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Sethusamudram Shipping Channel Project : Who is responsible? - Naresh Kadyan

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					SETHUSAMUDRAM SHIP
  CHANNEL PROJECT

INFORMATION MEMORANDUM




  Financial Advisor & Sole Arranger




           SEPTEMBER 2005
Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project



                                  IMPORTANT NOTICE

This Project Information Memorandum (PIM) contains proprietary and confidential
information regarding Sethusamudram Ship Channel Project (SSCP). The PIM has been
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 of
circulation among the potential lenders and investors. The financial projections
represent, to the best of knowledge and judgment, SCL’s expected financial position,
results of operations and cash flow situation for the projection period. These projections
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 the
work performed by UTIB is not in the nature of audit or due-diligence. Neither UTIB, nor
any of the directors, employees or advisors make any expressed or implied
representation or warranty and no responsibility or liability is accepted by any of them
with respect to the estimates or forecasts set forth in this PIM or the underlying
assumptions on which they are based or any credit decision taken on the basis of this
PIM.

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 contained
herein, may be reproduced or passed to any person or used for any other purpose other
than stated above.




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Sethusamudram Corporation Ltd                                                                                Information Memorandum
Sethusamudram Ship Channel Project



                                         TABLE OF CONTENTS
1.     EXECUTIVE SUMMARY ......................................................................................................... 7
2.     THE PROJECT COMPANY .................................................................................................... 9
   2.1    Particulars............................................................................................................................... 9
   2.2    Shareholding & Capital Structure ..................................................................................... 9
   2.3    Shareholding Pattern ........................................................................................................... 9
   2.4    Promoter Details ................................................................................................................. 10
     2.4.1      Tuticorin Port Trust (TPT) .............................................................................................. 10
     2.4.2      Chennai Port Trust (CPT) ............................................................................................ 10
     2.4.3      Ennore Port Ltd. (EPL) ................................................................................................. 11
     2.4.4      Paradip Port Trust (PPT) .............................................................................................. 12
     2.4.5      Vishakhapatnam Port Trust (VPT) ............................................................................. 12
     2.4.6      Shipping Corporation of India (SCI) ........................................................................ 13
     2.4.7      Dredging Corporation Of India (DCI) ..................................................................... 14
   2.5    Organization & Management ......................................................................................... 15
     2.5.1      The Board of Directors................................................................................................ 15
   2.6    Organization Structure and Key Executives .................................................................. 15
3.     THE PROJECT ...................................................................................................................... 16
4.     SCOPE OF WORK ............................................................................................................... 18
   4.1    Channel Design .................................................................................................................. 18
     4.1.1      Introduction ................................................................................................................. 18
     4.1.2      Vessel Size Design ....................................................................................................... 18
     4.1.3      Number of Lanes......................................................................................................... 18
     4.1.4      Channel Width ............................................................................................................ 19
     4.1.5      Channel Depth ........................................................................................................... 20
     4.1.6      Extra Widening at Bends ........................................................................................... 20
     4.1.7      Channel Dimensions .................................................................................................. 20
   4.2    Dredging Requirements .................................................................................................... 21
     4.2.1      Introduction ................................................................................................................. 21
     4.2.2      Capital Dredging ........................................................................................................ 21
     4.2.3      Maintenance Dredging ............................................................................................ 22
     4.2.4      Dumping Areas ........................................................................................................... 22
     4.2.5      Dredging Methods ..................................................................................................... 23
     4.2.6      Proposed Dredging Methods For SSCP .................................................................. 23
   4.3    Ancillary Facilities................................................................................................................ 24
     4.3.1      General ......................................................................................................................... 24
     4.3.2      Service Jetty................................................................................................................. 24
     4.3.3      Shore Facilities ............................................................................................................. 24
     4.3.4      Development of Fishing Harbour ............................................................................. 25
   4.4    Vessel Traffic Management System ................................................................................ 25
     4.4.1      Introduction ................................................................................................................. 25
     4.4.2      Architecture ................................................................................................................. 25
     4.4.3      Radar Locations .......................................................................................................... 25
   4.5    Flotilla & Navigational Aids ............................................................................................... 26
5.     THE EXECUTION STRATEGY ................................................................................................ 27
   5.1    Dredging Works .................................................................................................................. 27
     5.1.1      Details of MoU with DCI ............................................................................................. 27
     5.1.2      International Competitive Bidding .......................................................................... 27
   5.2    Implementation Schedule ................................................................................................ 29
   5.3    Operations Plan .................................................................................................................. 29



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Sethusamudram Corporation Ltd                                                                              Information Memorandum
Sethusamudram Ship Channel Project

     5.3.1     Channel Navigation Plan .......................................................................................... 29
     5.3.2     Toll Collection Plan ..................................................................................................... 30
     5.3.3     Maintenance Dredging Plan.................................................................................... 30
6.      TRAFFIC ASSESMENT .......................................................................................................... 32
   6.1    Introduction ......................................................................................................................... 32
   6.2    Data Collection & Review ................................................................................................ 32
   6.3    Traffic Growth Rate Forecast ........................................................................................... 33
     6.3.1     GDP Forecast ............................................................................................................... 33
     6.3.2     Traffic Growth Rate Forecast .................................................................................... 35
   6.4    Traffic Analysis – Indian Ports ............................................................................................ 37
   6.5    Traffic forecasts ................................................................................................................... 37
   6.6    Traffic Forecasts - Ports ...................................................................................................... 38
   6.7    Vessel Size Review and Design Vessel ............................................................................ 39
     6.7.1     Review of Existing and Ordered Vessel Fleet at Global Level ........................... 39
     6.7.2     Vessel Fleet on Future Order ..................................................................................... 40
     6.7.3     Summary of the Vessel Review ................................................................................ 40
     6.7.4     Vessel Trend Review ................................................................................................... 40
     6.7.5     Design Vessel Size for Sethusamudram Ship Channel ......................................... 41
   6.8    Vessel Traffic Forecast - Sethusamudram Ship Channel ............................................ 41
     6.8.1     Introduction ................................................................................................................. 41
     6.8.2     Origination Destination Pairs relevant for SSCP..................................................... 42
     6.8.3     Indian Ports - Sethusamudram Share ...................................................................... 44
     6.8.4     Average Parcel Size ................................................................................................... 45
     6.8.5     Number of Vessels through SSC ............................................................................... 45
     6.8.6     Total SSC Traffic ........................................................................................................... 49
     6.8.7     SSC Traffic after, DOWNTIME..................................................................................... 49
7.      TARIFF CALCULATION ....................................................................................................... 51
   7.1    Introduction ......................................................................................................................... 51
   7.2    Savings on Fuel Cost .......................................................................................................... 51
   7.3    Charter Savings ................................................................................................................... 52
   7.4    Channel Tariff Rate ............................................................................................................ 53
8.      ENVIRONMENT AND SOCIAL IMPACT ASSESSMENT ....................................................... 55
     8.1.1     Environmental Regulations ....................................................................................... 55
     8.1.2     Impacts due to the Project ....................................................................................... 55
     8.1.3     Impacts on Landbased Facilities ............................................................................. 55
   8.2    Impacts on Productivity and Ecology in GOM/Palk Bay ............................................ 56
     8.2.1     Socio-economic Impact ........................................................................................... 57
     8.2.2     Environmental Management Plan .......................................................................... 57
   8.3    Environmental Monitoring ................................................................................................. 59
     8.3.1     Institutional Mechanism for Environmental Management Plan ........................ 60
9.      SHIP CHANNEL – INTERNATIONAL EXPERIENCES ............................................................ 61
   9.1    Panama Canal ................................................................................................................... 61
   9.2    Suez Canal ........................................................................................................................... 62
10.     PROJECT AND O&M COST ................................................................................................ 64
   10.1     Operation & Maintenance Cost ................................................................................. 64
     10.1.1 Maintenance Cost ..................................................................................................... 64
     10.1.2 Operations Cost .......................................................................................................... 65
11.     MEANS OF FINANCE ......................................................................................................... 67
12.     FINANCIAL PROJECTIONS ................................................................................................ 68
   12.1     Sensitivity Analysis ........................................................................................................... 72
   12.2     Project IRR ........................................................................................................................ 73
13.     RISK ANALYSIS & MITIGATION .......................................................................................... 75



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Sethusamudram Corporation Ltd                                                                     Information Memorandum
Sethusamudram Ship Channel Project

14.   INDICATIVE TERM SHEET .................................................................................................... 77
15.   CONCLUSION .................................................................................................................... 81




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Sethusamudram Corporation Ltd                            Information Memorandum
Sethusamudram Ship Channel Project



                               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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Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project



                 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 Construction
IEE          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 & Maintenance
POL          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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Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project


1. EXECUTIVE SUMMARY

India has a long peninsular coast of 3,554 nautical miles and has had maritime trade with
various countries of the world for more than 3000 years. Similarly, shipping trade between
the east and west coasts of India has prevailed for a long time. However, the Indian
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 western
countries with destination in the east coast of India and also Bangladesh, China etc have
to navigate around Sri Lanka. The existing waterway between India and Srilanka in the
Gulf of Mannar and Palk Strait, is shallow at many places and does not have sufficient
draft to allow for the movement of ships. Further, the presence of a sandstone reef,
known as Adams Bridge, located southeast of Rameswaram near Pamban, and
connecting the Talaimannar Coast of Sri Lanka also hinders the movement 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 to call
on East coast ports and vice versa have to travel around the Sri Lankan coast thereby
resulting in increase of travel distances, travel costs and time, etc. Apart from this, 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 of
India and to improve the navigation within territorial waters of India, a navigation
channel, named Sethusamudram Channel, connecting the Gulf of Mannar and Bay of
Bengal through Adam's Bridge, Palk Bay and Palk Strait has been envisaged to enable
ships upto a definite DWT moving between the east and west coasts of India to traverse
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 National
Environmental Engineering Research Institute (NEERI) was appointed to prepare an Initial
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 the Marine
National park at Gulf of Mannar. Following this study, NEERI in 2004, also carried out the
detailed Environment Impact Assessment Study. During 2004, TPT appointed L&T –
Ramboll Consulting Engineers also to prepare a Detailed Project Report (DPR) for the
Project.

For implementation of the Sethusamudram Ship Channel (SSC) Project, Government of
India (GoI) has promoted a Special Purpose Vehicle (SPV) company by the name of
Sethusamudram 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 of
India Ltd. (DCI) and Shipping Corporation of India Ltd. (SCI). TPT would also be acting as
the nodal agency for the implementation of the project.

