sethusamudram shipping channel project : who is responsible? - naresh kadyan

7/31/2019 Sethusamudram Shipping Channel Project : Who is responsible? - Naresh Kadyan

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Financial Advisor & Sole Arranger

SEPTEMBER 2005

SETHUSAMUDRAM SHIPCHANNEL PROJECT

INFORMATION MEMORANDUM


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Sethusamudram Corporation Ltd InformationMemorandumSethusamudram Ship Channel Project

IMPORTANT NOTICE

This Project Information Memorandum (PIM) contains proprietary and confidentialinformation regarding Sethusamudram Ship Channel Project (SSCP). The PIM hasbeen prepared by UTI Bank Limited (UTIB) based on the information provided by

Sethusamudram Corporation Ltd. (SCL) and other published information available.

The financial projections in the PIM have been prepared for the limited purpose ofcirculation among the potential lenders and investors. The financial projectionsrepresent, to the best of knowledge and judgment, SCLs expected financial position,results of operations and cash flow situation for the projection period. Theseprojections are subject to changes in economic conditions, legislation and other force-majeure circumstances.

UTIB has not independently verified all of the information contained in this PIM and thework performed by UTIB is not in the nature of audit or due-diligence. Neither UTIB, norany of the directors, employees or advisors make any expressed or impliedrepresentation or warranty and no responsibility or liability is accepted by any of themwith respect to the estimates or forecasts set forth in this PIM or the underlyingassumptions on which they are based or any credit decision taken on the basis of thisPIM.

This PIM is furnished on strictly confidential basis and is for the sole use of the person /organization to whom it is addressed. Neither this PIM, nor the information containedherein, may be reproduced or passed to any person or used for any other purposeother than stated above.

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TABLE OF CONTENTS

1. EXECUTIVE SUMMARY ............................................................................ 62. THE PROJECT COMPANY ......................................................................... 8

2.1 Particulars ...........................................................................................................8

2.2 Shareholding & Capital Structure .........................................................................82.3 Shareholding Pattern ...........................................................................................82.4 Promoter Details ..................................................................................................9

2.4.1 Tuticorin Port Trust (TPT) ...............................................................................92.4.2 Chennai Port Trust (CPT) ................................................................................92.4.3 Ennore Port Ltd. (EPL) ..................................................................................102.4.4 Paradip Port Trust (PPT) ...............................................................................102.4.5 Vishakhapatnam Port Trust (VPT) .................................................................112.4.6 Shipping Corporation of India (SCI) ..............................................................122.4.7 Dredging Corporation Of India (DCI) .............................................................12

2.5 Organization & Management .............................................................................142.5.1 The Board of Directors .................................................................................14

2.6 Organization Structure and Key Executives ........................................................143. THE PROJECT ....................................................................................... 154. SCOPE OF WORK .................................................................................. 17

4.1 Channel Design .................................................................................................174.1.1 Introduction .................................................................................................174.1.2 Vessel Size Design .......................................................................................174.1.3 Number of Lanes .........................................................................................174.1.4 Channel Width .............................................................................................184.1.5 Channel Depth ............................................................................................194.1.6 Extra Widening at Bends .............................................................................194.1.7 Channel Dimensions ....................................................................................19

4.2 Dredging Requirements .....................................................................................204.2.1 Introduction .................................................................................................204.2.2 Capital Dredging ..........................................................................................204.2.3 Maintenance Dredging .................................................................................214.2.4 Dumping Areas ............................................................................................214.2.5 Dredging Methods ......................................................................................224.2.6 Proposed Dredging Methods For SSCP .........................................................22

4.3 Ancillary Facilities ..............................................................................................234.3.1 General .......................................................................................................234.3.2 Service Jetty ...............................................................................................234.3.3 Shore Facilities ...........................................................................................234.3.4 Development of Fishing Harbour .................................................................23

4.4 Vessel Traffic Management System ...................................................................244.4.1 Introduction ................................................................................................244.4.2 Architecture ................................................................................................244.4.3 Radar Locations ..........................................................................................24

4.5 Flotilla & Navigational Aids ................................................................................25

5. THE EXECUTION STRATEGY ................................................................... 265.1 Dredging Works .................................................................................................26

5.1.1 Details of MoU with DCI...............................................................................265.1.2 International Competitive Bidding ................................................................26

5.2 Implementation Schedule ..................................................................................285.3 Operations Plan .................................................................................................28

5.3.1 Channel Navigation Plan ..............................................................................285.3.2 Toll Collection Plan .......................................................................................295.3.3 Maintenance Dredging Plan .........................................................................29

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6. TRAFFIC ASSESMENT ........................................................................... 316.1 Introduction .......................................................................................................316.2 Data Collection & Review ...................................................................................316.3 Traffic Growth Rate Forecast ..............................................................................32

6.3.1 GDP Forecast ...............................................................................................326.3.2 Traffic Growth Rate Forecast ........................................................................34

6.4 Traffic Analysis Indian Ports .............................................................................366.5 Traffic forecasts .................................................................................................366.6 Traffic Forecasts - Ports ....................................................................................376.7 Vessel Size Review and Design Vessel...............................................................38

6.7.1 Review of Existing and Ordered Vessel Fleet at Global Level .......................386.7.2 Vessel Fleet on Future Order .......................................................................386.7.3 Summary of the Vessel Review ....................................................................396.7.4 Vessel Trend Review ...................................................................................396.7.5 Design Vessel Size for Sethusamudram Ship Channel .................................40

6.8 Vessel Traffic Forecast - Sethusamudram Ship Channel ....................................406.8.1 Introduction .................................................................................................406.8.2 Origination Destination Pairs relevant for SSCP ............................................416.8.3 Indian Ports - Sethusamudram Share ..........................................................436.8.4 Average Parcel Size ....................................................................................436.8.5 Number of Vessels through SSC ..................................................................446.8.6 Total SSC Traffic ..........................................................................................476.8.7 SSC Traffic after, DOWNTIME .......................................................................47

7. TARIFF CALCULATION ........................................................................... 497.1 Introduction .......................................................................................................497.2 Savings on Fuel Cost ..........................................................................................497.3 Charter Savings .................................................................................................507.4 Channel Tariff Rate ............................................................................................51

8. ENVIRONMENT AND SOCIAL IMPACT ASSESSMENT .................................. 538.1.1 Environmental Regulations ..........................................................................538.1.2 Impacts due to the Project ...........................................................................538.1.3 Impacts on Landbased Facilities ...................................................................53

8.2 Impacts on Productivity and Ecology in GOM/Palk Bay .......................................548.2.1 Socio-economic Impact ................................................................................558.2.2 Environmental Management Plan .................................................................55

8.3 Environmental Monitoring ..................................................................................578.3.1 Institutional Mechanism for Environmental Management Plan ......................58

9. SHIP CHANNEL INTERNATIONAL EXPERIENCES ..................................... 599.1 Panama Canal....................................................................................................599.2 Suez Canal.........................................................................................................60

10. PROJECT AND O&M COST .................................................................... 6210.1 Project Cost .....................................................................................................6210.2 Operation & Maintenance Cost .........................................................................62

10.2.1 Maintenance Cost ......................................................................................6210.2.2 Operations Cost .........................................................................................63

11. MEANS OF FINANCE ........................................................................... 65

12. FINANCIAL PROJECTIONS .................................................................... 6612.1 Sensitivity Analysis ..........................................................................................7012.2 Project IRR .......................................................................................................71

13. RISK ANALYSIS & MITIGATION ............................................................. 7314. INDICATIVE TERM SHEET .................................................................... 7515. CONCLUSION ..................................................................................... 78

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ANNEXURES

:

