Setu project: a white elephant, an ecological-social disaster, being falsely foisted as a dream project.

Setu project: a white elephant, an ecological-social disaster, being falsely foisted as a dream project.

Thanks to Capt. Balakrishna and to Sudarshan Rodriguez for their incisive analyses.

Executive Summary: Setu project is a white elephant, an ecological disaster, and is being foisted as a dream project without involving detailed studies using the expertise of Geological Survey of India (GSI) and National Institute of Oceanography (Goa), without consulting the local pollution control, maritime boards, without consulting the neighbouring country under international treaty obligations, ignoring international treaty obligations related to UN Law of the Sea, UNESCO World Heritage and Underwater Cultural Heritage Conventions. Above all, there is a cognizable criminal offence involved by violating Section 295 of the Indian Penal Code which prohibits the hurting of sentiments of a community.

It is shocking that a fundamental question remains unanswered: for whose benefit is this project? How will it benefit the coastal people? Has an alternative of Marine Economic Zones along the long 8000 km. of the nation been evaluated which has the potential to increase marine product export foreign exchange earnings from the present Rs. 8000 crores per annum to Rs. 40000 crores per annum?

Scrap the project. Don't ever dream such project disasters.

The project zone is Rama’s hotspot with mannar volcanic rocks and hotsprings all along the coastline and is close to the most fragile eco-system – the Sunda plate which is subject to almost daily earthquakes and which scientists (Nature magazine 6 Sept. 2007) have noted as a potential disaster zone which will adversely impact 6 crore coastal people from Kolkata to Kerala by a more devastating tsunami than the one which occurred on Dec. 26, 2004 killing 2,60,000 people. How could any rational government have conceived a project and inaugurated it on 2 July 2005 (that is within 6 months of the tsunami) without a detailed evaluation of the impact of the Dec. 2004 tsunami on the bathymetry of the ocean and without providing for tsunami protection measures to save the nation’s coastal property and peoples’ lives? How could anyone approve of a project which 34 Sri Lankan experts claim will impact adversely the drinking water supply to Rameshwaram and Jaffna if the fresh-water bearing limestone caves in Rama Setu are blasted off? Do we have a socially responsible governance or not?

The detailed project report prepared by the consultants for Setusamudram Corporation is an UNRELIABLE, document, based on computational errors, erroneous/biased assumptions and is intended only as a make-believe exercise, a pathetic attempt in economic casuistry. The project economics presented in the DPR is simply bogus. Capt. Balakrishnan conclusively proved that the project is nautical folly.

In addition to social costs which are excluded from the computations of economic viability, the following costs are also either excluded or grossly understated: 1. additional security costs which will devolve on the Indian Navy to acquire, for example, special anit-mine-warfare vessels which can traverse through a shallow channel in narrow straits (which may be of the order of Rs. 3000 crores); 2. costs to the neighbouring country, Sri Lanka, very close (3 kms. proximity) to the channel; 3. maintenance dredging costs in one of the five sedimentation sinks of the world constituting the Gulf of Mannar-Palk Straits; 4. costs of facilities which are an imperative, for salvage operations in case a ship gets grounded in the shallow sands; 5. failure to estimate the number of ships which will be less than 30,000 dwt (dead-weight-tonnes) and which will be phased out during the next 10 years since the trend is to build large-tonnage ships going upto 1 million dwt.; 6. losses which will be suffered by coastal people due to denial of access to about 26% of the ocean zone – the breeding zone for marine products and fish nurseries -- in Gulf of Mannar-Palk Straits by creating a veritable international boundary channel 3 kms. west of the Indi-Sri Lanka medial line (considering that the distance between Dhanushkodi and the Medial Line is only 15 kms.); 7. failure to include provisions/facilities for tsunami-cyclone protection to safeguard the integrity of the nation’s coastline.

SSCP will be a perpetual sick unit. The claim that Setusamudram Corp. Ltd. (SCL) will be financially self-sustaining is thus questionable. No sensible banker will lend money to such an entity. It will be a tax-payer’s burden for the foreseeable future.

First year Loss: Rs. 54 crores
(3055 passages/year X Rs.1.78 lakhs, i.e. Tariff of Rs. 3.89 lakhs minus Rs. 2.11 lakhs fuel and cost savings per passage of a ship);

9th year Loss: Rs. 143 crores
(3055 passages/year X Rs. 4.68 lakhs, i.e. Tariff of Rs. 6.79 lakhs minus Rs. 2.11 lakhs fuel and cost savings per passage of a ship).

There are hidden costs which have not been included; if included, the sickness of SCL will become chronic: a) Capital and maintenance costs for Naval security of the channel; b) Maintenance dredging costs may be as high as Rs. 1000 crores per annum; c) Provisions of tsunami protection walls as in Japan to save lives and property along the coastline; d) social costs such as loss of livelihood for coastal people dependent upon fisheries and marketing of marine products.

Dr. S. Kalyanaraman

Special Investigation June 15, 2008


An expert analysis of Sethu project
The howlers in the expert committee report on SSCP
By Captain (Retd) H. Balakrishnan, I.N.