As per the DPR, the Channel would lie between from Latitude 910’N to 1005’N latitude
and 790’E to 8005’E, longitude. The Channel, which will be called Sethusamudram
Channel, would have two legs, one in the Adam’s Bridge area, where sea - bed depth is
3 m and other is in the Palk Strait, where average depth is 6 to 8 m. In Gulf of Mannar and
other stretches of Palk Bay, the natural depth available will be enough for safe



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Sethusamudram Corporation Ltd                                        Information Memorandum
Sethusamudram Ship Channel Project

navigation of shipping vessels. The approved length of the channel in various sections is
167.22 Km.

The two legs of the channel in Palk Strait and Adam’s Bridge have further been divided
into 4 sections for awarding the dredging contract, so that dredging work is undertaken
simultaneously in all the sections, for faster completion of the project.

TPT has already awarded dredging contract for one section of the channel in Palk Strait
to 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 is
expected to complete by 31st May 2008, and the project is scheduled to be operational
from August 2008.

The Channel, once operational, will be beneficial to Indian coastal traffic, as well as the
foreign vessels touching the ports on eastern coast of India, as it will enable ships to travel
lesser distance. Ships using the Channel will be saving an average of 335 Nautical Miles
(NM) in distance as compared to the existing route. This would result in savings 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 for using the Channel. This
will offer more efficiency to shipping liners as well as allow them 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 Channel efficiently.

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

As per the cost estimates prepared, the cost of completion of SSC project would be Rs
24274 Million, which will be funded through debt equity of approximate 1.5:1. Total
equity 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 Commercial Banks in India
and abroad in the form of Rupee Term Loan (RTL) / Non Convertible Debentures (NCDs),
Foreign Currency Loan (FCL) & Zero Coupon Bond (ZCBs) in the ratio of 30:30:40. The
debt raised for the project is to be guaranteed by the Government of India (GoI). The
average DSCR of the total debt for the project works out to be 1.92. Based on the
estimated cash flow accruing from the project, financial structuring and envisaged
support from the promoters, the SSC project is expected to be a bankable proposition.




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Sethusamudram Corporation Ltd                                                 Information Memorandum
Sethusamudram Ship Channel Project


2. THE PROJECT COMPANY

Sethusamudram Corporation Ltd (SCL) was incorporated on December 6, 2004, to
develop and operate a navigation channel along the territorial waters of India for
connecting Gulf of Mannar with the Palk Bay, named as Sethusamudram Channel to
enable 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, Uthandi
                                     Chennai- 600 119
                                     Tamilnadu, India
 Communication Address         :     The Chairman & Managing Director
                                     Sethusamudram Corporation Limited
                                     C/o.Tuticorin Port Trust
                                     Tuticorin – 628 004
                                     Tamilnadu, India
 Date of Incorporation         :     December 06, 2004



2.2 Shareholding & Capital Structure

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

 As on 31st March, 2003
 Authorized Share Capital
                                                                            1000.00
 100,00,00,000 equity shares of Rs. 10/- each
 Issues, Subscribed and Paid-up Capital
                                                                              64.23
 6,42,30,000 equity shares of Rs. 10/- each
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                  300                       3%
                 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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Sethusamudram Corporation Ltd                                        Information Memorandum
Sethusamudram Ship Channel Project



2.4 Promoter Details

Sethusamudram Corporation Ltd (SCL) is being promoted by GoI, along with other Major
ports in the eastern coast of India, SCI and DCI, to develop the Sethusamudram
Navigational channel. GoI has appointed Tuticorin Port Trust as the nodal agency for the
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 latitude 8 
45’ North and longitude 78 13’ East. It was declared as 10th Major Port of India in 1974.
Tuticorin Port Trust, the present administrative body of the port, was constituted in 1979,
by merging Tuticorin Minor Port and the newly developed Major Port. Presently, Tuticorin
Port has 13 berths, which mainly handle Dry Bulk cargo, container vessels 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 has
increased 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 all major
ports in 2003-04.

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

TPT’s operating income has been increasing over the past 4 years. The port has been
generating 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 also registered
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           124.62
Operating Expenditure               60.12          58.09           60.99            64.78
Operating Surplus                   54.44          58.96             63.6           59.84
Finance and misc. Income            16.71          18.33           20.15            25.32
Finance and misc. Exp.              33.77           36.8           33.18            29.50
Net 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 situated on
the Coromandel Coast in South-East India at latitude of 13 6’ North and longitude 80
18’ East. The inner harbour at Chennai Port has a maximum draft of 11 m. The Port has 23
berths, of which 7 are in the outer harbor.




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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project

Chennai Port carried 10.65% of the total traffic at all major ports in 2003-04. It handled
36.71 million tones of cargo in 2003-04. In the last four years, dry bulk has constituted
almost 50% of the traffic throughput at Chennai Port. With a share close to 25%, liquid
bulk was the next most commonly handled commodity. Container cargo was third, its
share increasing from 14.53% in 2000-01 to 23.5% in 2003-04. Break-bulk cargo constitutes
less than 5% of the total cargo handled at the Port.

CPT has had an operating surplus over the past four years. The operating surplus for 2003-
04 was Rs. 107.17 crores, an increase of 64.34% over the previous year. CPT has registered
a net surplus over the past 4 years, although it fell steeply in 2003-04 by 41.43% over the
past year to Rs. 74.19 crores.
                                                                             (Rs. crores)
Description                      2000-01        2001-02           2002-03         2003-04
Operating Income                   370.49           371.02           335.46          368.56
Operating Expenditure              324.85             308.0          270.25          261.39
Operating Surplus                   45.64             63.02           65.21          107.17
Finance and misc. Income           104.24           289.59           110.58           45.02
Finance and misc. Exp.             112.28           138.64            49.11            78.0
Net Surplus/deficit                   37.6          213.97           126.68           74.19


2.4.3   Ennore Port Ltd. (EPL)

Ennore, the first corporatized major port in the Country, started commercial operations in
June 2001. Ennore Port is situated on the Coromandal coast about 24 km north of
Chennai Port. It is located at a latitude of 13 15’ N and a longitude 8020’ East. The
depth at Port basin is 15.5 metres. The port has 2 berths, which handle thermal coal for its
captive user, the Tamil Nadu Electricity Board.

Since the commencement of operations, traffic at the Port has grown by almost 200%. In
2003-04 traffic growth was 9.33%, compared to the average growth of 9.91% for all major
ports in the same year. At a cargo throughput of 9.27 million tones, Ennore carried 2.69%
of the total traffic carried at all major ports in 2003-04.

EPL’s operating income has been increasing steadily. In 2003-04, its operating revenue
was Rs. 85.64 crores, an increase of 11.4% over 2002-03. EPL has had an operating surplus
since its inception, though it registered a net deficit of Rs. 5.79 crore in 2003-04.

                                                                            (Rs. crores)
        Description                     2001-02         2002-03          2003-04
        Operating Income                    30.78          76.87             85.64
        Operating Expenditure               16.12            22.6            37.76
        Operating Surplus                   14.66          54.27             47.88
        Finance and misc. Income              .19            1.18             1.68
        Finance and misc. Exp.              50.77          48.32             55.35
        Net Surplus/Deficit               (35.92)            7.13           (5.79)




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project

2.4.4   Paradip Port Trust (PPT)

Paradip Port started its operations in March 1966, as 8 th Major Port in the Country. It has
an artificial lagoon-type harbour protected by two rubble-mound break-waters. Paradip
Port is a deepwater port on the eastern coast of India at latitude of 20  15’44’’ North and
longitude 86 40’34’’ East.

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 raw materials.

During the four-year period, from 2000-01 to 2003-04, traffic at Paradip has grown by a
CAGR 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 25.3 million
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 at
Paradip. Liquid bulk is the next most commonly carried commodity, its share declining
from 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 share was 0.2% in
2003-04.

During the past 4 years, PPT’s operating income has been increasing steadily. The Port
has 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           41.27
Operating Expenditure                15.09          20.09          21.18           21.29
Operating Surplus                    11.12           9.63          16.94           19.98
Finance and Misc. Income              2.24             3.5           2.53           1.88
Finance and misc. Exp.                6.07           9.84          11.58            9.08
Net 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 eastern
seaboard of India, known as the Circars Coast at latitude 17  41’34’’ North and longitude
8317’45’’ East. It is located in the Southern state of Andhra Pradesh, and serves as the
middle point distribution base for the southern, eastern, central and northern states of
India.

The inner harbour of the port has 13 multi-purpose berths, 2 oil berths and one captive
berth exclusively for fertilizer and fertilizer raw materials. The maximum draft available is 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 to
the average growth of 6.9% for all major ports. Vizag carried 13.85% of the total traffic
carried at all major ports in 2003-04. It carried 47.7 million tones in 2003-04, an increase of
3.76% over the previous year.



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Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project



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-bulk
follows at 3-4%. Container cargo contributes less than 1% to the total cargo throughput
at Vizag.

The Port’s operating income has been steadily increasing over the past 4 years and it
also reported operating surplus during the period. The operating surplus for 2003-04 was
Rs. 233.03 crores, an increase of 11.03% over the previous year. VPT has registered a net
surplus over the past 4 years. In 2003-04, its net surplus was Rs 77.81crores, 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           233.03
Finance and Misc. Income              49.1              44.3           14.04            11.12
Finance 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 2 nd October, 1961, by the
amalgamation of Eastern Shipping Corporation and Western Shipping Corporation.
Starting out as a marginal Liner shipping company with just 19 vessels, the SCI today has
metamorphosed into a conglomerate having 83 ships of 4.6 million DWT with substantial
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 shipping services
and its fleet includes ten different types of vessels: dry cargo vessels, cellular container
vessels, bulk carriers, crude carriers, product carriers, combination carriers, LPG/ammonia
carriers, phosphoric acid/chemical carriers, offshore supply vessels and passenger-cum-
cargo vessels.

For the financial year 2003-04, SCI recorded a turnover of Rs. 3,100.34 crores and a Net
Profit of Rs. 626.99 crores. The company declared and paid a special interim dividend of
170% for the Year 2003-04. Snapshot of the Company’s financials for the last few years is
presented below:
                                                                  (Rs. crores)
                         1999-2000    2000-01      2001-02       2002-03       2003-04
Equity 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




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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 dredging
company in India and the seventh largest dredging company in the world, in terms of
the capacity. DCI sources integrated dredging services to India’s major ports in the form
of maintenance dredging, capital dredging, reclamation, hydrographic surveys and
beach nourishment.