Annexure I : Organizational Chart

Annexure II : Implementation Schedule

Annexure III : Detailed Capital Cost

Annexure IV : Projected Cash Flow

Annexure V : Projected Balance Sheet

Annexure VI : Equity IRR Calculations

Annexure VII : Payback Period Calculations

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LIST OF ABBREVATIONS

CCT Channel Control Towers

CSD Cutter Suction Dredger

DWT Dead Weight Tonne

EIA Environmental Impact Assessment

EMP Environmental Management Plan

EPC Engineering, Procurement & Construction

GDP Gross Domestic Product

GoM Gulf of Mannar

GoTN Government of Tamil Nadu

GRT Gross Registered Tonnage

HSD High Speed Diesel

IALA International Association of Lighthouse Authorities

IAPH International Association of Ports and Harbours

IDC Interest During ConstructionIEE Initial Environmental Examination

IRR Internal Rate of Return

JNPT Jawaharlal Nehru Port Trust

LOA Length Overall

MARPOL Marine Pollution

MoEF Ministry of Environment / Forests

NEERI National Environmental Engineering Research Institute

NHO National Hydrographic Office

NM Nautical Mile

NRT Net Registered Tonnage

O&M Operation & MaintenancePOL Petrol Oil Lubricants

SCI Shipping Corporation of India

SCL Sethusamudram Corporation Limited

SSC Sethusamudram Ship Channel

SSCP Sethusamudram Ship Channel Project

TPT Tuticorin Port Trust

TSHD Trailer Suction Hopper Dredger

VTMS Vessel Traffic Management System

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1. EXECUTIVE SUMMARY

India has a long peninsular coast of 3,554 nautical miles and has had maritime tradewith various countries of the world for more than 3000 years. Similarly, shipping tradebetween the east and west coasts of India has prevailed for a long time. However, theIndian coast does not have a continuous navigation channel connecting the east and

west coasts. Currently the ships coming from the west coast of India and other westerncountries with destination in the east coast of India and also Bangladesh, China etchave to navigate around Sri Lanka. The existing waterway between India and Srilankain the Gulf of Mannar and Palk Strait, is shallow at many places and does not havesufficient draft to allow for the movement of ships. Further, the presence of asandstone reef, known as Adams Bridge, located southeast of Rameswaram nearPamban, and connecting the Talaimannar Coast of Sri Lanka also hinders themovement of large shipping vessels between the Indian and Sri Lankan coast.

Due to these factors, the ships originating from Western coast of India, which have tocall on East coast ports and vice versa have to travel around the Sri Lankan coastthereby resulting in increase of travel distances, travel costs and time, etc. Apart fromthis, the Indian Naval ships also have to traverse around Sri Lanka, which has been of

great concern for India from the strategic defense point of view.

In order to reduce the steaming distances between the Eastern and Western Coast ofIndia and to improve the navigation within territorial waters of India, a navigationchannel, named Sethusamudram Channel, connecting the Gulf of Mannar and Bay ofBengal through Adam's Bridge, Palk Bay and Palk Strait has been envisaged to enableships upto a definite DWT moving between the east and west coasts of India totraverse in Indian territorial waters and not go around Sri Lanka.

The Ministry of Surface Transport, Government of India, appointed Tuticorin Port Trust(TPT) as nodal agency in the year 1997 for execution of the project and NationalEnvironmental Engineering Research Institute (NEERI) was appointed to prepare anInitial environmental examination report on the project. In its report NEERI found the

project to be environmentally safe with negligible effect on the eco system and theMarine National park at Gulf of Mannar. Following this study, NEERI in 2004, alsocarried out the detailed Environment Impact Assessment Study. During 2004, TPTappointed L&T Ramboll Consulting Engineers also to prepare a Detailed ProjectReport (DPR) for the Project.

For implementation of the Sethusamudram Ship Channel (SSC) Project, Government ofIndia (GoI) has promoted a Special Purpose Vehicle (SPV) company by the name ofSethusamudram Corporation Ltd. (SCL). The other promoters of the company are

Tuticorin Port Trust (TPT), Chennai Port Trust (CPT), Ennore Port Company Ltd (EPC),Vishakhapattanam Port Trust (VPT), Paradip Port Trust (PPT), Dredging Corporation ofIndia Ltd. (DCI) and Shipping Corporation of India Ltd. (SCI). TPT would also be actingas the nodal agency for the implementation of the project.

As per the DPR, the Channel would lie between from Latitude 910N to 1005N latitudeand 790E to 8005E, longitude. The Channel, which will be called SethusamudramChannel, would have two legs, one in the Adams Bridge area, where sea - bed depth is3 m and other is in the Palk Strait, where average depth is 6 to 8 m. In Gulf of Mannarand other stretches of Palk Bay, the natural depth available will be enough for safenavigation of shipping vessels. The approved length of the channel in various sectionsis 167.22 Km.

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The two legs of the channel in Palk Strait and Adams Bridge have further been dividedinto 4 sections for awarding the dredging contract, so that dredging work is undertakensimultaneously in all the sections, for faster completion of the project.

TPT has already awarded dredging contract for one section of the channel in Palk Straitto Dredging Corporation of India, whereas a global tender has been floated for

identifying the dredging partners for other 3 sections of the channel. The dredging isexpected to complete by 31st May 2008, and the project is scheduled to be operationalfrom August 2008.

The Channel, once operational, will be beneficial to Indian coastal traffic, as well as theforeign vessels touching the ports on eastern coast of India, as it will enable ships totravel lesser distance. Ships using the Channel will be saving an average of 335Nautical Miles (NM) in distance as compared to the existing route. This would result insavings in fuel consumption as well as time savings of the order of almost 24 hours,which would result in savings in time charter rates paid to the shipping companies.Around 50% of these expected savings will be charged by the TPT as toll charges forusing the Channel. This will offer more efficiency to shipping liners as well as allowthem to retain part of the savings. The toll charges will offer revenue to SCL, which will

allow them to recover the investment as well as operate and maintain the Channelefficiently.

The Channel will be offering passage to vessels of sizes up to 50,000 DWT, withmajority of vessels plying on the route being of sizes up to 40,000 DWT. As per thetraffic study conducted by L& T Ramboll, the Channel is expected to handle 3,237vessels, in FY 2008-09, its first year of operation. From then onwards traffic is expectedto grow and it has been estimated that by the year 2025, the channel would behandling 7141 vessels annually.

As per the cost estimates prepared, the cost of completion of SSC project would be Rs24274 Million, which will be funded through debt equity of approximate 1.5:1. Totalequity investment in the Project is expected to be Rs 9710 Million. Total debt of Rs

14564 Million is proposed to be raised from Financial Institutions and CommercialBanks in India and abroad in the form of Rupee Term Loan (RTL) / Non ConvertibleDebentures (NCDs), Foreign Currency Loan (FCL) & Zero Coupon Bond (ZCBs) in theratio of 30:30:40. The debt raised for the project is to be guaranteed by theGovernment of India (GoI). The average DSCR of the total debt for the project worksout to be 1.92. Based on the estimated cash flow accruing from the project, financialstructuring and envisaged support from the promoters, the SSC project is expected tobe a bankable proposition.

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2. THE PROJECT COMPANY

Sethusamudram Corporation Ltd (SCL) was incorporated on December 6, 2004, todevelop and operate a navigation channel along the territorial waters of India forconnecting Gulf of Mannar with the Palk Bay, named as Sethusamudram Channel toenable better movement of various shipping vessels within the territorial waters of

India.

2.1 Particulars

Name : Sethusamudram Corporation Ltd

Registered Office : C/o.National Institute of Port-Management

East Coast Road, UthandiChennai- 600 119Tamilnadu, India

Communication Address : The Chairman & Managing DirectorSethusamudram Corporation Limited

C/o.Tuticorin Port TrustTuticorin 628 004Tamilnadu, India

Date of Incorporation : December 06, 2004

2.2 Shareholding & Capital Structure

Authorized, Subscribed and Paid-up capital (Rs. Crore)

As on 31stMarch, 2003

Authorized Share Capital100,00,00,000 equity shares of Rs. 10/- each

1000.00

Issues, Subscribed and Paid-up Capital6,42,30,000 equity shares of Rs. 10/- each

64.23

2.3 Shareholding Pattern

The proposed shareholding pattern of SCL is as below.

Particulars Total proposed (Rs.Million)

% of total

Government of India 4950 51%

Tuticorin Port Trust 500 5%

Shipping Corporation of India 500 5%

Ennore Port Ltd 3003%Visakhapattanam Port Trust 300 3%

Chennai Port Trust 300 3%

Paradip Port Trust 300 3%

Dredging Corporation of India Ltd 300 3%

Other Sources / Public Issue 2260 24%

GRAND TOTAL 9710 100%

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2.4 Promoter Details

Sethusamudram Corporation Ltd (SCL) is being promoted by GoI, along with otherMajor ports in the eastern coast of India, SCI and DCI, to develop the SethusamudramNavigational channel. GoI has appointed Tuticorin Port Trust as the nodal agency forthe development of the Channel. Brief profiles of the co-promoters of SCL is presented

below:

2.4.1 Tuticorin Port Trust (TPT)

Tuticorin Port is an artificial deep-sea harbour situated in the Gulf of Mannar at latitude8 45 North and longitude 78 13 East. It was declared as 10th Major Port of India in1974. Tuticorin Port Trust, the present administrative body of the port, was constitutedin 1979, by merging Tuticorin Minor Port and the newly developed Major Port.Presently, Tuticorin Port has 13 berths, which mainly handle Dry Bulk cargo, containervessels and break bulk cargo. The maximum draft available at the Port is 10.7 metres.