During the course of my analysis of the Report submitted by the ‘Committee of Eminent Persons’, I found that the Report faulted the ‘Detailed Project Report (DPR), prepared by the Consultants to the Project—M/s L&T Thornboll. Yet, Cabinet sanction for the SSCP was accorded on the basis of the DPR!! This left me wondering—‘What sanctity for Cabinet approvals, if the ‘due process of application of mind’ is conspicuous by its absence?

Report of ‘the committee of eminent persons’ finds fault with the DPR

Chapter-8: “Economic Viability And Related Issues”

Para 8.2.3 (pp –96)
“Hence, it may not be fair to pick up a few developments selectively and object to the viability of the Project, which was worked out sometime ago. As regards the comments made on the approach and assumptions adopted in the DPR, the main argument against the DPR rests on the distance that will be saved by ships that are coming from Europe, America, Persian Gulf and Africa (using Suez Canal). While the DPR takes the savings in distance from Cape Comorin, it has been argued that these ships need not come right up to Cape Comorin to go around Sri Lanka. This observation is valid as the ships coming from Europe, America, Africa etc. need not come to Cape Comorin for going around Sri Lanka. To that extent the savings in distance, particularly for non-coastal cargo, will be less.”

Para 8.2.6 (pp – 97)
“It is clear from this Table that there is hardly any saving for a ship coming via Port Louis (Mauritius) to the east coast ports. Hence, the point made that the ships coming from Mauritius using Cape of Good Hope route will not use the Channel is valid. However, the consultants have also not identified the ships coming via Mauritius in any of the five origin – destination pairs identified for the SSC (Table 6.10 of the DPR). It is seen that the difference in distance saved by the ships coming from Suez Canal to the east coast ports as obtained from the Chief Hydrographer and the one given by the Consultants in DPR is only 19 NM. The Consultants in DPR have taken the Channel length as 152 km for calculation of savings in fuel and savings in time charters whereas, the actual Channel length in DPR is 167.22 km. These differences, in Channel length and savings in distance, will have some impact on the savings of the ships.”

Para 8.2.7 (pp – 98)
The second argument is that the Consultants have taken the average distance saved instead of calculating the savings in distance for each ship journey. It is seen from the distances in the DPR that the distance saved varies from 254 NM to 424 NM. With this variation in distance, taking a simple average of 335.5 NM may not reveal the correct picture. It is seen as per the traffic statement for SSC in DPR (Table 6-11 page 158 of DPR), there is no coastal movement between Chennai and Tuiticorin, where the distance saved is maximum. However, the possibility of cargo movement between these ports exists, when the coastal shipping picks up. Most of the revenue is coming from non-coastal cargo. The average distance saved from Aden to different ports on east coast, excluding Tuiticorin, as per the distances obtained from Chief Hydrographer is 271 NM. The Consultants may have taken average distance so as to determine uniform Channel Charges for all routes; nevertheless, it would have been better if the Consultants had calculated the distance saved for each pair for estimating savings of ships and then recommend a tariff rate. The approach followed by the Consultants to propose tariff @ 75 per cent of savings in one of the alternatives, may result in a scenario where the Channel charges may be higher than the savings. As the tariff @ 50 per cent of savings has been proposed, in the base case IRR, such a situation has been avoided. However, the savings to some ships will be more than 50 per cent while for some it will be lower.”

Para 8.2.8 (pp – 98)
“It is, however, worthwhile to mention that the average distance taken (142 NM) in the Report captioned “Review of the Environmental and Economic Aspects of the Sethusamudram Ship Channel Project (SSCP)” is the average of ships taking the Suez route as well as the Mauritius route. This is also not relevant because the DPR does not envisage the ships moving via Cape of Good Hope and Mauritius as potential traffic for SSC. However, the Consultants have not explained how the ships coming from Africa other than Suez route, have not been taken into account while identifying SSC cargo from Africa. Similarly, the Consultants have not clarified how crude oil vessels and inter-port movements within east coast ports, have been excluded.”

Para 8.2.13 (pp – 100)
“ As regards speed of vessels, the Consultants have assumed that the ships will move at an average speed of 12 NM in open sea and 8 NM in the restricted channel. There are some apprehensions about the speed at which ships can move in a regulated channel. - - - - - -. Based on the impression gathered by the Members from the mariners, it is felt that an average speed of 6 to 8 NM in the proposed Channel is not an unreasonable assumption.”

Para 8.2.14 (pp – 100)
“The proposed Channel is a double lane Channel. The Consultants have recommended a double lane Channel as reducing it to a single lane would have enhanced the waiting period. This could have also been backed by a financial analysis.”

Para 8.2.15 (pp –100)
“The Consultants have estimated revenues escalating @ five per cent per annum. The revenues come mainly from the Channel charges. The charges are linked to savings in fuel cost and savings in charter costs. Hence, the increase in revenue is related to the increase in charter and bunker prices. The basis for estimating the escalation of five per cent per annum in revenue and costs has not been spelt out. The Consultants have also made no mention of the social cost.”

Para 8.2.16 (pp-100)
“The Consultants have taken 2001-02 as base for port-wise and commodity-wise forecast for next 20 years. The Consultants have taken average parcel load of previous three years from 1999-00 to 2001-02 as the basis to estimate the number of potential ships for the Channel in the next 20 years. Again, the Consultants have taken the DWT wise break up of vessels calling at east coast ports (excluding Tuiticorin) in 2001-02 as the basis to estimate the size-wise number of ships likely to use the Channel. The Committee feels that the Consultants should have taken into account the trend or other developments that may change the inter-se share in future.”