DCI has leading presence in maintenance dredging and it carries out limited capital
dredging in India as well as the international markets. The Company has an overall
market share of 75% of an estimated 108 million cubic meter dredging market in India,
with ~85% market share in maintenance dredging. DCI’s main client is the Kolkotta Port
Trust, which accounts for 45% of its annual maintenance dredging revenues. The Cochin
Port, New Mangalore Port Trust, JNPT, Vishakhapatnam Port and Paradip Port are DCI’s
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, these
dredgers have a capacity of 79.85 million cubic meters. DCI is currently running at 100%
capacity utilization with its dredgers deployed across Indian ports and in export markets.
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           176.44
PAT                             108.71           101.55           161.83           170.01




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Sethusamudram Corporation Ltd                                         Information Memorandum
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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 a
minimum 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 to appoint
director (s) u/s 408 of the Companies Act and such directors shall not be liable to 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 and
                                               Chairman, Tuticorin Port Trust
        2.    Vacant                           CMD, SCI
        3.    Capt. N K Gupta                  CMD, DCI
        4.    Shri K Suresh                    Chairman, Chennai Port Trust
        5.    Shri M Raman                     Chairman, Ennore Port Ltd
        6.    Shri R K Kishore                 Chairman, Vishakhapattanam Port Trust
        7.    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 Government Company
pursuant to Section 617 of Companies Act, 1956. As can be observed from the above,
SCL’s 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 from the Government of
India, who would be in a position to provide assistance and guidance 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, is overseeing
the activities for the implementation of the Project. His present team from Tuticorin Port
Trust, who are coordinating the implementation of the project, is assisting him. Their rich
experience in respective functions would help SCL in implementing the project within the
expected time frame and cost.

SCL shall be carrying out further recruitments in line with the progress of the Project in due
course of time. The proposed organization chart of SCL indicating the key executives
and their responsibilities is given at Annexure - I.




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3. THE PROJECT

India has a long peninsular coast of 3,554 Nautical Miles and has had maritime trade with
various countries of the world for more than 3000 years. Similarly, shipping trade between
the eastern and western coastlines of India has also been prevailing for a long time.
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 of India and other
western countries destined for the eastern coast of India and Bangladesh, China, etc.
have to navigate around the Sri Lankan coast. The existing waterway in the Gulf of
Mannar and Palk Strait is shallow at many places and the draft is not suitable to allow for
the movement of ships. Further, the presence of a sandstone reef, known as Adams
Bridge, located south east of Rameswaram near Pamban, and connecting the
Talaimannar Coast of Sri Lanka hinders the movement 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 to call
on East coast ports and vice versa have to travel around the Sri Lankan coast which
results in increased travel distances and time and consequently the costs. Ships
belonging 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 of
India and to improve the navigation within territorial waters of India, a navigation
channel, named Sethusamudram Channel, connecting the Gulf of Mannar and Palk Bay
through Adam's Bridge has been envisaged so that the ships moving between the east
and west coasts of India need not go around Sri Lanka.

Sethusamudram Ship Channel project, an ambitious scheme has been on the drawing
boards for nearly 140 years. It was originally conceived in 1860 by the British Commander
A. D. Taylor of the Indian Marines. It was followed by eight proposals for such project
during the pre-independence itself. In 1955, GoI formed a Sethusamudram Project
Committee headed by Shri. Ramaswamy Mudaliar. The Project gained momentum after
serious public opinions and representations from the Members of Parliament and
Members of Legislative Assembly of Tamil Nadu. This resulted in the formation of the H R
Laximinarayana Committee in 1981. Some further studies were also carried out after this
and in 1998 National Environmental Research Institute (NEERI) conducted Environmental
Impact Assessment (EIA) studies. During the year 1999, the Minister of Defence, GoI
announced the GoI’s intention to implement the Project.

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

The proposed Channel would have two legs, one in the Adam’s 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 of
Mannar and other stretches of Palk Bay, the natural depth available will be enough for
safe navigation of shipping vessels. The length of the Channel in various sections is as
under:




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      Section                 Length in Km                           Area

        G-A                           4.37                       Adam’s Bridge
        A-B                           17.3                       Adam’s Bridge
        B-C                          13.38                       Adam’s Bridge
        C-D                          37.44                          Palk Bay
        D-E                          40.48                          Palk Bay
        E-E4                         54.25                         Palk Strait
                                     167.22

The Sethusamudram Ship Channel is being developed at a distance of more than 20 Km
from Shingle Island of Gulf of Mannar near Dhanuskodi. The channel would connect Gulf
of Mannar and Bay of Bengal through Adam’s Bridge, Palk bay and Palk Strait running
parallel to the Indo-Sri Lankan Medial Line at a minimum distance of 3Km from the
border, within India’s territorial waters. The total length of the channel is 167 Km, which
would be 12m deep and 300m wide at bottom.

In order to execute the Sethusamudram Project, TPT appointed L&T - Ramboll, as the
Technical 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 the
Project. 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 a
comprehensive design process, which specifies the two main dimensions of the
navigational channel i.e. depth and width of the channel.

Design of the Sethusamudram Channel has been so planned that it will be able to
accommodate 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 of shipping vessels
within the Sethusamudram Channel, effects of winds, waves, tides, currents, visibility, and
navigational aids have also been considered in design of the Channel. The density and
type of traffic (one- or two-way traffic), ship speed, turning basins, and tug assistance are
other factors that have been considered in the Channel design.

4.1.2   Vessel Size Design

For planning and designing of a navigation channel, consideration of most suitable
vessel size / design vessel size is very essential, as it will influence the size of the channel. In
order to identify the ideal vessel size for the Sethusamudram Channel, the Technical
Consultant (TC), carried out a comprehensive vessel size analysis, on the basis of existing
chartering practices and parameters of the loading and unloading in the ports. The TC
also analyzed the ordered vessel fleet in the market, as well as the existing vessels. Based
on the above analysis, the TC has identified the band of the vessel size, which would be
expected to be sailing through the Channel. Based on the vessel size analysis, a summary
of the vessels, which will be using the Channel, is provided 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 the present,
the project does not have plan to increase the dredge depth to accommodate higher
vessel sizes as this would require a large amount of dredging which would affect its
financial viability. Hence the channel dimensions have been planned using the above
vessel sizes.

4.1.3   Number of Lanes

Number of lanes of a navigational channel is determined by the volume of traffic it
intends 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 the
Sethusamudram Channel as single lane channel. However, it meant a waiting period of
2 to 6 hours for ships using the channel, which would have reduced the timesavings and
discouraged the users. Hence, it was decided to design the Channel for two-lane traffic,
so that no waiting time would be involved for ships using the Channel. The occupancy



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levels of the two lane Sethusamudram Channel, vis-à-vis projected traffic is provided
below:

                                                              Short Term         Medium
S No                        Description                     2008      2013        Term    Long Term
  1       Annual Vessel Traffic                             3,055    4,005        4,878     7,141
  2       Annual Number of Operations (Days)                330       330          330       330
  3       Number of Transits / day                           9         12          15        22
  4       Channel Length (NM)                                90        90          90        90
  5       Vessel Speed                                       8         8            8         8
  6       Time 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 the year
           2025.
          As per the IS4651standards a sight distance of 7 to 8 times LOA is recommended
           for the loaded ships. By allowing same sight distance between vessels, a stopping
           distance of (8 X 200) 1,600 m between vessels is recommended. In Panama
           Channel a sight distance of 2.5 Km is adopted. By adopting 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 knots speed).

Thus, the inter arrival time assumed in the design, for two lane channel, is sufficient even
for the peak traffic in Year 2025. Hence, even if the traffic build up is more than the
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; the
speed of the vessel relative to the channel bottom; the traffic density; the characteristics
of other vessels encountered in the channel; whether channel is open or restricted;
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 a
         ship maneuvers, without encroaching on the safe bank clearances. Based on the
         PIANC guidelines, it has been decided to keep the width of maneuvering lane at
         1.8 B (where, B represents the Beam width of the design vessel i.e. 33 meters) 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 depending
         upon relative speeds of vessels and proximity of bows or sterns during the
         passage. To minimize the impact of passing, a ship clearance lane is provided. As
         per the PIANC guidelines and providing for heavy ship traffic density, this lane has
         been kept at 1.7 B (i.e. 56.1metres)
      3. Bank Clearances: Ships moving closer to the bank have a tendency to move
         towards the bank. To avoid this, additional channel width has been provided




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Sethusamudram Corporation Ltd                                    Information Memorandum
Sethusamudram Ship Channel Project

       outside the ship-maneuvering lane. As per the PAINC guidelines, it has been
       decided to provide a width of 0.5B (i.e. 16.5 meters) on each side of the bank.
    4. Additional Clearances: Apart from above, some allowances has been made for
       cross winds, cross currents, wave action etc. this additional clearance has been
       calculated at 2.1B (i.e. 69.3 meters).

As per the above calculation, total width for a double lane Sethusamudram Channel has
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 of 300 m.

4.1.5   Channel Depth

Channel depth of Sethusamudram Channel is to be 12 m. As per the PIANC
guidelines, a channel should have a depth such that depth to draught ratio is 1:10 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 10.7 m.

However, the above suggestion was only a conceptual plan for the design depth of
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 considering various
factors like vessel squat, wave induced motions in ship, tidal variations, and safety
margins. Based upon these factors, under keel clearance for ships in Sethusamudram
Channel was calculated to be 2 m. Hence, for a dredged level of 12 m, the
maximum draught of the ship to be allowed for safe navigation through the 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 path is
also increased at turnings. Because the direction of ship constantly changes in bends,
hydrodynamic forces develop, making it more difficult to steer in bends. The turning 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 11 o, 13o and 7o respectively.
Bend D has deflection angle of 56.98o and Bend E has deflection of 37.33o.

4.1.7   Channel Dimensions

Proposed Channel Dimensions are as follows:

   Channel Type                            Two Way
   Channel Width                           300 m
   Channel Depth                            - 12 m CD
   Sight Distance                          2.5 Km
   Permitted Draft of Vessel               10 m
   Beam                                    33 m



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Sethusamudram Corporation Ltd                                        Information Memorandum
Sethusamudram Ship Channel Project

   LOA                                        215 m

        Channel limitation is not on DWT of the vessel, but draft of vessel, which is 10 m.
        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 noted
         that sufficient water depth is available in these sections and in reality there is no
         restrictions on the navigable width.
        The Channel at the bends D & E is also enlarged to allow safe navigation as
         suggested in the reports.


4.2 Dredging Requirements

4.2.1    Introduction

Dredging is a construction process and the dredged area can be considered as a
constructed structure. The design of dredged area has to be carried out with equal
importance as that of any port structure. The dredging method, dredging equipment
and the costs associated with dredging are determined by the type of materials to be
dredged 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 the
bathymetry available in admiralty charts of the National Hydrographic Office (NHO),
Dehradun and through results of bathymetric surveys conducted by NHO and National
Ship Design Research Center (NSDRC) at the project site in recent times. Project would
involve capital dredging during the construction phase and maintenance dredging
during 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. The
estimation of dredged quantity has been arrived upon by, taking sections at every 100 m
intervals, and integrated throughout the length of the Channel. Estimation of dredging
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             6,718,933
                E2E3 (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.




