Tue, Sep 25 2007. 1:06 AM ISTMoney runs dry for SethusamudramLoan arranger Axis Bank predicts soaring costs will stop Adam’s Bridge’s demolition ahead of Hindu groups Priyanka P. Narain Mumbai: Religious questions and political battles aside, a key banker says there is just not enough money to demolish the bridge that Ram may or may not have built. The bank in charge of securing the loans for the proposed Rs2,400 crore channel says that the Sethusamudram project may never happen—in the absence of required money.“I don’t think this project will ever see the light of day because there is no money,” said Ashish Kumar Singh, vice-president of capital markets at Axis Bank Ltd. Axis, formerly known as UTI Bank, was appointed “loan arranger” for the project in 2005. The floating bridge has figured in the Bharatiya Janata Party’s plans for coming back to power. Since the project’s inception in 2004, costs have skyrocketed to at least Rs4,000 crore, interest rates have crawled higher and old loan terms have lapsed. Singh says the project is languishing because no company will dredge the channel for cheap and Indian dredging companies don’t have the required equipment. Even before the first dredger began its work in 2005, costs had already spiralled to more than Rs3,500 crore, Singh said. The loan sanctions, valid only up to Rs2,400 crore, lapsed. To secure more money, Singh said Sethusamudram Corp. Ltd would have to return to the drawing board, draw up new reports, sit with parliamentary committees and receive fresh approval. So far, it has not gone back to the government, as the delays in the project have moved from insufficient funds into other, more complicated political arenas. For the last few months, Hindu groups have staged protests, forcing the Supreme Court to halt the project until a January hearing. The floating bridge has figured in the Bharatiya Janata Party’s plans for coming back to power. Shipping minister T.R. Baalu has said he plans to carry on, regardless of public opinion. Baalu did not return a call for comment. He was at a meeting in Chennai of the Dravida Munnetra Kazhagam, part of the ruling coalition at the Centre. Singh, whose bank continues to be the loan arranger for the project, says the government has not approached him to raise any new loans. Even if it did, a government guarantee is now unlikely. “As a stand-alone project, no lender will touch this project. First, the interest rates have gone up. It is not possible to lock in the rates. The expected returns on the project were as low as 7.7% to begin with,” he said. “With higher debt cost and higher debt requirements, how can it hope to even break even?”Not so long ago, before protest defined the future of the Adam’s Bridge, or Ram Sethu, the project promised to shorten shipping routes and help revive Tamil Nadu’s economy. In late 2005, Axis had little problem selling the idea to lenders. When the bank hit the road to drum up interest, “it was the most attractive thing out there,” said Singh, who managed the loan-raising process for Sethusamudram. “It had great visibility, people were excited… and there was a buzz around it.”While the Union government and other government organizations, such as the Tuticorin, Chennai and Ennore port trusts, and the Dredging Corp. of India (DCI), were supposed to raise Rs971 crore in equity, the remaining Rs1,456.40 crore was to be a debt component, according to the project’s website.After six weeks of lobbying, 10 banks, including Deutsche Bank and the Dublin-based Depfa Bank, agreed to extend credit. Singh said that because the Union government guaranteed the loans, banks did not have to perform a risk analysis, nor worry about capital adequacy. On Monday, neither bank returned phone calls for comment.While Axis was raising debt, Sethusamudram simultaneously floated tenders for the dredging work.While DCI was nominated to do a quarter of the work, the rest of the dredging was to be done by third-party contractors, according to the project’s economic feasibility study.With 80% of the project total estimated to be dredging, these tenders were the most important part of the process, Singh said. Yet very few companies have the ships needed for such a project, said Capt. H. Balakrishnan, a naval expert who conducted an analysis of the project.Bidders included South Korea-based Hyundai Dredging International, Netherlands-based Van Oord International and Belgium-based JanBe Nul. On Monday, none returned calls for comment.“But the lowest quote was about 80 or 90% higher than what was estimated,” said Singh. This represented the first setback for the project. From then on, “it just unravelled”, Singh said.In 2006, as project costs escalated, DCI was nominated to do all the work. But it cannot do this work without help from other dredgers, as “it does not have the equipment needed,” said an official at the DCI office in Rameshwaram, who requested anonymity, citing a gag order.
Centre plans panel on Ram Setu to avoid infighting within UPA
Akhilesh Suman | New Delhi
With sharp differences within the UPA over the issue of Ram Setu, the Government has planned to set up a committee to resolve the conflict over alignment of a tunnel between India and Sri Lanka.
According to top Government sources, the constitution of the committee is being worked out and would be announced soon.
Sources said the committee would consist of experts and UPA leaders with terms of reference for scrutinising the alignment of the proposed tunnel and ascertain whether any change is feasible.