During the four year period, from 2000 01 to 2003 04, traffic at Tuticorin Port hasincreased at a CAGR of 3.6%. It handled 13.67 million tones in 2003-04, an increase of

2.89% over the previous year. Tuticorin Port handled 3.96% of the total traffic of allmajor ports in 2003-04.

During the 4-year period, dry bulk constituted almost 60% of the traffic throughput atTuticorin Port. During the 2003 04 also dry bulk continued to constitute the largestconstituent of total cargo at TPT, whereas Container cargo accounted for 19.67% in2003-04, and break-bulk was third, with a share of nearly 15%, followed by liquid bulkat around 7%.

TPTs operating income has been increasing over the past 4 years. The port has beengenerating operating surplus over the past four years. The operating surplus for 2003-04 was Rs. 59.84 crores, an increase of 5.91% over the previous year. TPT has alsoregistered a net surplus over the past 4 years. In 2003-04, its net surplus was Rs 55.66

crores, an increase of 10% over the previous year. (Rs. Crore)Description 2000-01 2001-02 2002-03 2003-04

Operating Income 114.56 117.05 124.59 124.62Operating Expenditure 60.12 58.09 60.99 64.78Operating Surplus 54.44 58.96 63.6 59.84

Finance and misc. Income 16.71 18.33 20.15 25.32Finance and misc. Exp. 33.77 36.8 33.18 29.50Net Surplus/deficit 37.38 40.49 50.57 55.66

2.4.2 Chennai Port Trust (CPT)

The Port of Chennai, which was commissioned in 1881, is an artificial harbour situatedon the Coromandel Coast in South-East India at latitude of 13 6 North and longitude8018 East. The inner harbour at Chennai Port has a maximum draft of 11 m. The Porthas 23 berths, of which 7 are in the outer harbor.

Chennai Port carried 10.65% of the total traffic at all major ports in 2003-04. It handled36.71 million tones of cargo in 2003-04. In the last four years, dry bulk has constitutedalmost 50% of the traffic throughput at Chennai Port. With a share close to 25%, liquidbulk was the next most commonly handled commodity. Container cargo was third, its

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The port has 7 dry-bulk berths, one oil jetty, one iron ore berth, one liquid cargo berth,two coal berths and two captive berths exclusively for fertilizer and fertilizer rawmaterials.

During the four-year period, from 2000-01 to 2003-04, traffic at Paradip has grown by aCAGR of 8.24% compared to the average CAGR of 6.9% for all major ports. Paradip

carried 7.34% of the total traffic carried at all major ports in 2003-04. It carried 25.3million tones in 2003-04, which was 5.9% higher than the previous last year.

In the last 4 years, dry bulk has constituted close to 85% of the traffic throughput atParadip. Liquid bulk is the next most commonly carried commodity, its share decliningfrom 14.7% in 2001-01 to 7.9% in 2003-04. Break-bulk followed at almost 0.5%.Container cargo has made a contribution to traffic only in the last 2 years, and its sharewas 0.2% in 2003-04.

During the past 4 years, PPTs operating income has been increasing steadily. The Porthas had an operating surplus over the past four years. The operating surplus for 2003-04 was Rs. 19.98 crore, an increase of 17.91% over the previous year.

(Rs. crores)Description 2000-01 2001-02 2002-03 2003-04

Operating Income 26.21 29.72 38.12 41.27Operating Expenditure 15.09 20.09 21.18 21.29Operating Surplus 11.12 9.63 16.94 19.98

Finance and Misc. Income 2.24 3.5 2.53 1.88Finance and misc. Exp. 6.07 9.84 11.58 9.08Net Surplus/Deficit 7.29 3.29 7.89 12.77

2.4.5 Vishakhapatnam Port Trust (VPT)

Vishakhapatnam Port is a natural harbour, situated on the stretch of the easternseaboard of India, known as the Circars Coast at latitude 17 4134 North and

longitude 83

1745 East. It is located in the Southern state of Andhra Pradesh, andserves as the middle point distribution base for the southern, eastern, central andnorthern states of India.

The inner harbour of the port has 13 multi-purpose berths, 2 oil berths and one captiveberth exclusively for fertilizer and fertilizer raw materials. The maximum draft availableis of 10.21 metres, in 8 berths in the inner harbour. The outer harbour has 8 berths,one finger type jetty and 3 captive berths.

In the past 4 years, traffic at Vizag Port has increased at a CAGR of 2.2% compared tothe average growth of 6.9% for all major ports. Vizag carried 13.85% of the total trafficcarried at all major ports in 2003-04. It carried 47.7 million tones in 2003-04, anincrease of 3.76% over the previous year.

In the last 4 years, dry bulk constituted almost 50% of the traffic throughput at Vizag.Liquid bulk is the next most commonly carried commodity at almost 40%. Break-bulkfollows at 3-4%. Container cargo contributes less than 1% to the total cargo throughputat Vizag.

The Ports operating income has been steadily increasing over the past 4 years and italso reported operating surplus during the period. The operating surplus for 2003-04was Rs. 233.03 crores, an increase of 11.03% over the previous year. VPT has

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registered a net surplus over the past 4 years. In 2003-04, its net surplus was Rs77.81crores, an increase of 35.17% over the previous year.

(Rs. crores)2000-01 2001-02 2002-03 2003-04

Operating Income 348.66 294.98 427.56 454.28

Operating Expenditure 237.5 223.6 217.7 221.25

Operating Surplus 111.1 171.3 209.8 233.03Finance and Misc. Income 49.1 44.3 14.04 11.12Finance and misc. Exp. 140.8 172.8 166.4 166.3

Net Surplus/deficit 19.46 42.83 57.57 77.81

2.4.6 Shipping Corporation of India (SCI)

The Shipping Corporation of India (SCI) was established on 2nd October, 1961, by theamalgamation of Eastern Shipping Corporation and Western Shipping Corporation.Starting out as a marginal Liner shipping company with just 19 vessels, the SCI todayhas metamorphosed into a conglomerate having 83 ships of 4.6 million DWT withsubstantial interests in 10 different segments of the shipping trade. The Company has

a share of about 34% of the total Indian tonnage.

SCI is the only Indian shipping company operating in almost all areas of shippingservices and its fleet includes ten different types of vessels: dry cargo vessels, cellularcontainer vessels, bulk carriers, crude carriers, product carriers, combination carriers,LPG/ammonia carriers, phosphoric acid/chemical carriers, offshore supply vessels andpassenger-cum-cargo vessels.

For the financial year 2003-04, SCI recorded a turnover of Rs. 3,100.34 crores and aNet Profit of Rs. 626.99 crores. The company declared and paid a special interimdividend of 170% for the Year 2003-04. Snapshot of the Companys financials for thelast few years is presented below:

(Rs. crores)

1999-2000 2000-01 2001-02 2002-03 2003-04Equity Paid Up 282.30 282.30 282.30 282.30 282.30

Networth 1,918.30 2,207.08 2,134.39 2,311.89 2,397.00

Gross Block 5,303.05 5,254.24 5,146.90 5,243.21 6,073.85

Sales 2,542.76 2,994.76 2,784.67 2,376.51 3,100.34

PBIDT 597.93 930.88 710.87 495.65 1,049.68

PAT 161.61 382.56 241.56 274.78 626.99

2.4.7 Dredging Corporation Of India (DCI)

The Dredging Corporation of India Limited (DCI) was established in the year 1976 to

provide dredging services to the Major Ports of the Country. DCI is the largest dredgingcompany in India and the seventh largest dredging company in the world, in terms ofthe capacity. DCI sources integrated dredging services to Indias major ports in theform of maintenance dredging, capital dredging, reclamation, hydrographic surveysand beach nourishment.

DCI has leading presence in maintenance dredging and it carries out limited capitaldredging in India as well as the international markets. The Company has an overallmarket share of 75% of an estimated 108 million cubic meter dredging market in India,

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with ~85% market share in maintenance dredging. DCIs main client is the KolkottaPort Trust, which accounts for 45% of its annual maintenance dredging revenues. TheCochin Port, New Mangalore Port Trust, JNPT, Vishakhapatnam Port and Paradip Portare DCIs other key clients.