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Sethusamudram Corporation Ltd                                        Information Memorandum
Sethusamudram Ship Channel Project

Of the above mentioned sections, dredging would be undertaken only in the Adam’s
Bridge 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 Km
from Shingle Island of Gulf of Mannar near Dhanuskodi. The Channel is connecting Gulf
of Mannar and Bay of Bengal through Adam’s Bridge, Palk bay and Palk Strait running
parallel to the Indo-Sri Lankan Medial Line at a minimum distance of 3Km from the
border, within India’s own territorial waters.

4.2.2.1    Additional Quantities

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

         Additional Dredging to be undertaken for extra widening at bends – 0.5 million
          cu. m.
         Additional quantity for stretch AB for inaccuracies (Sparse data) – 1.88 million cu.
          m.
         Add quantity to account for tidal corrections in bathymetry levels – 2.50 million
          cu. 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, which
generally occurs naturally, in order to maintain the design depth of the navigation
channel during the operations period.

The maintenance dredging quantity is estimated to be 2 million cubic meter per year for
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 million cum.

4.2.4     Dumping Areas

As the dredging process involves relocation of large quantities of material, it becomes
imperative that, any location chosen to dump the dredged material should not disturb
the surrounding environment of the dumping location. Keeping this in mind, TPT carried
out Dispersion Modeling Studies and Flow Modeling Studies, on the recommendation of
M/s NEERI and L&T – Ramboll respectively. Results of these studies show that dumping
locations in the sea are available. It would also be made sure that such an activity meets
all the environmental regulations. Following sites have been identified for dumping the
dredging material:

    1. The dredged material from Adam’s Bridge area would be dumped into sea in the
       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 from Adam’s
       Bridge (an area of 5 Km x 5 Km at geographical coordinates, 8 55’ 51.16”N and
       79 26’ 54.81”E).




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    2. The dredged material from Palk Strait of about 34 million cu. m. is proposed to be
       dumped off-shore in Bay of Bengal area at about 30 m depth with varying
       dumping leads and the same is preferred by NEERI (an area of 5 Km x 5 Km at
       geographical coordinates 10 13’ 14.05”N and 8013’ 11.56”E).


4.2.5     Dredging Methods

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

4.2.5.1    Hydraulic Cutterhead Dredge

The Hydraulic Cutterhead Dredge is a suction pump-type dredge that utilizes a revolving
cutter head to bite into and loosen the bottom material. This type of dredge is especially
suited to dredging consolidated or compacted materials and can be used to remove
soft rock deposits. Some of the sands are expected to be cemented, thus the power
provided by the hydraulic cutter head dredge is particularly desirable. The dredged
material is transported directly from the dredge site through floating and/or submerged
pipelines and discharged directly into the disposal site. With the use of the booster
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 soft
unconsolidated materials into a temporary storage hopper built into the hull of the vessel.
Once the hopper is filled, the dredge normally proceeds to the disposal site where the
material is bottom discharged. The hopper dredge can be very effective at removing
softer unconsolidated material from underlying harder strata.

4.2.6     Proposed Dredging Methods For SSCP

4.2.6.1    Adam’s Bridge Area

The total dredging quantity involved in Adam’s 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 of shoals and
islands, the direct deployment of Trailer Suction Hopper Dredger (TSHD) is not possible to
carry out dredging.

A self propelled Cutter Suction Dredger (CSD) of suitable cutter power and with its cutter
head replaceable by suction heads is the most suited equipment for dredging in such
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 for dredging
effectively. TSHDs are proposed for dredging materials below (-) 8mCD at Adam’s 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 level varies
from less than -5m at the shoals opposite to Point Calimere to -12m towards Palk Bay on



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Sethusamudram Ship Channel Project

the western side with a flat gradient and also on the eastern side towards Bay of Bengal
with a relatively steep gradient. From the borehole details available for this area, it is seen
that the initial reaches (commencing from the western side) consist of ‘clayey sand’ up
to a depth of -15m followed by ‘sand’ in the end reaches, assumed to be dredgeable by
TSHDs.

The Palk Strait area is divided into two sections depending on the distance to the
dumping spot in Bay of Bengal (one with average lead of 60 Km for stretch EE2 and the
other with average lead of 40 Km for the stretch E2E4). For dredging in Palk Strait area,
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) that
would be required for operating the Channel System effectively and without
interruptions. Apart from these, to minimize siltation and to ensure tranquility at the
dredged Channel across Adam’s Bridge, the provision of protective structures in the form
of breakwaters or other measures on either sides of dredged cut would also be
necessary.

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

4.3.2   Service Jetty

A service jetty on the northern shore of Dhanushkodi facing Palk Bay with berthing
platforms 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 of
the 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 is
proposed for berthing of pilot launches which can be used in fair weather period. At
other times the existing facilities at nearby Nagapattinam Port, with some improvements,
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 road and
railway sidings will also be constructed. The location of these facilities has not been
finalized, but if Pamban Island can be reclaimed, these facilities would be developed at
Pamban Island. DPR prepared by the Technical Consultant proposes a workshop of
40x25 m size with office cabins and equipment and provided with covered roof, parking
areas for field machinery, car parks, electrical substations, etc. DPR also proposes to
provide the Buoy Yard of size 250x30m with partly covered roof, office cabins, laborer
sheds, pollution control rooms, fire fighting equipment, etc. near the service jetty. A
Slipway will also be developed in the vicinity of service jetty with repair facilities for
repairing pilot and mooring launches.



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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project



4.3.4   Development of Fishing Harbour

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


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 the
operations of the Sethusamudram Channel, to improve the safety of the vessel traffic
and to protect the marine environment in the Channel. The Sethusamudram Corporation
Ltd will be implementing the VTMS covering the entire traffic route from south of Adam’s
Bridge to the east of the Middle Channel off Point Calimere, so as to enable proper
movement and controlling all vessels plying in the Channel area and ensuring
navigational safety, with capability to interacting with the traffic and responding in time
to the situations arising in the VTMS area.

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

4.4.2   Architecture

The VTMS shall provide seamless coverage for targets of fishing crafts and merchant
shipping vessels in the area and will be specified in the tender documents. The VTMS shall
fulfill the main functions of traffic monitoring, resource management, expected vessel
movements, disaster control and environmental monitoring. The system architecture shall
have the state of the art digital technology with latest computer aided systems (both
hardware and software) and cover the entire SSC route with up to 5 NM extra coverage
at either end of the Channel. Operational requirements of the VTMS shall be met by
integrating information from the sensors (radar, communication, IS, direction finders,
meteorological/ hydrological, Differential Global Positioning System (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 offshore locations
off turning point (CCT 3 & 4), two offshore locations close to the Channel turning points in
positions CCT-3 Lat (N) 09º40’55” Long 79º17’24” and CCT-4 Lat (N) 10º00’00” Long
79º31’12”. and Point Calimere (CCT 2). These stations will be integrated structures with
radar, communication, etc and act as the Channel Control Towers (CCTs) with
necessary infrastructure and manpower. The CCT at Rameswaram Island will be the
Master Station in the system.


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Sethusamudram Corporation Ltd                                        Information Memorandum
Sethusamudram Ship Channel Project


4.5 Flotilla & Navigational Aids

The SSC covers from approx 5 NM south of Adam’s bridge (off Rameswaram Island) to
approx 5 NM east of Middle Bank off Point Calimere, with a total Channel length of 95
NM and width of 300 metres. Any vessel using the SSC, would need to be guided, as
during its passage through the Channel it would be traveling through restricted space.
Hence, navigational aid infrastructure would be required to make vessel journey through
the SSC safe and secure.

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

          Tamper proof lighted Fair Way buoys as per International Association of
           Lighthouse Authorities (IALA) scheme at both ends of the SSC off Rameswaram
           island and off Point Calimere in positions
          Set of 30 tamper-proof lighted navigational buoys as per IALA scheme at approx
           3 to 8 NM intervals and with emphasis on the turning points, so that the vessel is
           always within the dredged channel limits / navigable depths.
          Vessel Traffic Management System
          Channel Control Towers at Rameswaram and Point Calimere and two off-shore
           locations.
          Compulsory pilotage for specified track distance (approx 8 NM on either side of
           Adam’s 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 pollution control
           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 table
below:

 S No                  Item            Rameswaram        Point       Each Afloat     TOTAL
                                                        Calimere       VTS Stn.
  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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Sethusamudram Corporation Ltd                                          Information Memorandum
Sethusamudram Ship Channel Project


5. THE EXECUTION STRATEGY

The major capital cost involved in the development of Sethusamudram Channel will
include dredging cost, navigational aid system & VTMS, Flotilla and Buoys cost and civil
construction cost.

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

5.1 Dredging Works

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

    1.   Stretch E3 – E 4
    2.   Stretch E – E3
    3.   Gulf of Mannar to Adam’s Bridge i.e. 0 to 11 Km
    4.   Adam’s 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 to Dredging
Corporation of India, on a nomination basis, whereas it has invited global tender 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 – E4 section
       on 25th June, 2005. DCI has already started dredging work in section allotted 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 terms and
       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 3
sections of Sethusamudram Channel. Leading dredging companies, who have bought
the tenders, are expected to submit their technical and financial bid to the TPT for
evaluation. Details of the tender conditions for each of the 3 sections are as follows:

                          Work A : Dredging         Work B: Dredging from   Work C: Dredging
S No      Description     from 0 to 11 Km of        11 Km to 35.05 Km of    from Palk Bay to Palk
                          SSCP                      SSCp                    Strait
          Estimated
1                         Rs 353 crores             Rs 621 crores           Rs 364 crores
          Value of Work
          Period of
2                         24 months                 24 months               24 months
          Completion



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Sethusamudram Corporation Ltd                                             Information Memorandum
Sethusamudram Ship Channel Project

           Per Day Output   47,000 cu m per
3                                                   48,000 cu m per day
           for CSD          day
           Per Day output   39,000 cu m per
4                                                   47,000 cu m per day        39,000 cu m per day
           for TSHD         day

5.1.2.1    Other Highlights of the Tender Document are as follows:

         Successful bidder, on receiving the work order, would submit a deposit equivalent
          to 5% of the value of the work, as performance security.
         Chief Engineer (SSCP), of Tuticorin Port Trust has been appointed as the Engineer
          for the Project. He would address all the engineering and dredging related issues
          with the Contractor/s. He has been appointed as the coordinating authority for
          the dredging work.
         Contractor shall take full responsibility for the adequacy, stability and safety of of
          all site operations and methods of dredging operation and implementation of
          Environment Management Plan.
         As per the contract agreement, completed work would mean that contractor
          would develop the Channel as per the designs provided to him, till the depth of –
          12 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, which
          should 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 completion
          of works.
         Damages: Contractor shall be paying 0.1% of work value per day for the delay in
          the project execution, with an upper limit of 5%.
         Contractor shall take insurance cover, jointly in name of Contractor and Tuticorin
          Port Trust to cover all the equipments installed by the port trust as well as those
          bought in by contractor for completing the work.
         All the interim payments made to the Contractor shall be treated as advance
          payment and shall be fully recoverable, if the Project is not completed
          successfully. All such interim payments by Tuticorin Port Trust to the Contractor
          would be made against an irrevocable bank guarantee, which can be
          encashed by TPT, if contract is not performed satisfactorily.
         TPT shall also deduct the 10% of each interim payment, towards building up of a
          security deposit, to the tune of 5% of value of work.
         The Contractor shall provide all the superintendence, labor, materials, plant and
          equipment, etc. required for the design and execution of the Project.
         The Contractor shall be responsible for
               a. Accurate setting out of the works in relation to original points, lines and
                   level of reference given by the engineer in writing
               b. Correctness of the position, levels, dimensions and alignment of all parts of
                   work
               c. 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 is
          under the care of Contractor, shall be responsibility of the Contractor.