Chapter 6: Environment And Related Issues
“Issue 5: Impact of Cyclones on the Project and also on sedimentation dynamics”

Para 6.4.13 (pp – 77)
(A Howler!!!)

“It appears that all the ports on the coast will be vulnerable and not only the SSCP. Necessary safeguards to deal with cyclone condition have been incorporated in the Project design.”

(Comment: As young mariners, we are taught in the Navigation School, about the dangers posed by the ‘Tropical Revolving Storms’ (Cyclones) and the precautions and actions to be taken at sea to ‘avoid’ these ‘Cyclones’. These are highlighted in the Admiralty publication “The Mariner’s Handbook”. But, this is the FIRST TIME, I’m learning about ‘necessary precautions’ taken to safeguard a ‘static entity’ called the SSCP’!! Should be in the reckoning for the Nobel Prize in ‘SCIENCE’!!)

“Issue 7: Impact of sulphur in the fuel on environment”

Para 6.4.20 (pp – 79)
“The emission of SO2 due to burning of fuel in ship is considered as a line source. The ships have been recommended to use low sulphur fuel. The emissions envisaged will be low and impact of these emissions on the Marine National Park which is 20 km away from the Channel, considering the dispersion and dilution potential available due to sea wind, is not envisaged”.

(Comment: The use of Low Sulphur High Speed Diesel (LSHSD) by ships will affect the fuel savings costs as LSHSD is nearly 1.5 times costlier than HSD. The difference in rates between HSD and LSHSD can be clearly seen on the website www.bunkerworld.com)

(The writer can be contacted at “Athreya”A1/8-flat-5 22nd Cross Street Besantnagar, Chennai-600 090)
http://www.organiser.org/dynamic/modules.php?name=Content&pa=showpage&pid=241&page=13

http://setubandha.blogspot.com/2008/05/analysing-economic-viability-of-sscp.html
Analysing the economic viability of the SSCP from a shipping perspective on the basis of official reports – Part 7 by Capt. (Retd.) H. Balakrishnan, I.N.

Introduction

1. Over the past year (2007), much has been written and stated, in the media, about the viability or otherwise, of the SSCP. The statements have also highlighted the economic benefits that would accrue to the Southern districts of Tamil Nadu on account of the SSCP.
2. This paper analyses the economic viability of the SSCP, from a shipping perspective, on the basis of information contained in various 'official documents' and reports such as:
(a) The website of the Sethusamudram Corporation Ltd. (SCL)
(b) The 'Report' submitted by the 'Committee of Eminent Persons' to the Govt. of India. This 'Report had formed the basis of the revised affidavit filed in the Supreme Court, by the Govt. of India.
(c) The 'Information Memorandum of Sept. 2005' prepared by the then UTI Bank (now Axis Bank), the lead Bank for arranging the financial loan for the execution of the Project.

Economic viability of the SSCP

SCL Website

3. The website, in addition to highlighting various USPs of the project, states: "Sethusamudram Ship Channel Project, which envisages digging a ship channel across the Palk Straits between India and Sri Lanka, is finally taking shape. The project will allow ships sailing between the East and West Coasts of India to have a straight passage through India's territorial waters, instead of having to circumvent Sri Lanka. This will lead to a saving of upto 424 nautical miles (780 kms) and upto 30 hours in sailing time." It further states: "The project will become self-sustaining over a period of time. According to conservative estimates, about 3055 vessels will be using the canal annually. This will inevitably go up further."
4. The foregoing statement in the website implies that the SSCP is envisaged as a profitable undertaking which would lead to its self-sustenance in the years ahead.

Information Memorandum of the UTI Bank (now Axis Bank)

5. From this document, the annual expenditure for the SCL can be calculated. The main items forming this expenditure are summarized below.
6. Operation and Maintenance Costs (O&M Costs). From item 10.2 of the 'Information Memorandum', the budgeted figures for the O&M costs are as follows:


(a)Maintenance Costs
(Rs. in millions)
-- Maintenance of Vessel traffic Management Scheme (VTMS) 50
-- Maintenance dredging 200
(Note: For the 3rd and 4th year Maintenance Dredging has been
pegged at Rs. 170 million and from the 5th year onwards it
stabilizes at Rs. 140 million)
-- Civil Maintenance 10
-- Tugs and launches 100
-- Plant and Machinery 10

(b) Operation costs
-- Administration and staff costs 50
--VTMS 8.5
--Tugs and Launches 68
-- Plant and Machinery 20

(d) Contingency and Project Management costs
-- Contingencies 25.8
(Note: For the 3rd and 4th year, this has been pegged at
Rs. 24.3 million. From the 5th year onwards, it stabilizes at
Rs. 22.8 million).