DCI has a fleet of 10 Trailer Suction Hopper Dredgers (THSD) and two Cutter Suction

Dredgers (CSD) for maintenance and capital dredging respectively. Together, thesedredgers have a capacity of 79.85 million cubic meters. DCI is currently running at100% capacity utilization with its dredgers deployed across Indian ports and in exportmarkets. Financial snapshot of the company over last 5 year period is presented below:

Rs Crore

2000-01 2001-02 2002-03 2003-04

Equity Paid Up 28.00 28.00 28.00 28.00

Networth 436.58 517.13 657.87 789.36

Gross Block 610.71 805.7 831.83 832.51

Net Sales 416.79 524.99 492.9 520.72

Other Income 34.93 37.49 64.47 69.38

PBIDT 177.53 220.11 246.89 231.58

PBT 157.22 164.59 188.92 176.44PAT 108.71 101.55 161.83 170.01

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2.5 Organization & Management

2.5.1 The Board of Directors

As per the Articles of Association (AoA), Sethusamudram Corporation Ltd can have aminimum of three (3) directors and a maximum of twelve (12) directors. The directors

representing Tuticorin Port Trust (TPT) and the Shipping Corporation of India Ltd (SCI)shall be non-rotational directors. The Government of India shall also have right toappoint director (s) u/s 408 of the Companies Act and such directors shall not be liableto retire by rotation.

The present composition of the Board of Directors of SCL is as follows:

Sr.No.

Name Designation

1. Shri N K Raghupathy Chairman & Managing Director,Sethusamudram Corporation Ltd andChairman, Tuticorin Port Trust

2. Vacant CMD, SCI

3. Capt. N K Gupta CMD, DCI4. Shri K Suresh Chairman, Chennai Port Trust

5. Shri M Raman Chairman, Ennore Port Ltd

6. Shri R K Kishore Chairman, Vishakhapattanam Port Trust7. Shri S Tripathy Chairman, Paradip Port

8. Shri A K Bhalla Joint Secretary (Ports), Ministry of Shipping, GoI

9. Shri T Srinidhi Director (Finance), Ministry of Shipping,GoI

Consequent on the participation of Central Government in the equity capital of M/s.SCL to the extent of 51%, the Company has acquired the status of GovernmentCompany pursuant to Section 617 of Companies Act, 1956. As can be observed from

the above, SCLs Board is represented by senior officials from the neighboring ports,which are the co promoters and will benefit from the project, as well as those fromthe Government of India, who would be in a position to provide assistance andguidance to the Company for successful implementation of the Project.

2.6 Organization Structure and Key Executives

Shri N K Raghupathy, IAS, who is the Chairman & Managing Director of SCL, isoverseeing the activities for the implementation of the Project. His present team from

Tuticorin Port Trust, who are coordinating the implementation of the project, isassisting him. Their rich experience in respective functions would help SCL inimplementing the project within the expected time frame and cost.

SCL shall be carrying out further recruitments in line with the progress of the Project indue course of time. The proposed organization chart of SCL indicating the keyexecutives and their responsibilities is given atAnnexure - I.

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3. THE PROJECT

India has a long peninsular coast of 3,554 Nautical Miles and has had maritime tradewith various countries of the world for more than 3000 years. Similarly, shipping tradebetween the eastern and western coastlines of India has also been prevailing for a longtime. However, the coast of India does not have a continuous navigation channel

connecting the east and west coasts. Currently, the ships from the western coast ofIndia and other western countries destined for the eastern coast of India andBangladesh, China, etc. have to navigate around the Sri Lankan coast. The existingwaterway in the Gulf of Mannar and Palk Strait is shallow at many places and the draftis not suitable to allow for the movement of ships. Further, the presence of a sandstonereef, known as Adams Bridge, located south east of Rameswaram near Pamban, andconnecting the Talaimannar Coast of Sri Lanka hinders the movement of large shippingvessels between the Indian and Sri Lankan coast.

Due to these factors, the ships originating from Western coast of India, which have tocall on East coast ports and vice versa have to travel around the Sri Lankan coastwhich results in increased travel distances and time and consequently the costs. Shipsbelonging to Indian Navy also have to traverse around Sri Lanka, which has been of

concern for India from the defense point of view.

In order to reduce the steaming distances between the Eastern and Western coasts ofIndia and to improve the navigation within territorial waters of India, a navigationchannel, named Sethusamudram Channel, connecting the Gulf of Mannar and Palk Baythrough Adam's Bridge has been envisaged so that the ships moving between the eastand west coasts of India need not go around Sri Lanka.

Sethusamudram Ship Channel project, an ambitious scheme has been on the drawingboards for nearly 140 years. It was originally conceived in 1860 by the BritishCommander A. D. Taylor of the Indian Marines. It was followed by eight proposals forsuch project during the pre-independence itself. In 1955, GoI formed a SethusamudramProject Committee headed by Shri. Ramaswamy Mudaliar. The Project gained

momentum after serious public opinions and representations from the Members ofParliament and Members of Legislative Assembly of Tamil Nadu. This resulted in theformation of the H R Laximinarayana Committee in 1981. Some further studies werealso carried out after this and in 1998 National Environmental Research Institute(NEERI) conducted Environmental Impact Assessment (EIA) studies. During the year1999, the Minister of Defence, GoI announced the GoIs intention to implement theProject.

In 2004, Government of India, appointed Tuticorin Port Trust (TPT) as the nodal agencyfor implementing the Sethusamudram Channel Project.

The proposed Channel would have two legs, one in the Adams Bridge, where depth is

3 m and other leg is in the Palk Strait, where average depth is 6 to 8 m. In the Gulf ofMannar and other stretches of Palk Bay, the natural depth available will be enough forsafe navigation of shipping vessels. The length of the Channel in various sections is asunder:

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Section Length in Km Area

G-A 4.37 Adams Bridge

A-B 17.3 Adams Bridge

B-C 13.38 Adams Bridge

C-D 37.44 Palk Bay

D-E 40.48 Palk BayE-E4 54.25 Palk Strait

167.22

The Sethusamudram Ship Channel is being developed at a distance of more than 20Km from Shingle Island of Gulf of Mannar near Dhanuskodi. The channel wouldconnect Gulf of Mannar and Bay of Bengal through Adams Bridge, Palk bay and PalkStrait running parallel to the Indo-Sri Lankan Medial Line at a minimum distance of3Km from the border, within Indias territorial waters. The total length of the channel is167 Km, which would be 12m deep and 300m wide at bottom.

In order to execute the Sethusamudram Project, TPT appointed L&T - Ramboll, as theTechnical Consultant (TC) to the Project. TC has prepared the Detailed Project Report(DPR) for the Project, which provides the scope of implementation and operation of theProject. Details about the project are presented in following chapters.

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4. SCOPE OF WORK

4.1 Channel Design

4.1.1 Introduction

Navigational Channel Projects involve dredging and construction, that require acomprehensive design process, which specifies the two main dimensions of thenavigational channel i.e. depth and width of the channel.

Design of the Sethusamudram Channel has been so planned that it will be able toaccommodate the design vessel for the channel i.e. the maximum size of the ship,which can navigate through the channel. Apart from this, for safe operations ofshipping vessels within the Sethusamudram Channel, effects of winds, waves, tides,currents, visibility, and navigational aids have also been considered in design of theChannel. The density and type of traffic (one- or two-way traffic), ship speed, turningbasins, and tug assistance are other factors that have been considered in the Channeldesign.

4.1.2 Vessel Size Design

For planning and designing of a navigation channel, consideration of most suitablevessel size / design vessel size is very essential, as it will influence the size of thechannel. In order to identify the ideal vessel size for the Sethusamudram Channel, the

Technical Consultant (TC), carried out a comprehensive vessel size analysis, on thebasis of existing chartering practices and parameters of the loading and unloading inthe ports. The TC also analyzed the ordered vessel fleet in the market, as well as theexisting vessels. Based on the above analysis, the TC has identified the band of thevessel size, which would be expected to be sailing through the Channel. Based on thevessel size analysis, a summary of the vessels, which will be using the Channel, isprovided below:Vessel Size (DWT) Length Overall (LoA) (m) Beam (m) Draft (m)

30,000 190 30 10.5

40,000 215 33 11.0*

50,000 267 33 12.5** Lightly Loaded Vessel

It is intended to provide a channel with a dredged depth of (-) 12 m c d. For thepresent, the project does not have plan to increase the dredge depth to accommodatehigher vessel sizes as this would require a large amount of dredging which would affectits financial viability. Hence the channel dimensions have been planned using theabove vessel sizes.

4.1.3 Number of Lanes

Number of lanes of a navigational channel is determined by the volume of traffic itintends to handle and by the desired level of navigability and safety.