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



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Sethusamudram Corporation Ltd                                    Information Memorandum
Sethusamudram Ship Channel Project



    1. VTMS and Navigational Aid Systems
    2. Flotilla and Buoys
    3. Civil Construction Contracts.

All the above contracts are expected to be floated in next 6- 9 months, so that works on
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 be
completed in a 3-year timeframe. As per the proposed schedule, Project is expected to
be operational by August 2008. The project implementation chart is provided at
Annexure – II. As per the original schedule, the dredging work was expected to be
completed by May, 2008. However, TPT has developed a new implementation plan, in
which they have divided the dredging into 4 sections, instead of 2 dredging section as
suggested in the DPR. This new plan would help in completing the dredging in 2-year
timeframe, and would also for loss of time due to any delays and ensure that the Project
is operational at the end of 3rd year. TPT is in the process of finalizing a revised
implementation schedule for the Project with the above objective.

5.3 Operations Plan

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

Sethusamudram Channel Authority will be responsible for the operations of the Channel.
Its responsibility would cover the following aspects:
     1. Channel Navigation: It would operate and maintain the VTMS and guide the
         ships crossing the channel.
     2. Toll Collection
     3. Repair Workshop
     4. Piloting
     5. Maintenance Dredging
     6. Buoy Yard
     7. Service Jetties
     8. Search & Rescue Operations
     9. Launch Facility

5.3.1   Channel Navigation Plan

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

       Vessels/owners/ agents will intimate the Sethusamudram Channel Authority of the
        impending arrival of vessel alongwith their registration and cargo details and ETA
        fairway buoy at least 48 hours before, in the specified format.
       Two hours before the arrival, vessels will establish effective two-way
        communication on VHF with the Channel Authority/ Channel Control Tower (CCT)
        and workout modalities for the transit, pilot embarkation, etc.



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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project

       Designated pilots will carryout compulsory pilotage for the vessels in pilotage
        waters of the SSC, for which the vessels will render all possible assistance as per
        the IMO conventions, including the provision of proper pilot ladders, etc. Day and
        night navigation will be permitted based on the weather factors and its effect on
        the vessel in constrained channel, fishing density along the route and operational
        state of the VTMS and the ship’s navigational equipment.
       CCT at either end of the Channel will establish VTMS control on real-time and
        ensure safe passage. They will be authorized to enforce regulatory measures and
        control, without impinging upon the Master’s full responsibility to his ship safety in
        prevailing conditions at sea.
       CCTs will keep track of the vessel movements throughout the transit and keep
        records for meaningful investigations into any violation/ accident/mishap, etc in
        the 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 CCTs
        within 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 action
        against errant vessels/staff. Traffic regulatory measures will be enforced for all
        vessels, including the fishing vessels. Convoy movements will be adopted with
        Navy/ Coast Guard assistance, based on security inputs along the International
        Border 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 guard will
        assist the Channel Authority in cleanup measures and prosecuting the offenders.

The Channel Authority, ship owners, agents and masters of the vessels will establish well
considered methods and procedures to ensure safe navigation through the SSC and
thereby protect the marine environment in the area, as well as the safety and security 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 the
concerned port trust using the Electronic Data Interchange (EDI). The port trust raises the
bill on the users with full particulars (type of charge/the date/shift etc) and sends their
billings to the port user’s bank through EDI for realization of the same.

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

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

5.3.3   Maintenance Dredging Plan




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Sethusamudram Corporation Ltd                                 Information Memorandum
Sethusamudram Ship Channel Project

SCL plans to give maintenance dredging work to a dredging company, which has
expertise in undertaking maintenance dredging works. Keeping this in mind, SCL
proposed to float tenders to select the most suitable dredging company for undertaking
maintenance dredging work in the channel, once the project is operational.




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Sethusamudram Corporation Ltd                                              Information Memorandum
Sethusamudram Ship Channel Project


6. TRAFFIC ASSESMENT

6.1 Introduction

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

      a. Coastal Shipping Vessels
      b. Overseas Shipping Vessels

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

      1. Data Collection and Review
      2. Questionnaire survey and Interviews with the Major Ports, Directorate General of
         Shipping and Shipping Corporation of India
      3. Traffic Growth Rate Forecast
      4. Review of current ports and maritime traffic in the region
      5. Assessment of the future regional traffic by commodity type
      6. Assessment of Origination – Destination of cargo that is likely to pass through
         Sethusamudram Ship Channel
      7. Preparation of the traffic demand forecast for Sethusamudram Ship Channel

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

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 downtime predictions for the
Channel. Once the total cargo volume was established, average parcel sizes to the
destination ports was calculated. This average parcel size was used to 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 the
project committees formed since then has estimated the traffic potential of the channel.
A snapshot of the each of the estimation, undertaken since is given below:

                                                                No. of Transits per NRT* (in Lakh Tonnes
S No     Year Proposal                                               annum              per annum)
                Sethusamudram         Project      Committee
         1956                                                         1,613                 64
  1             projection for 1961
  2      1960 Govt of Madras                                          2,212                 93
  3      1963 Mr. K N Srinivasan, Projection for 1968                 1,933                 79
                Mr.     Venkateshwaran,         Sethusamudram
         1968                                                                              102
  4             Project
  5      1968 Mr. Natarajan,                                          2,371                105



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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project

                Projection for 1974                            3,300               150
  6       1983 Mr. H R Laxminarayan
                Projection for 1980                            2,100               160
                Projection for 1989-90                         3,000               230
               Pallavan Transport Consultancy Services Ltd,
          1996                                                 4,211               388.5
  7            Projection for 2000
  8     2004 Considered by NEERI                               2,004               153
*NRT – Net Registered Tonnage

Technical Consultants also prepared and distributed a questionnaire (seeking details
relating to the quantum of cargo with type, mode of transportation, ocean freight cost
per tonne, present and future cargo volumes, origin and destination of cargo, etc.) for
obtaining data, opinion and requirements of probable users of Sethusamudram Ship
Channel. 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 developments
in the immediate neighborhood, as in the case of Trend Based Projections. However, the
approach to traffic projection for the Sethusamudram Channel has to be different from
that for a port, as the ships using this Channel will serve the entire nation linking ports on
the west coast and those on the east coast. Therefore, it is considered appropriate 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 the statistical
regression technique. As a first step toward forecasting the traffic growth rate, GDP
forecast for the horizon period was established. Methodology for GDP forecast is
explained below:

6.3.1     GDP Forecast

In 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 –


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Sethusamudram Corporation Ltd                                           Information Memorandum
Sethusamudram Ship Channel Project

2002, and also incorporated the GDP forecast targets developed by Planning
Commission and other economic monitoring agencies


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 of
economy is over 5%.

6.3.1.2    GDP Forecast Targets

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

Apart from the targets of planning commission, consultants also noted the growth rates
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 to 5.7
                          2      World Bank / IMF         5.0 to 5.5
                          3      Crisil / CII             6.4
                          4      ETIG                     5.8
                          5      ADB                      6.0 (6.3 in 04 –05)

Considering the past GDP growth rates, as well as the GDP forecasts developed by
economic agencies for last few years, consultant developed GDP forecasts for three
different scenarios, ' Pessimistic', 'Moderate' and ' Optimistic'.

         It was observed that the long-term growth during 1980 to 2002 was 5.57 percent.
          Additionally, it is observed that during the last three 5-year periods it was over 5.5
          percent and maintained a steady growth during the last decade -1992-2002.
          Thus, it was considered that on an average the GDP growth could be as low as 5
          percent and no lower. Hence, pessimistic growth rate was assumed at 5%.




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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project

       Considering that GDP growth in the past was above 7.5 percent only a few times,
        it was assumed that GDP could be as high as 6.5 percent on an average. Hence,
        optimistic growth was assumed at 6.5 percent.
       Thus, three different scenarios, which are considered pragmatic and
        conservative, were adopted for this study, namely:

              Pessimistic growth starts at    5.00 percent
              Moderate growth starts at       6.00 percent
              Optimistic growth starts at     6.50 percent

       The growth rates for the latter periods are reduced for every block of five years.
       It is assumed that the economic growth (GDP) will be no lower than 5.5 percent in
        the optimistic growth scenario. This is based on the information that the long-term
        average growth observed for the period between 1980 and 2002 is about 5.5
        percent.
       The GDP growth during the moderate growth scenario will be no lower than 5
        percent the growth observed during the period 1982-87, the lowest among the
        four 5-year period growths.
       In the pessimistic growth scenario, it is assumed this value will be no lower than 4.5
        percent, the growth observed in two separate years (2000-01 and 2002-03) in IX-
        Plan period.

