SSCP cost benefit analysis
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SSCP cost benefit analysis

Archive Manager by WEB DESK
Jul 29, 2007, 12:00 am IST
in General
Jeay Sindh Freedom Movement chairman Sohail Abro

Jeay Sindh Freedom Movement chairman Sohail Abro

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The capital cost of constructing the SSCP is Rs. 2,330 crore. The equity component of the Special Purpose Vehicle (SPV) is Rs. 971 crore. The debt portion has been pegged at Rs. 1,456.40 crore.

For the debt portion of Rs. 1,456.40 crore, assuming an interest burden of 10 per cent, it works out to Rs. 145.64 crore per annum. Assuming a repayment period of 25 years, the annual installments work out to Rs. 58.25 crore.

Thus, the total annual financial repayment for servicing the debt would be Rs. 145.64 + Rs. 58.25 crore = Rs. 203.89 crore or Rs. 204 crore (approx).

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The major contributor to the earnings of the SSCP will be the ships that navigate through the canal.

This article analyses the cost benefit that accrues to the ships that navigate through the Sethusamudram Canal.

According to the consultants for the SSCP, the number of ships that are expected to navigate through the SSCP is 3,055 in 2008 and 7,141 in 2025.

Coal Ships
One can predict with a reasonable accuracy the number of coal-carrying bulk-carriers that will navigate through the SSCP. These vessels carry thermal coal from Haldia/Paradeep/Vizag to Chennai/Tuiticorin to cater to the requirements of the thermal power plants located at these ports.

Other Vessels
To cater to the requirement of petroleum products for Tuiticorin and nearby areas, a very optimistic number may be 200 vessels. At the most, it may be possible that 1,000 vessels use the SSCP annually, though this figure may not be realised, and is nowhere near the projected 3,055 vessels in 2008. This is on account of the fact that global shipping trends are towards larger vessels of 60,000 DWT and above, and the SSCP being restricted to vessels of 30,000 DWT- 34,000 DWT, with a draught limitation of 10.7 metres.

Cost Recovery
(a) The annual financial repayment burden on the SSCP would be Rs 204 crore. (b) Maximum number of ships expected to use the SSCP would be 1,000 ships (c) Thus, cost per ship to be levied through pilotage/allied rates = Rs. 204/1000= Rs. 0.2 crore.

Shri K.S. Ramakrishnan, had made two insightful comments. Firstly, ?The saving in sailing time for that ship will also be substantially less than the 36 hours projected by the SSCP because the ship cannot be towed at its normal speed through the canal, and time will also be lost in embarkation/disembarkation of pilots and other inspection procedures. The saving in sailing time of just about a day will not justify the incurring of over eight times the cost of the saved fuel.? Secondly, ?The two statements that the ships using the Sethusamudram Canal will save money and that the SSCP will be a financially viable undertaking are therefore mutually contradictory and cannot have simultaneous validity.? His wise words of reason have been corroborated by the ?Time and Space? and ?Voyage Costs? calculations. It is quite possible that Indian flag flying ships maybe ?coerced? into using the SSCP to justify its existence. However, no such compulsions exist in respect of foreign flag ships. Thus the Sethusamudram Canal Project just does not make ?nautical sense?.

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