In order to minimize the cost of the Project, initially it was decided to develop theSethusamudram Channel as single lane channel. However, it meant a waiting period of2 to 6 hours for ships using the channel, which would have reduced the timesavingsand discouraged the users. Hence, it was decided to design the Channel for two-lanetraffic, so that no waiting time would be involved for ships using the Channel. The

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occupancy levels of the two lane Sethusamudram Channel, vis--vis projected traffic isprovided below:

S No Description

Short Term MediumTerm

LongTerm2008 2013

1 Annual Vessel Traffic 3,055 4,005 4,878 7,141

2 Annual Number of Operations (Days) 330 330 330 3303 Number of Transits / day 9 12 15 22

4 Channel Length (NM) 90 90 90 90

5 Vessel Speed 8 8 8 8

6Time required to maneuver the channel(Hrs)

11.5 11.5 11.5 11.5

7 Average Inter arrival time (2 Way) (Hours) 5.3 4 3.2 2.1

8 Peak inter arrival time (70%) (Hours) 3.7 2.8 2.2 1.5

Minimum inter arrival time is 1.5hrs between the ships during peak time at theyear 2025.

As per the IS4651standards a sight distance of 7 to 8 times LOA isrecommended for the loaded ships. By allowing same sight distance between

vessels, a stopping distance of (8 X 200) 1,600 m between vessels isrecommended. In Panama Channel a sight distance of 2.5 Km is adopted. Byadopting sight distance of 2.5 Km, same as that used in Panama Canal,minimum inter arrival time between ships required would be 0.17 hrs (8 knotsspeed).

Thus, the inter arrival time assumed in the design, for two lane channel, is sufficienteven for the peak traffic in Year 2025. Hence, even if the traffic build up is more thanthe projections, Channel will be able to handle the traffic without any congestion.

4.1.4 Channel Width

The design width of channel measured at the bottom of the slope is dependant on the

beam and steering characteristics of the design vessel; the under keel clearance; thespeed of the vessel relative to the channel bottom; the traffic density; thecharacteristics of other vessels encountered in the channel; whether channel is open orrestricted; currents, wave action and winds that causes the vessel to yaw.

Channel width of Sethusamudram comprises following components:

1. Ship Maneuvering Lane: This refers to the portion of the channel within which aship maneuvers, without encroaching on the safe bank clearances. Based onthe PIANC guidelines, it has been decided to keep the width of maneuveringlane at 1.8 B (where, B represents the Beam width of the design vessel i.e. 33meters) or 60.4 meters

2. Ship Clearance Lane: When ships move opposing each other in a channel, they

move away or towards each other according to pressure field set up dependingupon relative speeds of vessels and proximity of bows or sterns during thepassage. To minimize the impact of passing, a ship clearance lane is provided.As per the PIANC guidelines and providing for heavy ship traffic density, thislane has been kept at 1.7 B (i.e. 56.1metres)

3. Bank Clearances: Ships moving closer to the bank have a tendency to movetowards the bank. To avoid this, additional channel width has been providedoutside the ship-maneuvering lane. As per the PAINC guidelines, it has beendecided to provide a width of 0.5B (i.e. 16.5 meters) on each side of the bank.

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4. Additional Clearances: Apart from above, some allowances has been made forcross winds, cross currents, wave action etc. this additional clearance has beencalculated at 2.1B (i.e. 69.3 meters).

As per the above calculation, total width for a double lane Sethusamudram Channelhas been arrived upon at 8.4 B, which equals to 8.4 X 33 m = 277.2 m. Keeping a

further safety allowance, Channel has been proposed to be designed with a width of300 m.

4.1.5 Channel Depth

Channel depth of Sethusamudram Channel is to be 12 m. As per the PIANCguidelines, a channel should have a depth such that depth to draught ratio is1:10 in sheltered waters. Keeping this in mind, NEERI, in their EIA study of 2004,arrived upon the channel depth of 12 m, for catering to ships with a draft of 10.7m.

However, the above suggestion was only a conceptual plan for the design depthof the Channel and the TC undertook further analysis to arrive at the under keel

clearance for the design vessel.

The under keel clearance for the design vessel was arrived at by consideringvarious factors like vessel squat, wave induced motions in ship, tidal variations,and safety margins. Based upon these factors, under keel clearance for ships inSethusamudram Channel was calculated to be 2 m. Hence, for a dredged level of12 m, the maximum draught of the ship to be allowed for safe navigation throughthe Channel would be 12 2 = 10 m.

4.1.6 Extra Widening at Bends

Design of Sethusamudram Channel incorporates 5 bends, namely bend A, B, C, D & E.The bend in a channel causes changes in the flow and path of the ship in the bend is

wider than in the straight. Vessel control is reduced at bends and width of swept pathis also increased at turnings. Because the direction of ship constantly changes inbends, hydrodynamic forces develop, making it more difficult to steer in bends. Theturning in bends has to be made at the proper time to prevent contact with the banks.

The bends A, B, C for the Channel have deflecting angles of 11o, 13o and 7o

respectively. Bend D has deflection angle of 56.98o and Bend E has deflection of37.33o.

4.1.7 Channel Dimensions

Proposed Channel Dimensions are as follows:

Channel Type Two WayChannel Width 300 mChannel Depth - 12 m CD

Sight Distance 2.5 KmPermitted Draft of Vessel 10 m

Beam 33 mLOA 215 m

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Channel limitation is not on DWT of the vessel, but draft of vessel, which is 10m.

Design vessel speed in the channel is 8 Knots.

Even though the channel width in Palk bay is marked as 300 m, it is to be notedthat sufficient water depth is available in these sections and in reality there isno restrictions on the navigable width.

The Channel at the bends D & E is also enlarged to allow safe navigation assuggested in the reports.

4.2 Dredging Requirements

4.2.1 Introduction

Dredging is a construction process and the dredged area can be considered as aconstructed structure. The design of dredged area has to be carried out with equalimportance as that of any port structure. The dredging method, dredging equipmentand the costs associated with dredging are determined by the type of materials to bedredged and its physico-chemical properties ascertained through elaborate field and

laboratory investigations as prescribed by the relevant standards. Details of dredging,which would form a large part of the Project Cost, are discussed in this section.

The dredging requirement for the Sethusamudram Channel has been calculated by thebathymetry available in admiralty charts of the National Hydrographic Office (NHO),Dehradun and through results of bathymetric surveys conducted by NHO and NationalShip Design Research Center (NSDRC) at the project site in recent times. Project wouldinvolve capital dredging during the construction phase and maintenance dredgingduring the operational period.

4.2.2 Capital Dredging

Capital dredging will be undertaken for deepening of the navigation channel to the

required depth of 12m and would involve relocation of large quantities of material. Theestimation of dredged quantity has been arrived upon by, taking sections at every 100m intervals, and integrated throughout the length of the Channel. Estimation ofdredging material quantity is presented below in the table:

Segment*Length(Km) Dredge Quantity (Cu M)

GA (Adam's Bridge) 4.37 2,406,323

AB (Adam's Bridge) 17.3 37,611,940

BC (Adam's Bridge) 13.38 5,887,713

CD (Palk Bay) 37.44 -

DE (Palk Bay) 40.48 -

EE1 (Palk Strait) 13.56 604,700

E1E2 (Palk Strait) 13.56 6,718,933E2E3 (Palk Strait) 13.56 11,834,350

E3E4 (Palk Strait) 13.57 12,559,795

167.22 77,623,754* Segments have been divided along the length of the Channel.

Of the above mentioned sections, dredging would be undertaken only in the AdamsBridge and Palk Strait sections, as existing natural depth in Palk Bay is already 12 m.

The Sethusamudram Ship Channel is being developed at a distance of more than 20

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Km from Shingle Island of Gulf of Mannar near Dhanuskodi. The Channel is connectingGulf of Mannar and Bay of Bengal through Adams Bridge, Palk bay and Palk Straitrunning parallel to the Indo-Sri Lankan Medial Line at a minimum distance of 3Km fromthe border, within Indias own territorial waters.

4.2.2.1 Additional Quantities

Apart from the estimation of dredged quantity presented in above table, followingadditional quantities have also been assumed, providing for variations in Channel, lackof data as well as to count for tidal corrections.

Additional Dredging to be undertaken for extra widening at bends 0.5 millioncu. m.

Additional quantity for stretch AB for inaccuracies (Sparse data) 1.88 millioncu. m.

Add quantity to account for tidal corrections in bathymetry levels 2.50 millioncu. m

Total dredging quantity: 77.62 + 0.5 + 1.88 + 2.5 = 82.50 million cu. m.

4.2.3 Maintenance Dredging

Maintenance dredging concerns the removal of siltation from the channel bed, whichgenerally occurs naturally, in order to maintain the design depth of the navigationchannel during the operations period.

The maintenance dredging quantity is estimated to be 2 million cubic meter per yearfor initial 2 years and expected to reduce to 1.7 million cum in 3rd and 4th year. From 5th

year onwards the maintenance dredging quantity is expected to stabilize at 1.4 millioncum.