The assumed GDP growth rates for the three growth scenarios for the study are as
presented in table given below:

                 Period              Pessimistic   Moderate      Optimistic
                 2004-2006             5.00%        6.00%         6.50%
                 2007-2011             5.25%        6.25%         7.00%
                 2012 – 2016           5.00%        6.00%         6.50%
                 2017 – 2021           5.00%        5.75%         6.25%
                 2022 onwards          4.75%        5.50%         6.00%

6.3.2   Traffic Growth Rate Forecast

The GDP growth rate forecast developed in previous section has been used to forecast
the cargo traffic to be handled by the various Indian ports. The relationship between the
GDP and the traffic in tonnes, was established using the statistical regression technique.
A log – log form of curve was fitted for each commodity type separately and the
observed GDP values. In the relationship established using the technique, GDP was
considered as an independent variable, whereas coefficient of GDP represented the
elasticity of traffic demand vis-à-vis the economic growth. The relationships, which were
developed for different commodity, are presented below:

         Commodity                                 Relationship with GDP
          Iron Ore                         Log (Iron Ore) = 1.73 + 0.47 *Log (GDP)
          Fertilizer                       Log (Fertilizer) = 1.75 + 0.36 *Log (GDP)
             POL                             Log (POL) = -1.11 + 1.02 *Log (GDP)
            Coal                            Log (Coal) = -11.70 + 2.71 *Log (GDP)
        General Cargo                  Log (General Cargo) = -3.72 + 1.41 *Log (GDP)




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Sethusamudram Corporation Ltd                                                          Information Memorandum
Sethusamudram Ship Channel Project

6.3.2.1   Elasticity of Demand

Elasticity of the cargo demand (i.e. Coefficient of GDP in the relationship), were
estimated based on the results of the regression analysis. Further, the elasticity in the base
year was adjusted for few of the commodities, if they were observed to be unrealistic
considering the values based on the yearly changes and moving averages. For
forecasting the traffic growth rates, elasticity was considered for the five-year periods,
arrived upon by change in the elasticity for each year and 5 year moving averages. The
elasticity values considered for each cargo type over the forecast period are given
below:

   Year            Iron Ore               Fertilizer             POL            Coal          General Cargo
   2000               0.47                  0.36                 0.95           1.07              1.41
   2005               0.36                  0.32                 0.93           1.04              1.20
   2010               0.30                  0.30                 0.91           1.02              1.10
   2015               0.24                  0.28                 0.90           1.00              1.00

Traffic Growth Rate

Traffic growth rate for each commodity type were estimated based on the assumed
GDP growth rates and estimated elasticity for each commodity type, and their
relationships with GDP growth rates. The estimated traffic growth rates based on this is
presented in table below:



                                                 Commodity Growth Rates in %
                 Iron Ore               Fertilizer                POL                Coal          General Cargo
  Year    Low Medium High Low Medium High Low Medium High Low Medium High Low Medium High
  2002    2.6     3.07      3.54   2      2.37       2.73 5.24    6.19   7.15 5.91   6.98   8.05 7.75   9.16   10.57
  2003    2.6     3.07      3.54   2      2.37       2.73 5.24    6.19   7.15 5.91   6.98   8.05 7.75   9.16   10.57
  2004    2.6     3.07      3.54   2      2.37       2.73 5.24    6.19   7.15 5.91   6.98   8.05 7.75   9.16   10.57
  2005    1.97    2.32      2.68 1.77     2.09       2.42 5.1     6.03   6.95 5.7    6.74   7.78 6.63   7.83   9.04
  2006    1.97    2.32      2.68 1.77     2.09       2.42 5.1     6.03   6.95 5.7    6.74   7.78 6.63   7.83   9.04
  2007    1.88    2.23      2.5 1.69      2.01       2.26 4.87    5.79   6.49 5.44   6.48   7.26 6.33   7.53   8.43
  2008    1.88    2.23      2.5 1.69      2.01       2.26 4.87    5.79   6.49 5.44   6.48   7.26 6.33   7.53   8.43
  2009    1.88    2.23      2.5 1.69      2.01       2.26 4.87    5.79   6.49 5.44   6.48   7.26 6.33   7.53   8.43
  2010    1.57    1.87      2.1 1.58      1.88       2.11 4.8     5.71   6.4 5.35    6.37   7.13 5.79   6.89   7.72
  2011    1.57    1.87      2.1 1.58      1.88       2.11 4.8     5.71   6.4 5.35    6.37   7.13 5.79   6.89   7.72
  2012    1.5      1.8      1.95 1.51     1.81       1.96 4.57    5.49   5.94 5.09   6.11   6.62 5.51   6.61   7.17
  2013    1.5      1.8      1.95 1.51     1.81       1.96 4.57    5.49   5.94 5.09   6.11   6.62 5.51   6.61   7.17
  2014    1.5      1.8      1.95 1.51     1.81       1.96 4.57    5.49   5.94 5.09   6.11   6.62 5.51   6.61   7.17
  2015    1.21    1.45      1.58 1.4      1.68       1.82 4.51    5.41   5.86   5      6    6.5    5     6      6.5
  2016    1.21    1.45      1.58 1.4      1.68       1.82 4.51    5.41   5.86   5      6    6.5    5     6      6.5
  2017    1.21    1.39      1.52 1.4      1.61       1.75 4.51    5.18   5.63   5    5.75   6.25   5    5.75   6.25



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Sethusamudram Corporation Ltd                                            Information Memorandum
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  2018   1.21    1.39   1.52 1.4   1.61   1.75 4.51   5.18   5.63   5   5.75   6.25   5   5.75   6.25
  2019   1.21    1.39   1.52 1.4   1.61   1.75 4.51   5.18   5.63   5   5.75   6.25   5   5.75   6.25
2020 - 25 1.21   1.39   1.52 1.4   1.61   1.75 4.51   5.18   5.63   5   5.75   6.25   5   5.75   6.25



6.4 Traffic Analysis – Indian Ports

As a first step towards forecasting the traffic for Sethusamudram Channel, the time series
data of maritime cargo traffic at the national level as well as port level, was analyzed.
The analysis was carried out for each of the principal commodity types like iron ore,
fertilizers, POL and crude, coal and others.

Highlights of the past traffic analysis is as follows:

        During the 50-year period (1950-51 to 2001-02), cargo traffic handled by all Indian
         ports has increased from 22.51 MTPA to 385.59 MTPA, representing an average
         annual growth of 5.73%.

        During the decade of 1991 to 2001, the total cargo traffic handled at the major
         ports in the country has increased from 158 MTPA to 288 MTPA, representing an
         average annual growth of 6.2%.

        Ports on east coast have shown a variation in growth from 2.6% to 11.22% during
         the decade, whereas ports on west coast have shown a wider variation in growth
         rates, ranging from –0.29% to 23.20%.

        As per the cargo details of 2001-02, east coast ports contribute 52% of total cargo
         traffic in India.

        A relationship between GDP and Traffic in tones was established. It must be
         noted, that R Square values for the relationship are very high, hence it can be
         stated that growth in traffic is closely related to growth in the GDP.

        Elasticity of the cargo demand by type, through each of the ports on the Indian
         coastline was estimated based on results of regression analysis. The base year
         elasticity was derived from the regression models. Further elasticity values for
         each cargo type were estimated over a 5 year block period using the yearly
         values and moving average analysis.

        Traffic growth rates for the each commodity type were estimated based on the
         assumed growth of economy upto the horizon period and estimated elasticity for
         each commodity.

6.5 Traffic forecasts

Based on the estimates of elasticity of cargo traffic demand through 12 major Indian
ports with respect to GDP and assumed growth rates of GDP, forecast of cargo traffic
through major ports has been made for 20 year horizon. Cargo forecasts have been
developed based on the 3 different scenarios viz. Pessimistic, Moderate and Optimistic.
The cargo forecasts were developed at National level as well as port level. From these
forecasts, traffic potential for Sethusamudram Channel was derived.



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Sethusamudram Corporation Ltd                                        Information Memorandum
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TRAFFIC FORECASTS – NATIONAL LEVEL

i)     Overall Traffic

The overall traffic through major Indian Ports is likely to increase from 289 million tonnes in
2002 to over 1,112 million tonnes by 2025 under the optimistic scenario. Under the
moderate scenario, traffic of the order of about 970 million tones is expected. This
indicates that the traffic over the years in future up to the horizon period is likely to
increase between 2.8 and 3.9 times of the base year traffic.

ii)    Iron Ore Traffic

The iron ore traffic through Indian Ports is likely to be the order of about 71 million tonnes
by 2025 in the moderate growth scenario. It is likely to be 67 million tonnes and 75 million
tonnes respectively, by the horizon, in the other two growth scenarios. The cargo
estimates indicate that iron ore traffic is likely to increase between 1.5 and 1.6 times
during the study period.

iii)   Fertiliser Traffic

The fertiliser traffic through Indian Ports is likely to be the order of about 15 million tonnes
by 2025 in the moderate growth scenario. It is likely to be 14 million tonnes and 16 million
tonnes respectively, by the horizon, in the other two growth scenarios. The fertiliser traffic
is likely to increase between 1.4 and 1.6 times during the study period.

iv)    POL Traffic

The POL traffic through Indian Ports is likely to be the order of about 378 million tonnes by
2025 in the moderate growth scenario. It is likely to be 313 million tonnes and 433 million
tonnes respectively, by the horizon, in the other two growth scenarios. The POL traffic is
likely to increase between 3 and 4 times during the study period.

v)     Coal Traffic

The coal traffic through Indian Ports is likely to be the order of about 194 million tonnes by
2025 in the moderate growth scenario. It is likely to be 157 million tonnes and 226 million
tonnes respectively, by the horizon, in the other two growth scenarios. The coal traffic is
likely to increase between 3.4 and 4.9 times during the study period.

vi)    General Cargo Traffic including container movements

General cargo comprises cargo of other commodities and that moving by containers. It
is likely to be the order of about 311 million tonnes by 2025 in the moderate growth
scenario. It is likely to be 254 million tonnes and 361 million tonnes respectively, by the
horizon, in the other two growth scenarios. The general cargo traffic is likely to increase
between 3 and 4 during the study period.

6.6 Traffic Forecasts - Ports

From the national level forecasts derived in the previous section, the base forecasts of
the traffic through each of the Indian major Ports were estimated based on the share of



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Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project

the traffic as observed for the year 2001. This was mainly to assess the volumes that are
likely to flow through the corridors identified by the ports operating at a particular
location.

       The estimates indicate that Visakhapatnam and Chennai ports or the nearest
        ports on the East Coast and Kandla / nearest ports on the West Coast are having
        potential cargo to handle close to or over 140 million tonnes of cargo by the end
        of horizon period in the moderate growth scenario.
       Haldia Port on the east coast and Mumbai and JNPT ports on the West Coast are
        likely to handle around 90 million tonnes of cargo by the horizon in the same
        scenario.
       In this scenario, Mumbai and JNPT ports together are likely to handle close to 180
        million by the end of the horizon period. In the pessimistic scenario, these ports
        are likely to handle between 70 and 80 million tonnes.
       In the optimistic growth scenario, Paradip Port is also likely to handle about 80
        million tonnes by horizon.
       Thus, in the optimistic scenario seven of the major ports - four on the East Coast
        and three on the West Coast - are likely to handle over 70 million tonnes of cargo
        by horizon.
       In moderate growth scenario the number of ports handling over 80 million tonnes
        would be six with three each on East and West coasts respectively.

