

Ramesh, R. 2005b. Sethusamudram Shipping Canal Project, Current Science, Vol. 88, No. 4.

L&T-Ramboll. 2005. Detailed Project Report and Evaluation of EIA Study for Sethusamudram Ship Channel Project. L&T Ramboll Consulting Engineers Limited.

NEERI. 2004a. Environmental Impact Assessment for Proposed Sethusamudram Ship Channel Project, National Environmental Engineering Research Institute, Nagpur. August 2004. 427 pp.

NEERI. 2004b. Technical Feasibility and Economic Analysis of Proposed Sethusamudram Channel. National Environmental Engineering Research Institute Nagpur, July 2004. 330 pp.

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