4.2.4 Dumping Areas

As the dredging process involves relocation of large quantities of material, it becomesimperative that, any location chosen to dump the dredged material should not disturbthe surrounding environment of the dumping location. Keeping this in mind, TPTcarried out Dispersion Modeling Studies and Flow Modeling Studies, on therecommendation of M/s NEERI and L&T Ramboll respectively. Results of these studiesshow that dumping locations in the sea are available. It would also be made sure thatsuch an activity meets all the environmental regulations. Following sites have beenidentified for dumping the dredging material:

1. The dredged material from Adams Bridge area would be dumped into sea inthe Gulf of Mannar at location of 30 m natural depth within Indian territorial

waters. The dumping location is assessed to be 25 - 30 Km distant away fromAdams Bridge (an area of 5 Km x 5 Km at geographical coordinates, 8 5551.16N and 7926 54.81E).

2. The dredged material from Palk Strait of about 34 million cu. m. is proposed tobe dumped off-shore in Bay of Bengal area at about 30 m depth with varyingdumping leads and the same is preferred by NEERI (an area of 5 Km x 5 Km at

geographical coordinates 1013 14.05N and 8013 11.56E).

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4.2.5 Dredging Methods

Several types of dredging equipment may be used to accomplish the dredging in theSethusamudram Channel.

4.2.5.1 Hydraulic Cutterhead Dredge

The Hydraulic Cutterhead Dredge is a suction pump-type dredge that utilizes arevolving cutter head to bite into and loosen the bottom material. This type of dredgeis especially suited to dredging consolidated or compacted materials and can be usedto remove soft rock deposits. Some of the sands are expected to be cemented, thusthe power provided by the hydraulic cutter head dredge is particularly desirable. Thedredged material is transported directly from the dredge site through floating and/orsubmerged pipelines and discharged directly into the disposal site. With the use of thebooster pumps, it is possible to pump the material as far as 20 to 25 Km.

4.2.5.2 Hopper Dredge

Hopper dredges are typically self-propelled ocean-going vessels, which can dredge softunconsolidated materials into a temporary storage hopper built into the hull of thevessel. Once the hopper is filled, the dredge normally proceeds to the disposal sitewhere the material is bottom discharged. The hopper dredge can be very effective atremoving softer unconsolidated material from underlying harder strata.

4.2.6 Proposed Dredging Methods For SSCP

4.2.6.1 Adams Bridge Area

The total dredging quantity involved in Adams Bridge area is about 48.0 million cu.m.to dredge upto 12 m CD level comprising segments GA, AB and BC. Of these,segments GA and AB are much shallower with existing bed levels touching even -1.1 to

-1.2m in segment AB and having steep gradients on both north and south of string ofshoals and islands, the direct deployment of Trailer Suction Hopper Dredger (TSHD) isnot possible to carry out dredging.

A self propelled Cutter Suction Dredger (CSD) of suitable cutter power and with itscutter head replaceable by suction heads is the most suited equipment for dredging insuch shallower portions. To dredge segments GA and AB up to a level of (-)8 m level,which will involve a quantity of 18.0 million. cu. m., it is proposed to deploy CSD fordredging effectively. TSHDs are proposed for dredging materials below (-) 8mCD atAdams Bridge area.

4.2.6.2 Palk Strait Area

The total length of Channel in Palk Strait is about 54 km and the average bed levelvaries from less than -5m at the shoals opposite to Point Calimere to -12m towardsPalk Bay on the western side with a flat gradient and also on the eastern side towardsBay of Bengal with a relatively steep gradient. From the borehole details available forthis area, it is seen that the initial reaches (commencing from the western side) consistof clayey sand up to a depth of -15m followed by sand in the end reaches, assumedto be dredgeable by TSHDs.

The Palk Strait area is divided into two sections depending on the distance to thedumping spot in Bay of Bengal (one with average lead of 60 Km for stretch EE2 and the

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other with average lead of 40 Km for the stretch E2E4). For dredging in Palk Straitarea, minimum of two TSHDs mentioned above are proposed to be deployed in E E3& E3 E4 sections.

4.3 Ancillary Facilities

4.3.1 General

There are a number of ancillary structures and facilities (both land and marine) thatwould be required for operating the Channel System effectively and withoutinterruptions. Apart from these, to minimize siltation and to ensure tranquility at thedredged Channel across Adams Bridge, the provision of protective structures in theform of breakwaters or other measures on either sides of dredged cut would also benecessary.

Apart from this, two jetties each 150 m long at either end of land Channel for handlinglaunches, one slipway for repairing launches, a workshop and a buoy yard apart fromoperational and office buildings and staff quarters would also be developed formaintenance and operation of the Channel.

4.3.2 Service Jetty

A service jetty on the northern shore of Dhanushkodi facing Palk Bay with berthingplatforms 150m long is planned because of existence of tranquil conditions in the area.

The berth will facilitate day-to-day operations and maintenance, as well as berthing ofthe tugs and crafts with berthing possible on both faces.

For the purpose of pilotage for the Channel in Palk Strait, a jetty at Point Calimere isproposed for berthing of pilot launches which can be used in fair weather period. Atother times the existing facilities at nearby Nagapattinam Port, with someimprovements, can be used for the pilotage operations.

4.3.3 Shore Facilities

A Repair Workshop and the Buoy Yard with access facilities such as a two lane roadand railway sidings will also be constructed. The location of these facilities has notbeen finalized, but if Pamban Island can be reclaimed, these facilities would bedeveloped at Pamban Island. DPR prepared by the Technical Consultant proposes aworkshop of 40x25 m size with office cabins and equipment and provided with coveredroof, parking areas for field machinery, car parks, electrical substations, etc. DPR alsoproposes to provide the Buoy Yard of size 250x30m with partly covered roof, officecabins, laborer sheds, pollution control rooms, fire fighting equipment, etc. near theservice jetty. A Slipway will also be developed in the vicinity of service jetty with repairfacilities for repairing pilot and mooring launches.

4.3.4 Development of Fishing Harbour

The Fisheries Harbor at Rameswaram would be developed according to modernrequirements with fish landing stations and augmenting shore facilities for conductingauctions etc., as a social development measure. Furthermore, some two or three newfishing harbours may also be developed in the region, with the possible assistance ofthe State, by identifying specific feasible locations.

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4.4 Vessel Traffic Management System

4.4.1 Introduction

VTMS is a modern aid to navigation service, which will be installed and utilized in theoperations of the Sethusamudram Channel, to improve the safety of the vessel traffic

and to protect the marine environment in the Channel. The SethusamudramCorporation Ltd will be implementing the VTMS covering the entire traffic route fromsouth of Adams Bridge to the east of the Middle Channel off Point Calimere, so as toenable proper movement and controlling all vessels plying in the Channel area andensuring navigational safety, with capability to interacting with the traffic andresponding in time to the situations arising in the VTMS area.

The VTMS (SSC) will involve proper state shipping control over the traffic in the SSCarea. It will consist of radar systems at 4 locations on RCC towers to cover theoperational areas by radar, communication / data transmission facilities, civil works forthe radar / communication / Channel Control Towers (CCTs) with integral power andlogistic support facilities, supply of electronic digital equipment / systems of VTMS andtheir installation, testing, commissioning and product support issues.

4.4.2 Architecture

The VTMS shall provide seamless coverage for targets of fishing crafts and merchantshipping vessels in the area and will be specified in the tender documents. The VTMSshall fulfill the main functions of traffic monitoring, resource management, expectedvessel movements, disaster control and environmental monitoring. The systemarchitecture shall have the state of the art digital technology with latest computeraided systems (both hardware and software) and cover the entire SSC route with up to5 NM extra coverage at either end of the Channel. Operational requirements of theVTMS shall be met by integrating information from the sensors (radar, communication,IS, direction finders, meteorological/ hydrological, Differential Global PositioningSystem (DGPS), etc) and presented in a concise manner for fulfilling the aims and

objectives of the VTMS.

4.4.3 Radar Locations

With due regard to the geographical coverage of the VTMS (SSC) and safety factors,the radar stations will be established at Rameswaram Island (CCT 1), two offshorelocations off turning point (CCT 3 & 4), two offshore locations close to the Channelturning points in positions CCT-3 Lat (N) 094055 Long 791724 and CCT-4 Lat (N)100000 Long 793112. and Point Calimere (CCT 2). These stations will beintegrated structures with radar, communication, etc and act as the Channel Control

Towers (CCTs) with necessary infrastructure and manpower. The CCT at RameswaramIsland will be the Master Station in the system.

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4.5 Flotilla & Navigational Aids

The SSC covers from approx 5 NM south of Adams bridge (off Rameswaram Island) toapprox 5 NM east of Middle Bank off Point Calimere, with a total Channel length of 95NM and width of 300 metres. Any vessel using the SSC, would need to be guided, asduring its passage through the Channel it would be traveling through restricted space.