7. Details of the financial loan. From Item 14 of the Information Memorandum, entitled 'Indicative Term Sheet,' the following are the details of the financial loan:--
(a) Rupee loan
-- Amount Rs. 4369 million
-- Interest rate 8%
-- Loan period 13 years
-- Moratorium period 5 years
-- Principal repayment 16 'equal installments' from the end of 5 years

(b) US Dollar loan
-- Amount USD 100 milion
-- Interest rate Libor + 125 to 175 basis points = 5%
-- Loan period 20 years
-- Moratorium period 8 years
-- Principal repayment 24 'equal installments' from the end of 8 years
(c) Zero coupon bonds
-- Amount Rs. 5826 million
-- Interest rate NIL
-- Loan period 30 years
-- Moratorium period 18 years
- Principal repayment 12 'annual instalments' beginning from the end of 18 years

8. Profitability. A profit margin of 9% has been assumed for the project to build reserves.
9. Thus, the 'Income to be generated' by the SCL to become a self-sustaining undertaking, on an annual basis, is tabulated at Appendix A. The Zero Coupon Bonds have not been taken into account for the purposes of this analysis.
10. Ship tariff. As the SCL website anticipates an annual shipping traffic of 3055 ships to pass through the SSCP, the possible tariff to be levied on individual ships has been calculated and tabulated at Appendix A.

Time and fuel cost savings

11. The Report submitted by the 'Committee of Eminent Persons' (Chapter 8, para 8.2.5), gives the voyage distances between the ports of 'Origin' and 'Destination'. The voyage speeds in the 'open sea' as also through the 'SSCP' have been given in this Report (Chapter 8, para 8.2.13).
12. On the basis of the foregoing, the following have been tabulated: (a) Fuel cost savings—Appendix B; (b) Time savings –-Appendix C

Analysis of the Appendices

13. The Report by the 'Committee of Eminent Persons', in Chapter 8, Para 8.2.7 states: "The approach followed by the consultants to propose tariff @ 75% of savings in one of the alternatives, may result in a scenario where the channel charges may be higher than the savings. As the tariff rate @50% of savings has been proposed, in the base case I.R.R., such a situation has been avoided. However, the savings to some ships will be more than 50%, while for some, it will be lower."
14. In the light of the foregoing, comparison of the possible tariff to be levied on individual ships as calculated at Appendix A, and 50% the Fuel Cost Savings at Appendix B (column 'q'), will clearly reveal that the SCL will NOT be able to recover its expenditure burden in the FIRST YEAR OF OPERATION ITSELF.
15. On the other hand, if the SCL decides on a higher tariff regime, as in the case of the major ports of India (e.g. Chennai Port Rs. 1.11 lakh/km for 7 kms of 'pilotage'), then the fuel cost savings achieved by navigating through the SSCP, will be nullified for the shipping companies.
16. The 'Time Savings' tabulation at Appendix C debunks the claim of the SCL website of 'Savings upto 30 hours in sailing time'. The same is the case in 'Savings in Voyage distances' also.
17. Cost escalation. A report in the economics daily 'MINT' of 25 Sept. 2007, entitled 'Money runs dry for Sethusamudram', stated the cost of the project has 'Skyrocketed to at least 4000 crores, interest rates have crawled higher and old loan terms have lapsed.' In a word, higher tariff regime for ships other than indicated at Appendix A.

Conclusion

18. In my earlier 6 Part analysis of the SSCP, I had concluded that the 'SSCP just does not make any nautical sense.'
19. The present analysis, on the basis of official reports, has only served to reinforce the earlier conclusion.
20. The SSCP is a nautical folly.


Appendices:
(A) Income Generatin and Possible ship Tariff
(B) Fuel Cost Savings
(C) Time Savings

References:
(1) Sethusamudram Corporation Ltd. Website URL: www.sethusamudram.gov.in
(2) Report by the 'Committee of Eminent Persons'
(3) Informatin Memorandum of the UTI Bank (Axis Bank) URL: http://sethusamudram.gov.in/Images/InfoMemo.doc



Appendix A SSCP – Income Generation and Ship Tariff
(Rs. in Lakhs); US $ = Rs. 39.79

Year/item 1 2 3 4 5 6 7 8 9
Rupee loan interest 3495.2 3495.2 3495.2 3495.2 3495.2 3495.2 3495.2 3495.2 3495.2
Rupee loan principal 5461.25 5461.25 5461.25 5461.25
US $ loan interest 1989.5 1989.5 1989.5 1989.5 1989.5 1989.5 1989.5 1989.5 1989.5
US $ loan
principal 3315.83
O&M 5423.0 5423.0 5108.0 5108.0 4793.0 4793.0 4793.0 4793.0 4793.0
9% profit 981.69 981.69 953.34 953.34 924.99 1416.5 1416.5 1416.5 1714.93
TOTAL 11889.39 11889.39 11546.04 11546.04 11202.69 17155.40 17155.40 17155.40 20769.71
TARIFF
(Total / 3055) 3.89 3.89 3.78 3.78 3.66 5.61 5.61 5.61 6.79

Appendix B SSCP Voyages: Fuel Costs and Savings
(Open sea speed = 12 knots; SSCP speed = 6 knots)

Voyage From Voyage To Voyage Fuel Cost (Around Srilanka) Voyage Vuel Cost (Via SSCP) Savings Rs.
Aden Chennai 64,26,744.3 60,04,222.8 4.22,521.5
Aden Vizag 70,53,937.8 67,63,501.8 2,90,436.0
Aden Kolkata 78,47,019.3 76,63,104.0 1,83,915.3
Kochi Chennai 22,36,933.0 18,04,469.6
...