These forecasts are without considering the constraints placed by the limitations on the
capacity expansion that exist in some of the Ports. It is assumed that the demands of the
forecast traffic will be met by the new port developments in the region or with the
expansion undertaken by these ports in the future.

6.7 Vessel Size Review and Design Vessel

For planning and designing of a shipping navigation channel, it is imperative to select
most suitable size of vessel, which will navigate through the channel. Selection of design
vessel will not only influence the design of the channel, but also the cargo potential of
the channel, as channel may not be able to handle some portion of the estimated
potential traffic which may be handled by vessels larger then the design vessel of the
channel. Following aspects are also considered for recommending the design vessel size
for the Channel:

       Review of existing as well as ordered vessel fleet in global market
       Review of vessels calling / going out at Indian major ports

6.7.1   Review of Existing and Ordered Vessel Fleet at Global Level

Technical Consultants reviewed Clarkson Register (April 2002) in order to identify the
distribution of existing vessels, of varying sizes, plying in the market. Analyses of the
Clarkson Register, revealed the following distribution of vessel sizes:
      About 70% of vessel sizes are up to 30,000 DWT and among them 15% are
         between 10,000 DWT to 20,000 DWT and 11% of vessels are between 20,000 to
         30,000 DWT.
      About 8% of the vessels are having size between 30,000 DWT to 40,000 DWT
      About 84% of overall worldwide vessel fleet has size within 50,000 DWT and out of
         this, 15% are between 30,000 to 50,000 DWT.




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Sethusamudram Corporation Ltd                                        Information Memorandum
Sethusamudram Ship Channel Project

6.7.2   Vessel Fleet on Future Order

Technical Consultants also reviewed the Clarkson Register (April 2002) for distribution of
overall vessels ordered for building for the world market. It was observed that 38% of the
ordered vessels are within 30,000 DWT and about 52% are having size up to 40,000 DWT.
About 63% are having size up to 50,000 DWT.

From the existing vessel size distribution and the expected future vessel size distribution, it
can be observed that there is a growing trend towards the larger size vessels. However,
despite this, there will be large number of smaller size vessels operating in the market.

6.7.3   Summary of the Vessel Review

From the review analysis of vessel sizes that are existing and ordered around the world
market and vessels calling at Indian major ports, it is summarized that on an average 70%
of vessels are of size upto 40,000 DWT and 86% of vessels are within 50,000 DWT.

                      Clarkson Register / Major           % Vessel Size (DWT)
           S No             Indian Ports            Upto 50,000      Upto 40,000
             1                           CLARKSON REGISTER
            1.1   Existing                                 84               67
            1.2   Future Ordered                           63               52
             2                  Vessels Calling Indian Ports in One Year
            2.1   Tuticorin Port                           99               96
            2.2   Chennai Port                             86               72
            2.3   Ennore Port                             100               0
            2.4   Vishakhapattanam Port                    72               51
            2.5   Paradip Port                             72               52
            2.6   Haldia Port                              78               66
            2.7   Kolkata Port                             97               95
            2.8   Kandla Port                              92               88
            2.9   Mumbai Port                              90               84
           2.10   Jawaharlal Nehru Port                    99               89
           2.11   Mormugoa Port                            67               53
           2.12   New Mangalore Port                       82               75
           2.13   Cochin Port                              90               87
                  Average                                  86               70



6.7.4   Vessel Trend Review

Further an attempt is made to review and study the trends / growth scenario of
worldwide vessel sizes from the Clarkson register. Age wise details of the overall vessels
having size upto 30,000 DWT available in the world market are given in the following
Tables.




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Sethusamudram Corporation Ltd                                            Information Memorandum
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                                                         Age of Vessel
                    DWT Range               15-19           10 -14        5-9
                       0 – 4999              568             597          788
                    5000 - 9999              435             627          878
                   10000 - 14999             201             268          356
                   15000 - 19999             163             142          273
                   20000 - 24999             82              200          344
                   25000 - 29999             137             130          202
               Total No. of Vessels         1,586            1,964       2,841
               Growth                                         24           45
               %                            24.82%          30.73%       44.45%

The above reveals the following:

       The vessel trend / growth up to 30,000 DWT is continuously increasing
        from the last 20 years
       About 25% growth rate can be seen in the vessel sizes up to 30,000 DWT
        during past 15 years
       Vessels having age below 9 years and up to 30,000 DWT showing about
        44% growth

From the above study, it is understood that the trend towards vessels
up to 30,000 DWT is continuously increasing and it is more likely follow the same trend in
future.


6.7.5   Design Vessel Size for Sethusamudram Ship Channel

After critical review and analysis of distribution of cargo vessel sizes in the world market
and the cargo vessels calling at the Indian major ports and also by considering -12 m CD
as the depth of the Channel as presently conceived, the vessel sizes recommended for
further planning and designing of the proposed Sethusamudram Ship Channel are up to
about 30,000 DWT to 40,000 DWT, which covers about 73% of the world ships plying and
on order. Thus the band of the recommended vessel sizes, which may operate in the
Sethusamudram Channel, is presented below:


      Vessel Size                 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



6.8 Vessel Traffic Forecast - Sethusamudram Ship Channel

6.8.1   Introduction




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Sethusamudram Corporation Ltd                                                 Information Memorandum
Sethusamudram Ship Channel Project

A review of the maritime traffic flow pattern in relation to the port locations in India and
its neighborhood have indicated that the cargo traffic between the following origin-
destination (O-D) pairs would enjoy significant distance advantage if the proposed
Channel were in existence and as such would be potential users of this facility.

Based on the secondary data collected by the Consultants, as well as their analysis of
the data, along with the O – D pairs described in the table below, an estimation for the
base year forecast for Sethusamudram Channel has been made, if the proposed
channel were in existence.

6.8.2      Origination Destination Pairs relevant for SSCP

 S No                                       Origin – Destination Pairs
   1                Indian East Coast Ports excluding Tuticorin ↔ Indian West Coast Ports
   2                             Tuticorin ↔ Rest of the Indian East Coast Ports
   3                       Persian Gulf ↔ Indian East Coast Ports excluding Tuticorin
            North America, Europe and North Africa (through Suez Canal route) ↔ Indian East Coast
  4                                         Ports excluding Tuticorin
  5                 Colombo (Transit Traffic) ↔ Indian East Coast Ports excluding Tuticorin



Following are the assumptions made in the cargo forecast:

          Sethusamudram ship Channel will develop as a major shipping route, which will
           benefit all the ports in India.
          Overseas cargo from Indian East Coast ports to western countries will move
           through this Channel.
          Cargo flow between other neighbouring (Pakistan, Bangladesh) countries (not to
           or from India) that would go through SSC is neglected in the absence of data,
           and as a conservative evaluation.

6.8.2.1      Indian Coastal Cargo

Summary of review and analysis of origin and destination of cargo moving around Indian
coast through Indian ports relevant to Sethusamudram Ship Channel is presented in table
below:

                                      Originating (Million            Terminating(Million
                                            Tonnes)                        Tonnes)
          Port                    Coal Iron &            POL Total Coal Iron &            POL Total
                                           Pellets                          Pellets
          Calcutta                     0             0      0    0     0              0    0.2   0.2
          Haldia                     2.9             0      0   2.9    0              0    1.3   1.3
          Paradip                    1.9             0    0.7   2.6    0              0    0.6   0.6
          Vishakhapattanam           0.4        3.2       1.4    5     0              0      5        5
          Chennai                      0             0    0.6   0.6    0              0      2        2
          Tuticorin                    0             0      0    0    5.2             0      0   5.2
          Cochin                       0             0    0.8   0.8    0              0      0        0
          New Mangalore                0             0      0    0     0              0      0        0



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Sethusamudram Corporation Ltd                                                  Information Memorandum
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       Marmugoa                       0       0     0           0          0      1.8    0      1.8
       Mumbai                         0       0     7           7          0       0    1.3     1.3
       JNPT                           0       0     0           0          0       0     0          0
       Kandla                         0       0     0           0          0       0     0          0
       Dhrmatar                       0       0     0           0          0      1.1   1.1     2.2
       Revdanda                       0       0     0           0          0      0.3   0.3     0.6
       Sikka                          0       0    1.3         1.3         0       0     0          0
       TOTAL                         5.2    3.2 11.8          20.2     5.2        3.2 11.8     20.2


Within the framework of the traffic flow streams identified in the table above, coastal
cargo relevant for the proposed SSC project has been assessed as 20.2 million tones for
the base year 2001-02. This constitutes about 20% of the total Indian coastal cargo
moved during 2001-02 (i.e.108 million tones). The foregoing coastal cargo relevant for the
SSC project is originating / terminating at nine major ports and three minor ports.

6.8.2.2      Indian Overseas Cargo

Following similar approach as above, an estimate of the base year (2001-02) overseas
cargo that would pass through the proposed SSC has been made. In view of the
location of the proposed SSC project in relation to the Indian ports only cargo traffic
flows between Indian east coast ports (excluding Tuticorin) and countries lying west of
India (i.e. countries of Middle East, Gulf, Africa, Europe and Americas) have been found
to have relative cost advantage and as such would opt for the route via the proposed
SSC. Based on this analysis, 37.1 million tonnes of cargo constituting about 13% of the
total cargo handled at all the major Indian ports in 2001-02 (287.7 million tones) has been
assessed as potential traffic for the proposed SSC project.

               Import and Export Cargo Flows Relevant for SSC Project (2001-02)

                                                     Cargo in ‘000 Tonnes at Port
                        Country of                            Vishakha-
   Commodity        Origin/Destination Kolkata Haldia Paradip pattanam Chennai TOTAL
Coal                Africa                    0           0            0            0         73         73
Coal                Gulf                      0           0           11           41         28         80
Coal                Other Countries           0           0            0            7         80         87
Coal                USA                       0           0           26            0           0        26
Fertilizer          Africa                    0     807          1,406          1,277         919 4,409
Fertilizer          USA                       0     154                0          332         27        513
General Cargo Africa                        257     613              222          495         488 2,075
General Cargo Other Countries                91          24           99          122     1,812 2,148
General Cargo Sri Lanka                       0          28            3            0           1        32
General Cargo USA                           186     268               28           46         64        592
POL                 Africa                 1,511   8,092             120        7,427     4,260 21,410
POL                 Other Countries           0           0            0            0         25         25
POL                 USA                       0           5            0          127           0       132



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Sethusamudram Corporation Ltd                                                    Information Memorandum
Sethusamudram Ship Channel Project


Total Imports                                   2,045     9,991      1,915           9,874      7,777 31,602
General Cargo Gulf                                 99       257          0             141        344    841
General Cargo M. East                                0           0          0         148           332     480
General Cargo Other Countries                      41            0          0           3       1,398 1,442
General Cargo Sri Lanka                              2           0          0          56             7      65
General Cargo USA                                131       299              0         104           392     926
General Cargo African Countries                    15           34         22          18            42     131
General Cargo Europe                             182       418              5         570            51 1,226
Iron Ore            Gulf                             0           0          0           0           155     155
POL                 Europe                           0           0          0          95             0      95
POL                 Gulf                             0           0          0          76             0      76
POL                 M. East                          0           0          0          34             0      34
POL                 America                        0          0             0           44          0    44
Total - Exports                                  470      1,008            27        1,289      2,721 5,515


Of the 37.1 million tonne overseas cargo identified for the project, about 31.6 million
tonnes (85%) is accounted by imports and the remaining 5.5 million tonnes (15%) is export
traffic. Three of the five ports handle 88% - Visakhapatnam (30.1%), Haldia (29.6% and
Chennai (28.3%). The remaining 12% are accounted by Kolkata (6.8%) and Paradip
(5.2%).