The decision to set up a committee came in the view of stiff opposition, by the UPA allies and a section among the Congress, to the way DMK supremo and Tamil Nadu Chief Minister K Karunanidhi launched a sustained tirade against Lord Ram.
The Government has taken three months time from the Supreme Court to reassess the historicity of the Ram Setu in the light of the objection raised by the petitioners.
Karunanidhi hinted on Thursday that for him the tunnel is important, not the alignment. Sources said that the idea behind this committee was to buy time at least till Assembly elections in Gujarat.
Not against realignment of Sethusamudram project, says TN CM
Chennai, Sept. 23 (PTI): Under attack for his questioning the existenc of Lord Ram, Tamil Nadu Chief Minister M Karunanidhi today said he was not against the realignment of the Sethusamudram project and he was only concerned about the implementation of the project.
“It is for the engineers to decide on any realignment,” he told a television channel here.
Karunanidhi said he did not have any comment to make on VHP leader Ramvilas Vedanti’s retracting his statement of issuing a ‘fatwa’ against him (Karunanidhi).
“I do not have any comment to make on it,” he said.
On protests by DMK cadres outside the BJP headquarters here today condemning the statements made by Vedanti against him, Karunanidhi said “that was a one-day token protest”.
He said demonstrations for implementation of the Sethusamudram project would continue throughout the state.
To a query why the Congress was keeping silent on the issue, he said there was no need for the Congress to comment on it as the matter was in the Supreme Court.
On relations with the Congress, he said “don’t worry, nothing will happen,” he said.
Bridge over troubled debate Ramaswamy R. Iyer Posted online: Monday, September 24, 2007 at 0000 hrs IST
The debate over the Sethusamudram project has gone completely off the rails. The debate thus needs to be brought back to good sense and relevance. Let us start with the Ram Setu aspect as it has been the main subject of discussion. The question is not whether Ram was a historical figure; or whether he built the bridge; or whether he or the monkey army could have built it; or whether indeed the feature in question is natural or man-made. The crucial point is whether the site is sacred in the eyes of many people. I am not sure of the answer to that question, but if it is ‘yes’, then that is a relevant factor in project-planning. Leaving the sea aside for a moment, let us ask ourselves what a government or other project authority would have done if, in the course of construction of a building or road or bridge, they had encountered a temple or mosque or church or burial ground. The planners or builders in such a case would surely go round that structure or feature rather than cavalierly build over it and damage it, if the option of avoidance were available. Exactly the same logic applies in the present case. If it is feasible to avoid touching the structure or feature in question (whether we call it Adam’s Bridge or Ram Setu or whatever), that would be the wisest course. However, let us suppose that avoidance is not an available option, and that if the channel is to be built at all it will necessarily involve cutting across or otherwise damaging the ‘sacred’ feature. Then the question will be: how important is the channel? Some have suggested that the ‘national interest’ of all should prevail over the religious sentiment of some. There are two questions here. First, avoiding possible trouble by refraining from injuring the feelings of a group of people may also be regarded as being in the national interest, in which case we have to balance one form of national interest against another. Second, we cannot readily assume that building the channel is in the national interest; that proposition has to be established. On the latter question, it has been argued that the project will have serious impact and consequences. The construction of the channel will involve violent disturbance of the sea-bed; and after construction, the maintenance of the channel will involve continuous dredging for all time to come; and of course, if the channel is successful, ships will be constantly passing through, adding to the disturbance. To put it very mildly, all this can hardly have a benign impact on coral reefs or on aquatic life. Prima facie, the project will have major ecological consequences. It is also likely to have an impact on the livelihoods of fisherfolk in the area; at any rate the people concerned seem to be very worried on this score. It has also been argued that the existing ridge, whether natural or man-made, affords a measure of protection to the coastal area from extreme events such as tsunamis, and that the project will destroy that protection. Sri Lanka is not very happy about the project, for whatever reason. To cap it all, it has been stated that no big ship will use this channel; that they will continue to go round Sri Lanka; that only small coastal ships can use the channel; and that the channel will be economically non-viable. If that were true, it would be a coup de grace: why incur financial, economic, social and ecological costs to build a project which is not going to be used, and which evidently no one wants? This, if true, would be illogic of a kind that might have been appropriate for a Kafka novel. It is not being argued here that the answers to all the questions raised above are necessarily unfavourable to the project. However, these are relevant and important questions and we need authoritative answers. The government may say that all these issues have been studied, that the answers are known, and that it was only after a detailed examination that the project that decision was taken. If that is the case, all that material should be put in the public domain for examination. It is not enough for the government to satisfy itself internally. It must provide all relevant information and enable the people of the country (and there is a great deal of expertise outside the government) to judge for themselves whether a sensible or foolish decision has been taken. The plea of this article, therefore, is: stop work on the project, put all relevant material in the public domain, allow a public debate, and then review the project in the light of the comments received. The writer served as secretary of water resources in the Government of India