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If SSP Corporationis chronically sick,it may not matter much to Baalu. The Government will not become bankrupt overnight! Much less, the longevity of Baaly in politis is limited, He is simply making hay while sun shines! For the opportunists and self seekers like Baa;u. the arguments of Dr. Kalyanaram, though most sensible, may not mean much to Baalu

M.Srinivaan

--- On Sat, 3/5/08, kalyan97 wrote:
From: kalyan97
Subject: [Branded Indian] Analysing the economic viability of the SSCP -- Capt. (Retd) H. Balakrishnan, I.N.
To:
Date: Saturday, 3 May, 2008, 5:11 PM
http://setubandha. blogspot. com/2008/ 05/analysing- economic- viability- of-sscp.html
Analysing the economic viability of the SSCP from a shipping perspective on the basis of official reports – Part 7 by Capt. (Retd.) H. Balakrishnan, I.N.
Introduction
1. Over the past year (2007), much has been written and stated, in the media, about the viability or otherwise, of the SSCP. The statements have also highlighted the economic benefits that would accrue to the Southern districts of Tamil Nadu on account of the SSCP.
2. This paper analyses the economic viability of the SSCP, from a shipping perspective, on the basis of information contained in various 'official documents' and reports such as:
(a) The website of the Sethusamudram Corporation Ltd. (SCL)
(b) The 'Report' submitted by the 'Committee of Eminent Persons' to the Govt. of India. This 'Report had formed the basis of the revised affidavit filed in the Supreme Court, by the Govt. of India.
(c) The 'Information Memorandum of Sept. 2005' prepared by the then UTI Bank (now Axis Bank), the lead Bank for arranging the financial loan for the execution of the Project.

Economic viability of the SSCP

SCL Website

3. The website, in addition to highlighting various USPs of the project, states: "Sethusamudram Ship Channel Project, which envisages digging a ship channel across the Palk Straits between India and Sri Lanka, is finally taking shape. The project will allow ships sailing between the East and West Coasts of India to have a straight passage through India's territorial waters, instead of having to circumvent Sri Lanka. This will lead to a saving of upto 424 nautical miles (780 kms) and upto 30 hours in sailing time." It further states: "The project will become self-sustaining over a period of time. According to conservative estimates, about 3055 vessels will be using the canal annually.. This will inevitably go up further."
4. The foregoing statement in the website implies that the SSCP is envisaged as a profitable undertaking which would lead to its self-sustenance in the years ahead.

Information Memorandum of the UTI Bank (now Axis Bank)

5. From this document, the annual expenditure for the SCL can be calculated. The main items forming this expenditure are summarized below.
6. Operation and Maintenance Costs (O&M Costs). From item 10.2 of the 'Information Memorandum', the budgeted figures for the O&M costs are as follows:


(a)Maintenance Costs
(Rs. in millions)
-- Maintenance of Vessel traffic Management Scheme (VTMS) 50
-- Maintenance dredging 200
(Note: For the 3rd and 4th year Maintenance Dredging has been
pegged at Rs. 170 million and from the 5th year onwards it
stabilizes at Rs. 140 million)
-- Civil Maintenance 10
-- Tugs and launches 100
-- Plant and Machinery 10
(b) Operation costs
-- Administration and staff costs 50
--VTMS 8.5
--Tugs and Launches 68
-- Plant and Machinery 20
(d) Contingency and Project Management costs
-- Contingencies 25.8
(Note: For the 3rd and 4th year, this has been pegged at
Rs. 24.3 million. From the 5th year onwards, it stabilizes at
Rs. 22.8 million).
7. Details of the financial loan. From Item 14 of the Information Memorandum, entitled 'Indicative Term Sheet,' the following are the details of the financial loan:--
(a) Rupee loan
-- Amount Rs. 4369 million
-- Interest rate 8%
-- Loan period 13 years
-- Moratorium period 5 years
-- Principal repayment 16 'equal installments' from the end of 5 years
(b) US Dollar loan
-- Amount USD 100 milion
-- Interest rate Libor + 125 to 175 basis points = 5%
-- Loan period 20 years
-- Moratorium period 8 years
-- Principal repayment 24 'equal installments' from the end of 8 years
(c) Zero coupon bonds
-- Amount Rs. 5826 million
-- Interest rate NIL
-- Loan period 30 years
-- Moratorium period 18 years
- Principal repayment 12 'annual instalments' beginning from the end of 18 years
8. Profitability.. A profit margin of 9% has been assumed for the project to build reserves.
9. Thus, the 'Income to be generated' by the SCL to become a self-sustaining undertaking, on an annual basis, is tabulated at Appendix A. The Zero Coupon Bonds have not been taken into account for the purposes of this analysis.
10. Ship tariff. As the SCL website anticipates an annual shipping traffic of 3055 ships to pass through the SSCP, the possible tariff to be levied on individual ships has been calculated and tabulated at Appendix A.
Time and fuel cost savings
11. The Report submitted by the 'Committee of Eminent Persons' (Chapter 8, para 8.2.5), gives the voyage distances between the ports of 'Origin' and 'Destination' . The voyage speeds in the 'open sea' as also through the 'SSCP' have been given in this Report (Chapter 8, para 8.2.13).
12. On the basis of the foregoing, the following have been tabulated: (a) Fuel cost savings—Appendix B; (b) Time savings –-Appendix C
Analysis of the Appendices
13. The Report by the 'Committee of Eminent Persons', in Chapter 8, Para 8.2.7 states: "The approach followed by the consultants to propose tariff @ 75% of savings in one of the alternatives, may result in a scenario where the channel charges may be higher than the savings. As the tariff rate @50% of savings has been proposed, in the base case I.R.R., such a situation has been avoided. However, the savings to some ships will be more than 50%, while for some, it will be lower."
14. In the light of the foregoing, comparison of the possible tariff to be levied on individual ships as calculated at Appendix A, and 50% the Fuel Cost Savings at Appendix B (column 'q'), will clearly reveal that the SCL will NOT be able to recover its expenditure burden in the FIRST YEAR OF OPERATION ITSELF.
15. On the other hand, if the SCL decides on a higher tariff regime, as in the case of the major ports of India (e.g. Chennai Port Rs. 1.11 lakh/km for 7 kms of 'pilotage'), then the fuel cost savings achieved by navigating through the SSCP, will be nullified for the shipping companies.
16. The 'Time Savings' tabulation at Appendix C debunks the claim of the SCL website of 'Savings upto 30 hours in sailing time'. The same is the case in 'Savings in Voyage distances' also.
17. Cost escalation. A report in the economics daily 'MINT' of 25 Sept. 2007, entitled 'Money runs dry for Sethusamudram' , stated the cost of the project has 'Skyrocketed to at least 4000 crores, interest rates have crawled higher and old loan terms have lapsed.' In a word, higher tariff regime for ships other than indicated at Appendix A.
Conclusion
18. In my earlier 6 Part analysis of the SSCP, I had concluded that the 'SSCP just does not make any nautical sense.'
19. The present analysis, on the basis of official reports, has only served to reinforce the earlier conclusion.
20. The SSCP is a nautical folly.
Appendices:
(A) Income Generatin and Possible ship Tariff
(B) Fuel Cost Savings
(C) Time Savings

References:
(1) Sethusamudram Corporation Ltd. Website URL: www.sethusamudram. gov.in
(2) Report by the 'Committee of Eminent Persons'
(3) Informatin Memorandum of the UTI Bank (Axis Bank) URL: http://sethusamudra m.gov.in/ Images/InfoMemo. doc
- Show quoted text -

Appendix A SSCP – Income Generation and Ship Tariff
(Rs. in Lakhs); US $ = Rs. 39.79
Year/item 1 2 3 4 5 6 7 8 9
Rupee loan interest 3495.2 3495.2 3495.2 3495.2 3495.2 3495.2 3495.2 3495.2 3495.2
Rupee loan principal 5461.25 5461.25 5461.25 5461.25
US $ loan interest 1989.5 1989.5 1989.5 1989.5 1989.5 1989.5 1989.5 1989.5 1989.5
US $ loan
principal 3315.83
O&M 5423.0 5423.0 5108.0 5108.0 4793.0 4793.0 4793.0 4793.0 4793.0
9% profit 981.69 981.69 953.34 953.34 924.99 1416.5 1416.5 1416.5 1714.93
TOTAL 11889.39 11889.39 11546.04 11546.04 11202.69 17155.40 17155.40 17155.40 20769.71
TARIFF
(Total / 3055) 3.89 3.89 3.78 3.78 3.66 5.61 5.61 5.61 6.79
Appendix B SSCP Voyages: Fuel Costs and Savings
(Open sea speed = 12 knots; SSCP speed = 6 knots)
- Show quoted text -
Voyage From Voyage To Voyage Fuel Cost (Around Srilanka) Voyage Vuel Cost (Via SSCP) Savings Rs.
Aden Chennai 64,26,744.3 60,04,222.8 4.22,521.5
Aden Vizag 70,53,937.8 67,63,501.8 2,90,436.0
Aden Kolkata 78,47,019.3 76,63,104.0 1,83,915.3
- Show quoted text -
Kochi Chennai 22,36,933.0 18,04,469.6 4,32,403.4
Kochi Paradeep 33,25,715.9 31,29,586.2 1,96,129.7
Kochi Kolkata 36,57,208.1 34,59,090.0 1,98,118.1
Tuticorin Vizag 24,71,278.5 19,56,439.0 5,14,839.5
Tuticorin Kolkata 32,66,634.8 28,56,893.0 4,09,741.4
Notes
(A) The distance and speeds used for the calculations have been obtained from the 'Report' submitted by 'The Committee of Eminent Persons'
(B) The Indian Oil Corporation tariffs effective from 1 March 2008 for various marine fuels per metric tonne (Mt) are as follows:
(i) High Speed Diesel (HSD) for use in the SSCP = Rs. 27,384 + 23.43% VAT = Rs. 33,800/Mt
(ii) Heavy Oil (H.O.) for use in the Open Sea = Rs. 27,313 + 4% VAT = Rs. 28,405.5/Mt
(C) The average fuel consumption has been taken as 1 Mt per hour
(D) These calculations do NOT take into account the 'Pilotage Rates' that are going to be levied for using the SSCP
(E) Based on current Pilotage Rates being levied at Major Ports in India, it is probable that circumnavigating Sri Lanka would be more cost-effective.
Appendix C SSCP Time Savings for voyages
(Open sea speed = 12 knots; SSCP speed = 6 knots)
Voyage From Voyage To Voyage distance around Sri Lanka (km) Voyage distance via SSCP (km) Voyage Time around Sri Lanka Voyage Time via SSCP Savings in Time (Hours)
Aden Chennai 2715 2380 226.25 206.96 19.2
Aden Vizag 2980 2700 248.33 233.63 14.7
Aden Kolkata 3315 3080 276.25 265.3 10.9
Kochi Chennai 945 605 78.75 59 19.7
Kochi Paradeep 1405 1165 117.08 105.71 11.37
Kochi Kolkata 1545 1305 128.75 117.3 11.45
Tuticorin Vizag 1045 670 87 64.4 22.6
Tuticorin Kolkata 1380 1050