Hence, navigational aid infrastructure would be required to make vessel journeythrough the SSC safe and secure.

The general navigational aid requirements for passage through SSC will necessitatethe following:

Tamper proof lighted Fair Way buoys as per International Association ofLighthouse Authorities (IALA) scheme at both ends of the SSC off Rameswaramisland and off Point Calimere in positions

Set of 30 tamper-proof lighted navigational buoys as per IALA scheme at approx3 to 8 NM intervals and with emphasis on the turning points, so that the vesselis always within the dredged channel limits / navigable depths.

Vessel Traffic Management System

Channel Control Towers at Rameswaram and Point Calimere and two off-shorelocations.

Compulsory pilotage for specified track distance (approx 8 NM on either side ofAdams Bridge off Rameswaram Island and Middle Channel off Point Calimere).

Provision of pilotage facilities (pilots, tugs, mooring boats, pilot launches)

Supporting vessels with staff (waterbarge, sullage barge, and oil pollutioncontrol vessel for complying with Marine Pollution (MARPOL) 73/78)

Patrol vessels with crew for effective security needs.

DGPS reference station at Rameswaram and Point Calimere + 2 Fairway buoys

Set of legally valid navigational charts and publications, based on detailed

hydrographic surveys, for marine safety, published by the National

Hydrographic Office under IMO/IHO conventions.

The details of tugs, pilotage and other navigational equipments is provided in the tablebelow:

S No Item Rameswaram Point

Calimere

Each Afloat

VTS Stn.

TOTAL

a. Tugs 30 Ton Bollard Pull 2 2 - 4

b. Tugs 10 Ton Bollard Pull - - 1 2

c. Pilot Launch 2 2 - 4

d. Mooring Boats 3 3 1 8

e. Survey Launch 1 - - 1

f. Patrol Crafts 2 1 1 5

g. Sullage Barge 1 - - 1

h. Buoy Servicing Vessel 1 - - 1

i. Water Barge (200 T) 1 - - 1

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5. THE EXECUTION STRATEGY

The major capital cost involved in the development of Sethusamudram Channel willinclude dredging cost, navigational aid system & VTMS, Flotilla and Buoys cost and civilconstruction cost.

Tuticorin Port Trust, which has been appointed as the nodal authority for developmentof Sethusamudram Channel, has decided to place tenders for each of the major workinvolved in the channel development.

5.1 Dredging Works

Sethusamudram Channel has been divided into 4 Sections, for undertaking dredgingworks. Al the four sections would be dredged simultaneously so as to reduce the timerequired for completing the Project. These four sections are as follows:

1. Stretch E3 E 42. Stretch E E33. Gulf of Mannar to Adams Bridge i.e. 0 to 11 Km4. Adams bridge to Palk bay i.e. 11 Km to 35.05 Km

Of the above-mentioned sections, TPT has already given the Section E3 E4 toDredging Corporation of India, on a nomination basis, whereas it has invited globaltender for other sections to select a dredging company to undertake dredging work.

TPT has signed a Memorandum of Understanding (MoU) with DCI for the same.

5.1.1 Details of MoU with DCI

1. TPT signed an MoU with DCI for undertaking the dredging works in E3 E4section on 25th June, 2005. DCI has already started dredging work in sectionallotted to it.

2. The section is approximately 13.57 Km long, with an estimated dredging

quantity of 13.55 million cu. m.3. DCI is expected to complete the work in 24 months, excluding the delays due to

bad weather period or stopping of dredging due to force majeure conditions.4. Final terms and conditions regarding the payment will be finalized, once the

International Competitive Bidding is over for other 3 Sections. Financial termsand conditions would be similar to the terms and conditions agreed in ICB.

5.1.2 International Competitive Bidding

TPT has floated a global tender for undertaking the dredging work in the remaining 3sections of Sethusamudram Channel. Leading dredging companies, who have boughtthe tenders, are expected to submit their technical and financial bid to the TPT forevaluation. Details of the tender conditions for each of the 3 sections are as follows:

S No DescriptionWork A :Dredging from 0to 11 Km of SSCP

Work B: Dredgingfrom 11 Km to 35.05Km of SSCp

Work C: Dredgingfrom Palk Bay toPalk Strait

1EstimatedValue of Work

Rs 353 crores Rs 621 crores Rs 364 crores

2Period ofCompletion

24 months 24 months 24 months

3Per Day Outputfor CSD

47,000 cu m perday

48,000 cu m per day

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S No DescriptionWork A :Dredging from 0to 11 Km of SSCP

Work B: Dredgingfrom 11 Km to 35.05Km of SSCp

Work C: Dredgingfrom Palk Bay toPalk Strait

4Per Day outputfor TSHD

39,000 cu m perday

47,000 cu m per day39,000 cu m perday

5.1.2.1 Other Highlights of the Tender Document are as follows:

Successful bidder, on receiving the work order, would submit a depositequivalent to 5% of the value of the work, as performance security.

Chief Engineer (SSCP), of Tuticorin Port Trust has been appointed as theEngineer for the Project. He would address all the engineering and dredgingrelated issues with the Contractor/s. He has been appointed as the coordinatingauthority for the dredging work.

Contractor shall take full responsibility for the adequacy, stability and safety ofof all site operations and methods of dredging operation and implementation ofEnvironment Management Plan.

As per the contract agreement, completed work would mean that contractorwould develop the Channel as per the designs provided to him, till the depth of12 m. The Contractor shall be responsible for the work till issuance of the

Taking Over Certificate by the Engineer. Contractor shall commence the work within the 30 days of the work order.

Contractor shall be submitting its work plan within 15 days of work order, whichshould be duly approved by the Engineer.

Dredging work can be suspended by the engineer, if needed.

A defect liability period of 60 day will be available, from the date of completionof works.

Damages: Contractor shall be paying 0.1% of work value per day for the delayin the project execution, with an upper limit of 5%.

Contractor shall take insurance cover, jointly in name of Contractor andTuticorin Port Trust to cover all the equipments installed by the port trust aswell as those bought in by contractor for completing the work.

All the interim payments made to the Contractor shall be treated as advancepayment and shall be fully recoverable, if the Project is not completedsuccessfully. All such interim payments by Tuticorin Port Trust to the Contractorwould be made against an irrevocable bank guarantee, which can be encashedby TPT, if contract is not performed satisfactorily.

TPT shall also deduct the 10% of each interim payment, towards building up ofa security deposit, to the tune of 5% of value of work.

The Contractor shall provide all the superintendence, labor, materials, plant andequipment, etc. required for the design and execution of the Project.

The Contractor shall be responsible fora. Accurate setting out of the works in relation to original points, lines and

level of reference given by the engineer in writingb. Correctness of the position, levels, dimensions and alignment of all parts

of workc. Provision for all necessary instruments, appliances and labor in

connection with the completions of the work.

Any losses or damages, except in case of Force Majeure, to the work, while it isunder the care of Contractor, shall be responsibility of the Contractor.

Apart from the dredging contract, Tuticorin Port would also be floating tenders for theother components of the Project, viz.:

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1. VTMS and Navigational Aid Systems2. Flotilla and Buoys3. Civil Construction Contracts.

All the above contracts are expected to be floated in next 6- 9 months, so that workson them also finishes along with the dredging work.

5.2 Implementation Schedule

As per the implementation schedule proposed in the DPR, the Project is expected to becompleted in a 3-year timeframe. As per the proposed schedule, Project is expected tobe operational by August 2008. The project implementation chart is provided atAnnexure II. As per the original schedule, the dredging work was expected to becompleted by May, 2008. However, TPT has developed a new implementation plan, inwhich they have divided the dredging into 4 sections, instead of 2 dredging section assuggested in the DPR. This new plan would help in completing the dredging in 2-yeartimeframe, and would also for loss of time due to any delays and ensure that theProject is operational at the end of 3rd year. TPT is in the process of finalizing a revisedimplementation schedule for the Project with the above objective.

5.3 Operations Plan

Tuticorin Port Trust is the executing authority for developing the SethusamudramChannel. Even after the completion of the construction phase, Tuticorin Port Trust willcontinue to play an important role in the operation of the Channel. SethusamudramChannel Authority will be set up for day-to- day operations of the Channel.

Sethusamudram Channel Authority will be responsible for the operations of theChannel. Its responsibility would cover the following aspects:

1. Channel Navigation: It would operate and maintain the VTMS and guide theships crossing the channel.

2. Toll Collection

3. Repair Workshop4. Piloting5. Maintenance Dredging6. Buoy Yard7. Service Jetties8. Search & Rescue Operations9. Launch Facility

5.3.1 Channel Navigation Plan

The navigational procedure for various vessels using the Sethusamudram Channelwould be as follows:

Vessels/owners/ agents will intimate the Sethusamudram Channel Authority ofthe impending arrival of vessel alongwith their registration and cargo detailsand ETA fairway buoy at least 48 hours before, in the specified format.

