Rama Setu: bad economics

Indrajit Hazra, Hindustan Times

Email Author

Rameshwaram/Chennai, September 18, 2007

First Published: 01:45 IST(18/9/2007)

Last Updated: 02:14 IST(18/9/2007)

Ram Setu: Good politics, bad economics

Standing on the shoreline at Dhanushkodi near Rameshwaram, one can’t see the underwater structure that some believe was built by Lord Ram and others to be a coral reef formation. But one can make out two rectangular structures on the horizon. Not more than 7-8 km into the sea, two dredging ships lie idle not unlike two sunbathing elephants. But do they represent one giant Rs 3,000 crore-plus white elephant in the making?

Until last month, when a Supreme Court order stopped work on the Sethusamudram Shipping Canal Project (SSCP) to ascertain possible ecological damage, these ships were busy dredging to make a 12-metre deep, 300-metre wide navigable canal ready by 2008. The canal, according to its champions, will considerably reduce shipping time and fuel expenses between the east and west coasts of India by providing a shorter alternative to travelling around Sri Lanka.

With the BJP-VHP adding its spanner in the canal work by protesting against any destruction of the Ram Setu (or Adam’s Bridge), the project is under fire. But there could be a more compelling reason than religious damage for the Sethusamudram Canal to be a bad idea: bad economics.

Some 666 km away from Rameshwaram, the Chennai office of L&T Ramboll, the engineering consultancy firm that prepared a detailed project report on the SSCP in 2004, was shut on the occasion of Vinayak Chaturthi. But even two days later, T. Srinivasan — who led the team that prepared the feasibility report (used by the government to go ahead with the project) — is mum about the criticisms levelled at it.

A report by infrastructure economist Jacob John shows that that the L&T Ramboll report overestimates the distance saved for ships by assuming Kanyakumari and Tuticorin as starting points for voyages around the Indian peninsula.

“Ships that arrive from Europe and Africa do not need to touch these destinations before going around Sri Lanka, making the distance saved for these ships much smaller,” he says. This observation is important because 60 per cent of the planned revenue of the canal is to come from international shipping. On being asked whether any shipping companies, foreign or domestic, have come on board promising future use of the canal, Sethusamudram Corp Ltd Superintendent Engineer, Manickam, is furtive. “The Dredging Corporation of India is very much involved in the project,” he says by way of an answer.

The feasibility report’s projected saving in time seems to have overlooked the fact that ships will have to slow down considerably after they enter the canal. Also, the need to have pilots guiding the ships once in the canal will add to the layering of cost and time. Prabir De, a maritime economist and Associate Fellow at the Research and Information System for Developing Countries, is skeptical about the business model of the project. “The overwhelming revenues are generated from container handling. Some 700,000 of the million containers being handled currently in Colombo are Indian and a significant amount of that figure could be diverted if the Sethusamnudram canal is up and running. But this seems to be a ‘static’ concept.” He goes on to explain that despite the possibility of additional container revenues, the economic cons are likely to outweigh the pros. With the time of travel not being reduced between Kolkata and Tuticorin by the projected 340 nautical miles and between Chennnai and Tuticorin by 434 nautical miles — because of slower speeds and piloting — ships may actually find it financially unfeasible to use the canal.

Retired Indian Navy Captain, H. Balakrishnan, who had come out with his own economic analysis of the project in March 2007, adds another economic disincentive. “The open source literature on the SSCP indicates that vessels up to 32,000 DWT (dead weight tonnage) can navigate through the canal. However, in the current global shipping scenario, to reduce operating costs and cater to the enormous growth in shipping needs, trends are towards operating vessels of 60,000 DWT and above.” In other words, bulk carriers won’t be able to pass through the canal. According to John, “It will take more than 200 years for the project to break even.”

When dealing with new ports or canals in India, hydraulic models are normally constructed to carry out tests on a much smaller scale. The Central Water and Power Research Station (CWPRS) at Kharakvasla near Pune, under the Union Ministry of Water Resources, is usually sought out for this purpose. CWPRS Director V.M. Bendre confirms that although such a test is not mandatory, “some other expert body must have conducted tests on the SSCP hydraulic model”. The National Environmental Engineering Research Institute (NEERI) prepared an Initial Environmental Examination (IEE) and a subsequent study of the project. There is no specific mention of any hydraulic model.

Which brings one to the question: whom will this Rs 3,000-plus project serve? Not the shipping industry, it seems, as not enough ships are likely to take this contentious “short cut”. Prabir De ventures an answer: “Frankly, it’s politics that is pushing the project. Very few people may end up being benefited by the canal. But a big project always looks good even if it actually ends up with more problems than benefits.” So one doesn’t even have to be a North Indian “Ram bhakt” to be worried about the Sethusamudram Canal Project.

http://tinyurl.com/yqgf4w

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