June 15, 2008

Sethu project

A mockery of science, conservation and environmental laws
By Sudarshan Rodriguez
It is beyond doubt that the Sethusamudram project will have disastrous consequences for the region’s biodiversity.

UNCOMFORTABLE QUESTIONS: Dredging activity will result in the killing of species protected under the Indian Wildlife (Protection) Act, 1972.

The religio-political controversy and public debate surrounding the Sethusamudram Ship Canal Project (SSCP) have overshadowed the original arguments raised against this project, namely its environmental, economic and social impacts.

Ecological significance
Part of the project area, specifically Adam’s Bridge, falls within the Gulf of Mannar Biosphere Reserve (GOMBR). It is India’s largest biosphere reserve and has an area of 10,500 sq km, covering the “Indian part of Gulf of Mannar between India and Sri Lanka.” It is one of India’s major coral reef ecosystems with 3,600 species of flora and fauna, of which 377 are endemic. It is famous for its chanks (conches and other shells) which make Rameswaram one of the world’s largest shell trade and craft centres. The 21 islands that constitute the core zone of the GOMBR form the Gulf of Mannar Marine National Park, which is India’s second marine national park. UNESCO’s Biosphere Reserve concept is based on the idea of oneness of humanity transcending national frontiers and recognises the need for conservation of vanishing species and habitats. The canal at Adam’s Bridge is a mere 20 km from Shingle Island, one of these 21 islands. With the completion of the SSCP, ships will be navigating through the biosphere reserve and close to the park.

The other part where most of the capital dredging is planned in the Palk Bay, which is also ecologically sensitive and has extensive sea grass meadows. Sea grasses serve as nurseries for fish stocks, and are essential grazing areas for turtles and dugongs (also known as the sea cow: a highly endangered species on the verge of extinction).

Rohan Arthur, an ecologist and a leading expert on sea grasses and corals with the Nature Conservation Foundation, is of the view that “the importance of the sea grass meadows of the Palk Bay and Gulf of Mannar cannot be overstated, as they are a conservation hotspot of regional and global relevance.” (from Review of the Environmental and Economic Aspects of the Sethusamudram Ship Canal Project by Sudarshan Rodriguez, Jacob John, Rohan Arthur, Kartik Shanker and Aarthi Sridhar.)

Impact of dredging
The Palk Bay, known for its unusually high sedimentation rate, is one of the five permanent sediment sinks of India, that is, sediments are constantly being deposited in the Palk Bay and Palk Strait. The sediment sink and transport mechanism in the region are yet to be fully understood. Strangely, all the project documents summarily ignore important knowledge of sedimentation, and the bibliography stops at 1989 while some of the key papers were published in the late 1990s and since 2000. Dredging Adam’s Bridge along a 300-metre wide stretch to make the canal passage will have drastic consequences for marine ecosystems in the Palk Bay and the Gulf of Mannar.

It will be akin to opening the floodgates of a dam and will allow sediments from the Palk Bay to flow freely into the Gulf of Mannar, thus affecting the corals and fisheries in the Marine National Park and the whole biosphere reserve. Both sea grasses and corals are sensitive to increases in sediment levels. “The changed sediment conditions have a range of effects on corals and sea grasses, affecting their basic physiology, reproduction, recruitment, population and community structure,” says Rohan Arthur in Review of the Environmental and Economic Aspects of the Sethusamudram Ship Canal Project (cited above).

Loss of wildlife
The project directly results in loss of wildlife, specifically protected species. This is evident from its own documents (Section 1.3 and 3.2 of the Environmental Impact Assessment prepared by NEERI) which acknowledges the presence of corals, sea fans, sponges, pearl oysters, chanks and sea cucumbers along the canal. The EIA (Section 6.4.1.2 and 6.6) report states: “Due to dredging, the bottom flora and fauna on an area of about 6 sq km along the channel alignment in Adam’s Bridge and about 16-17 sq km in Palk Bay/Palk Strait area will be lost permanently.” Thus, the dredging activity for the canal will result in the killing of corals, sea fans, sponges, and sea cucumbers, all of which are protected species under the Indian Wildlife (Protection) Act, 1972.