Two hours before the arrival, vessels will establish effective two-waycommunication on VHF with the Channel Authority/ Channel Control Tower(CCT) and workout modalities for the transit, pilot embarkation, etc.

Designated pilots will carryout compulsory pilotage for the vessels in pilotagewaters of the SSC, for which the vessels will render all possibleassistance as per the IMO conventions, including the provision of proper pilot

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ladders, etc. Day and night navigation will be permitted based on the weatherfactors and its effect on the vessel in constrained channel, fishing density alongthe route and operational state of the VTMS and the ships navigationalequipment.

CCT at either end of the Channel will establish VTMS control on real-time andensure safe passage. They will be authorized to enforce regulatory measures

andcontrol, without impinging upon the Masters full responsibility to his ship safetyinprevailing conditions at sea.

CCTs will keep track of the vessel movements throughout the transit and keeprecords for meaningful investigations into any violation/ accident/mishap, etc inthe SSC area.

CCT at Rameswaram Island will be the Master VTMS Control Station. Any directives to the vessels and vice versa on the safety and security issues to

meet the international / national regulations will be routed through the CCTswithin the notified Channel limits.

The Channel Authority will issue detailed orders/ instructions on safe operations

and will be legally empowered to control, investigate and take prompt actionagainst errant vessels/staff. Traffic regulatory measures will be enforced for allvessels, including the fishing vessels. Convoy movements will be adopted withNavy/ Coast Guard assistance, based on security inputs along the InternationalBorder Line with Sri Lanka.

Regular patrolling of the Channel will be enforced along the SSC by the Channel

Authority, akin to the highway patrol, for safety and security of the vessels.

MARPOL 73/78 provisions will be complied with by the vessels and coast guardwillassist the Channel Authority in cleanup measures and prosecuting theoffenders.

The Channel Authority, ship owners, agents and masters of the vessels will establishwell considered methods and procedures to ensure safe navigation through the SSCand thereby protect the marine environment in the area, as well as the safety andsecurity of the vessel and her crew members.

5.3.2 Toll Collection Plan

The Port users who use the port services like wharfage, Berth Hire, Marine charges,Customs Overtime, annual entry fee for forklift cranes, cranes etc. pay the fee to theconcerned port trust using the Electronic Data Interchange (EDI). The port trust raisesthe bill on the users with full particulars (type of charge/the date/shift etc) and sendstheir billings to the port users bank through EDI for realization of the same.

The Users Bank, on receiving the text files from Port converts the same intotransaction instructions and sends the list of users whose accounts have beensuccessfully debited/insufficient balance to debit the account through EDI.

It is understood that the Sethusamudram Corporation will also use the same modusoperandi for receiving payments from the Sethusamudram canal users. However theremay be slight changes in this mode, once the final toll collection plan is developed.

5.3.3 Maintenance Dredging Plan

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SCL plans to give maintenance dredging work to a dredging company, which hasexpertise in undertaking maintenance dredging works. Keeping this in mind, SCLproposed to float tenders to select the most suitable dredging company forundertaking maintenance dredging work in the channel, once the project isoperational.

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6. TRAFFIC ASSESMENT

6.1 Introduction

Total traffic for the Sethusamudram Channel can be put into two categories:

a. Coastal Shipping Vesselsb. Overseas Shipping Vessels

In order to identify the number of transit vessels that would navigate throughtheSethusamudram Channel, the Technical Consultant conducted a traffic assessmentstudy. The approach to the traffic study included following activities:

1. Data Collection and Review2. Questionnaire survey and Interviews with the Major Ports, Directorate General

of Shipping and Shipping Corporation of India3. Traffic Growth Rate Forecast4. Review of current ports and maritime traffic in the region5. Assessment of the future regional traffic by commodity type6. Assessment of Origination Destination of cargo that is likely to pass through

Sethusamudram Ship Channel7. Preparation of the traffic demand forecast for Sethusamudram Ship Channel

In order to calculate the number of vessels using the channel, Technical Consultantfirst reviewed the traffic profile of the Indian ports. The traffic in year 2001-02, wasused as base traffic. The growth rate for the port traffic has been assumed on the basisof GDP growth rate of India. Traffic forecast, thus developed is an unconstrainedforecast.

After this, based on the origination destination pair, as discussed in later sections,which might be using the SSC, above port traffic has been converted into SSC Traffic,with unrestricted draft. This traffic estimate was then re-estimated after considering

the draft restriction in the Channel. This traffic was further adjusted for downtimepredictions for the Channel. Once the total cargo volume was established, averageparcel sizes to the destination ports was calculated. This average parcel size was usedto convert the cargo volume into the number of transit vessels every year.

6.2 Data Collection & Review

Sethusamudram Project has been in planning since independence, and each of theproject committees formed since then has estimated the traffic potential of thechannel. A snapshot of the each of the estimation, undertaken since is given below:

S No Year Proposal

No. of Transits

per annum

NRT* (in LakhTonnes per

annum)

11956

Sethusamudram Project Committeeprojection for 1961

1,613 64

2 1960 Govt of Madras 2,212 93

3 1963 Mr. K N Srinivasan, Projection for 1968 1,933 79

41968

Mr. Venkateshwaran, SethusamudramProject

102

5 1968 Mr. Natarajan, 2,371 105

Projection for 1974 3,300 150

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6 1983 Mr. H R Laxminarayan

Projection for 1980 2,100 160

Projection for 1989-90 3,000 230

71996

Pallavan Transport Consultancy ServicesLtd, Projection for 2000

4,211 388.5

8 2004 Considered by NEERI 2,004 153

*NRT Net Registered Tonnage

Technical Consultants also prepared and distributed a questionnaire (seeking detailsrelating to the quantum of cargo with type, mode of transportation, ocean freight costper tonne, present and future cargo volumes, origin and destination of cargo, etc.) forobtaining data, opinion and requirements of probable users of Sethusamudram ShipChannel. The questionnaire was sent to the following organizations:

Kolkata Port Trust

Paradip Port Trust

Visakhapatnam Port Trust

Ennore Port Trust Chennai Port Trust

Tuticorin Port Trust Cochin Port Trust

New Mangalore Port Trust Mormugoa Port Trust

Jawaharlal Nehru Port Trust Mumbai Port Trust

Kandla Port Trust

6.3 Traffic Growth Rate Forecast

Various methods of traffic projections for ports, used frequently by consultants, are:

GDP Method of projection

Trend Based projection

User based projections

The traffic projection for a port is normally developed by considering the developmentsin the immediate neighborhood, as in the case of Trend Based Projections. However,the approach to traffic projection for the Sethusamudram Channel has to be differentfrom that for a port, as the ships using this Channel will serve the entire nation linkingports on the west coast and those on the east coast. Therefore, it is consideredappropriate to relate traffic of SSC to the growth of GDP for the Country as a whole.

The relationship between the GDP and the traffic in tonnes, was established using thestatistical regression technique. As a first step toward forecasting the traffic growth

rate, GDP forecast for the horizon period was established. Methodology for GDPforecast is explained below:

6.3.1 GDP ForecastIn order to establish the GDP growth rate of India, during the projection period of SSC,consultants carried out the Trend analysis of GDP growth over a 20 year period of 1982 2002, and also incorporated the GDP forecast targets developed by PlanningCommission and other economic monitoring agencies

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6.3.1.1 Past GDP Trends

The growth pattern for Indian Economy from 1982 to 2002 is given below

Constant 1993 prices

Period %1982 - 1992 5.39

1992 - 2002 6.17

1982 - 2002 5.75

1982 - 1987 5.22

1987 - 1992 5.96

1992 - 1997 7.07

1997 - 2002 5.63

It is observed that in all the four 5-year periods since 1982 the average growth ofeconomy is over 5%.

6.3.1.2 GDP Forecast Targets

In order to provide a close estimation of the GDP growth of the country, consultantspolled the GDP forecast rate provided by planning commission, as well as various othereconomic agencies. Planning Commission, which indicates the forecasts of nationaleconomy, in its 10th plan period has targeted an average growth of 8% as compared tobase scenario of 6.5%.

Apart from the targets of planning commission, consultants also noted the growthrates projected by various international funding agencies and credit rating agencies.

The target envisaged by these agencies for year 2003 04 was as follows:

Sr.No.

Agency GDP in 03 04

1 ICRA 5.5

sethusamudram shipping channel project : who is responsible? - naresh kadyan

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