Will ships use the canal at such costs?

K.S.Ramakrishnan

Former Deputy Chairman, Madras Port Trust

16 July 2005

The basic justification of the Sethusamudram Ship Canal Project (SSCP) is that it will reduce the distance between Kolkata and Tuticorin by 340 nautical miles and between Chennai and Tuticorin by 434 nautical miles, thereby saving for the ships plying between these places both fuel cost and time involved in sailing the additional distance.

This justification will be readily valid if the SSC is a free seaway which ships can sail through without any payment to the project authority.

But the SSC can not be a free seaway… as ships will be allowed to pass through the canal only under regulated pilotage, and pushed /pulled by tugs belonging to the SSCP.

Obviously, even while saving on the cost of fuel, a ship passing through the canal will be expected to make a payment to the SSCP for using the facility.

The likely pilotage charge to be levied by the SSCP has not been made public, but an approximate figure can be guessed by extrapolating similar charges levied by the Chennai and Tuticorin Port at present.

The approach channel to the Chennai port has a length of 7 km. A 36,000 tonne coal ship calling at Chennai has to pay approximately Rs.21.75 a tonne, or a total of Rs.7.83 lakh, as pilotage charges averaging Rs.1.11 lakh per km.

Tuticorin's approach channel is only 2.4 km long and an identical coal ship calling at this port is levied Rs.17 a tonne, or a total of 6.12 lakh, towards pilotage, working out to Rs.3 lakh per km.

(The comparative lower rate per km at Chennai is because the capitol cost of digging the much older channel has been amortised a long time ago.)

The projected length of the Sethusamudram channel is 56 km. Both capital and recurring cost will be much higher for the SSCP than for the Chennai and Tuticorin ports, and its levy of pilotage per km is likely to be substantially higher than that of even the latter if it has to have a 9 per cent return on the capital.

Even if the Chennai rate is assumed, the same ship will have to pay over 60 lakhs to the SSCP for passing through the canal.

But the cost of fuel that will be saved by the same ship by taking the shorter route through the Sethusamudram canal instead of sailing round Sri Lanka will be less than Rs. 7 lakh, which is even less than 1/8 of SSCP's likely levy.

The saving in sailing time for that ship will also be substantially less than the 36 hours projected by the SSCP because the ship can not be towed through the canal at its normal speed through the canal, and the 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 8 times the cost of fuel saved.