In fact, corals are Schedule I species, which means the government accords it the same protected status as a tiger. It is shocking that this aspect is being overlooked. According to the proponents of the project, it is an acceptable price to pay.

Environmental laws
The EIA did not have a dredging management programme. This is also pointed out in the L&T-Ramboll Detail Project Report (DPR) of the SSCP, which recommends that this be done (L&T-Ramboll DPR, Section 12.9.2 on page 12-11, bullet point 2). The EIA of the project also did not have a Disaster Management Plan (DMP), a mandatory legal requirement. (Under Form A, Item 11 of the EIA notification, 1994 and the Ministry of Environment and Forest’s EIA Manual).

Till date there is no DMP for the project and the project authorities have stated on various occasions that the Tuticorin Port Trust’s (TPT) DMP would be applicable for the project. The TPT’s DMP was developed only for the functioning of the Tuticorin port, where ships navigated in the southern Gulf of Mannar (around Kanyakumari) to Tuticorin and not further through the Adam’s Bridge and the Palk Bay.

Many experts have pointed out severe shortcomings in the project’s documents and design in terms of data gaps with respect to basic parameters such as sub-surface geology, bathymetry, and sedimentation process in the project area. These have resulted in the poor design of the project and inadequate assessment of risks, hazards and environmental impacts. It is beyond doubt that it will have disastrous consequences for the region’s biodiversity, causing major and permanent losses to fisheries and livelihoods.

The government needs to answer some uncomfortable questions on why it ignored its own conservation and environment laws. The relegation of the above-mentioned environmental arguments against the SSCP, and the lack of scientific rigour in the design and EIA of the project, represent a mockery of science, conservation and environmental laws.

(The writer is a Senior Research Associate at the Ashoka Trust for Research in Ecology and the Environment (ATREE). He can be contacted at sudarshanr@yahoo.com)

http://www.organiser.org/dynamic/modules.php?name=Content&pa=showpage&pid=241&page=14

History, ecology are at stake
From The Pioneer Edit Desk on June 12th

When the Taliban destroyed the Bamiyan statues, the world reacted with shocked horror at this act of barbarism. What the UPA Government in India proposes to do to Ram Setu, also known as Adam’s Bridge, is no less horrifying. As may be recalled, the Setusamudram Ship Channel Project aims to create a navigable sea route, between the Gulf of Mannar and Palk Bay, by slicing the Ram Setu in order to reduce the sailing distance between India’s coasts. Consequently, the Ram Setu, of known spiritual significance to Hindus, will be destroyed through extensive dredging. In fact, there are sound reasons for rejecting the project, as conceived at present, other than the important one of protecting the site for its cultural and religious worth. Among them, what are weighty are the objections that pertain to its wide-ranging environmental impact. For instance, experts have claimed shifts in the flows of currents would adversely affect sensitive ecosystems, as would the increasing possibility of damaging oil spills. It is estimated that fragile marine life, such as delicate corals, would be destroyed through the various processes unleashed. Life on the mainland would not remain unaffected as changes in seawater flows and temperature would impact climate and affect rainfall in coastal areas even as erosion could increase. Most importantly, experts inform us, the Ram Setu forms a barrier that blocks tsunamis, in the absence of which the entire coasts of Kerala and Tamil Nadu could be endangered. Were this not reason enough, Thorium deposits in Kerala and Tamil Nadu may be affected, upsetting India’s indigenous nuclear programme. It is significant that the Sir Mudaliar Committee Report of 1956 had recommended the abandonment of the idea of such a project, finding the channel alignment unsuitable.

The argument about the spiritual significance of the site is no less compelling. It is neither here nor there to argue that there is little scientific evidence to prove that Adam’s Bridge is manmade. For, within each spiritual tradition are matters purely of belief for which no rational explanations or scientific proofs are available. Thus Christians believe in the immaculate conception, the Jews that the Red Sea parted for Moses, and Muslims that Islam was revealed to the Prophet through the divine agency of Angel Gabriel. The Hindu belief that Hanuman’s vanar sena built a bridge to Lanka that allowed Ram to cross over, fell Ravana and rescue Sita is in a similar vein and should hardly be scoffed at. The historicity of the event has little relevance to the debate, though it is possible that, as Indians were prone to oral narratives rather than written records, facts are likely to be the basis of the Ramayan. As the sentiments of hundreds of millions of people are involved, these cannot be trumped by the views of an individual Minister in a democracy. Nothing explains the unholy hurry in going ahead with the project except the need to pander to the crassest financial interests.
Editor’s addendum: S Badrinarayanan, former director of Geological Survey of India and a member of the National Institute of Ocean Technology (NIOT) says the Adam’s Bridge was not a natural formation. “Such a natural formation is impossible. Unless somebody has transported them and dumped them there, those reefs could not have come there. Some boulders were so light that they could float on water. Apparently, whoever has done it, has identified light (but strong) boulders to make it easy for transportation. Since they are strong, they can withstand a lot of weight. It should be preserved as a national monument,” he opined.

http://www.hinduyuva.org/tattva-blog/2007/07/save-ram-setu/