6.8.3     Indian Ports - Sethusamudram Share

For forecasting cargo for SSC, Coastal and Overseas cargo whose origin / destination at
Indian East Coast port excluding Tuticorin port are considered. Commodity wise cargo
volumes, both coastal and overseas, are presented in the table below as a percentage
of that total commodity handled (originating or destined) at the particular port.

                  Percentage of cargo movement through SSC at each port

                                     Coastal (%)                           Overseas (%)
                                   Iron &                      Iron & General
        Port                  Coal Pellets POL Coal Fertilizer Pellets Cargo  POL
        Kolkata                 --        --       7.4     --         --        --           37.3    56.2
        Haldia                42.0        --     11.5      --        82.4       --           43.9    71.9
        Paradip               18.3        --     65.2     0.4        49.4       --           16.0     6.0
        Visakhapattanam        4.2       34.8    34.4     0.5        97.3       --           32.3     42
        Chennai                 --        --     30.6     1.6        56.6       2.1          42.4    50.4


The same break up percentages, of commodity wise cargo at each port, has been used
to project / forecast commodity wise cargo volumes likely to pass through SSC up to the
year 2025.




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project

6.8.4     Average Parcel Size

To arrive at the number of vessels passing through the Sethusamudram ship Channel,
cargo wise average parcel size of the vessels calling at the Indian ports was calculated,
using the parcel sizes over last 3 years at these ports. Average parcel size was used to
convert the cargo volume into number of vessels, which may transit through the SSC.

                                                                       Cargo in Tonnes
          Port                       Dry Bulk   Liquid Bulk   Break Bulk  Containers
          Calcutta                     2,913       12,580        3,055       7,229
          Haldia                      26,582       17,025        7,504       3,340
          Paradip                     26,996       10,985        6,527       1,054
          Visakhapattanam             35,613       28,975        5,640       2,504
          Chennai                     37,788       22,101        3,785      16,114
          Tuticorin                   27,126        7,018        4,394       4,521
          Cohin                       16,398       27,471        2,905       4,320
          New Mangalore               36,970       24,470        4,943        450
          Mormugoa                    59,908        8,174       10,520        982
          Mumbai                      13,048       23,681        6,832       8,704
          JNPT                        18,130       10,329         679       10,445
          Kandla                      18,427       32,138        9,629       6,197


6.8.5     Number of Vessels through SSC

Number of vessels passing through the SSC was arrived upon by dividing the estimated
cargo by average cargo parcel size for each of the commodity. Vessel traffic for the SSC
is categorized into the following two groups:

1. Total Potential Traffic

2. Restricted Traffic (due to Draft restrictions)


6.8.5.1    Total Potential Traffic

Total potential traffic for the SSC has been calculated based on the following inputs
calculated in the previous sections:

         Total Cargo Volume projections port wise
         % Break up, at each port, for cargo using SSC and not using SSC
         Average Parcel Size
         There will be a few numbers of empty voyages by coastal ships through the SSC.
          These are taken as 30 % of the total number of loaded coastal ships that will pass
          through SSC.

Using the above inputs, number of vessels that can transit through the proposed SSC
without any draft restrictions is presented below:




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project




                              Total Potential Vessel Traffic (Nos)

               Year            Pessimistic        Moderate       Optimistic
                   2004            5,393              5,560          5,729
                   2005            5,672              5,900          6,135
                   2006            5,967              6,263          6,572
                   2007            6,264              6,635          7,010
                   2008            6,576              7,030          7,479
                   2009            6,905              7,451          7,982
                   2010            7,226              7,864          8,480
                   2011            7,562              8,302          9,011
                   2012            7,898              8,747          9,537
                   2013            8,251              9,218          10,095
                   2014            8,619              9,716          10,688
                   2015            8,975              10,200         11,268
                   2016            9,346              10,710         11,881
                   2017            9,734              11,225         12,506
                   2018            10,139             11,766         13,164
                   2019            10,562             12,335         13,860
                   2020            11,004             12,933         14,595
                   2021            11,466             13,562         15,372
                   2022            11,948             14,224         16,192
                   2023            12,452             14,920         17,058
                   2024            12,978             15,652         17,974
                   2025            13,528             16,422         18,941


These values represent number of transit through SSC if there is no constraint such as
depth restrictions.

6.8.5.2   Restricted Traffic (due to Draft)

Of the total projected traffic calculations arrived upon in the previous section, all of it will
not translate into the traffic for the SSC, due to draft restriction placed in the design of
the channel. Hence, in order to arrive at the actual traffic projections for the SSC, an
analysis of the present vessel sizes which are playing to the Indian ports was carried out.
The details of the same are presented below:

                DWT ('000)      No. of Vessels        %        Cumulative (%)
                  Upto 10            1,272            20%            20%
                   10 -20            903              14%            33%


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Sethusamudram Corporation Ltd                                  Information Memorandum
Sethusamudram Ship Channel Project


                 20 - 30             809        12%            46%
                 30 -40              485        7%             53%
                 40 - 50             962        15%            68%
                 50 - 80             938        14%            83%
                80 - 100         1,127          17%           100%
                 Total           6,496


By adopting same trend for the ships passing through the SSC, distribution of potential
vessels in Sethusamudram Channel is presented in the table below:




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Sethusamudram Corporation Ltd                                          Information Memorandum
Sethusamudram Ship Channel Project




          No. of Transits upto 30,000 DWT   No. of Transits upto 40,000 DWT   No. of Transits upto 50,000 DWT   No. of Transits upto 80,000 DWT


Year     Pessimistic Moderate Optimistic Pessimistic Moderate Optimistic Pessimistic Moderate Optimistic Pessimistic Moderate Optimistic
  2004      2,481      2,557      2,636      2,858       2,947      3,037      3,667      3,780       3,896      4,476       4,614      4,755
  2005      2,609      2,714      2,822      3,006       3,127      3,252      3,857      4,012       4,172      4,708       4,897      5,092
  2006      2,745      2,881      3,023      3,162       3,320      3,483      4,058      4,259       4,469      4,953       5,198      5,455
  2007      2,881      3,052      3,225      3,320       3,517      3,715      4,259      4,512       4,767      5,199       5,507      5,818
  2008      3,025      3,234      3,440      3,485       3,726      3,964      4,472      4,781       5,086      5,458       5,835      6,208
  2009      3,176      3,427      3,672      3,660       3,949      4,230      4,695      5,066       5,428      5,731       6,184      6,625
  2010      3,324      3,618      3,901      3,830       4,168      4,494      4,913      5,348       5,766      5,997       6,527      7,038
  2011      3,479      3,819      4,145      4,008       4,400      4,776      5,142      5,645       6,127      6,276       6,891      7,479
  2012      3,633      4,024      4,387      4,186       4,636      5,054      5,371      5,948       6,485      6,556       7,260      7,915
  2013      3,795      4,240      4,644      4,373       4,886      5,350      5,610      6,268       6,865      6,848       7,651      8,379
  2014      3,965      4,469      4,917      4,568       5,149      5,665      5,861      6,607       7,268      7,154       8,064      8,871
  2015      4,128      4,692      5,183      4,757       5,406      5,972      6,103      6,936       7,662      7,449       8,466      9,353
  2016      4,299      4,926      5,465      4,954       5,676      6,297      6,356      7,283       8,079      7,757       8,889      9,862
  2017      4,478      5,163      5,753      5,159       5,949      6,628      6,619      7,633       8,504      8,079       9,316     10,380
  2018      4,664      5,412      6,056      5,374       6,236      6,977      6,895      8,001       8,952      8,416       9,766     10,926
  2019      4,859      5,674      6,376      5,598       6,537      7,346      7,182      8,388       9,425      8,767      10,238     11,504
  2020      5,062      5,949      6,714      5,832       6,855      7,736      7,483      8,794       9,925      9,133      10,734     12,114
  2021      5,274      6,239      7,071      6,077       7,188      8,147      7,797      9,222      10,453      9,517      11,257     12,758
  2022      5,496      6,543      7,448      6,332       7,539      8,582      8,125      9,672      11,010      9,917      11,806     13,439
  2023      5,728      6,863      7,847      6,599       7,908      9,041      8,467      10,146     11,600      10,335     12,384     14,158
  2024      5,970      7,200      8,268      6,878       8,296      9,526      8,825      10,643     12,222      10,772     12,991     14,918
  2025      6,223      7,554      8,713      7,170       8,704     10,039      9,199      11,167     12,880      11,229     13,630     15,721




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Sethusamudram Corporation Ltd                                        Information Memorandum
Sethusamudram Ship Channel Project

6.8.6   Total SSC Traffic

Since, draft of the channel is restricted to – 12 m and taking into account of underkeel
clearance of 2m, only vessels with draft of 10 m, will be able to pass through the channel.
As per the ideal vessel design for the channel, following vessels would be able to use the
channel:


Keeping the draft considerations in mind, it was estimated that all the vessels upto 20000
DWT, 75% of vessels up to 30000 DWT, 10% of vessels upto 40000 DWT and 5% of vessels
upto 50000 DWT and all empty vessels were expected to meet the draft criterion. Hence,
only these vessels have been used in calculating the traffic projections for the channel.

                            Total Vessel Traffic through SSC (Nos)

                Year          Pessimistic      Moderate        Optimistic
                    2004          2,432             2,507            2,584
                    2005          2,558             2,661            2,766
                    2006          2,691             2,824            2,963
                    2007          2,824             2,992            3,160
                    2008          2,965             3,170            3,372
                    2009          3,113             3,359            3,598
                    2010          3,258             3,545            3,822
                    2011          3,410             3,743            4,062
                    2012          3,561             3,944            4,299
                    2013          3,720             4,156            4,551
                    2014          3,886             4,380            4,818
                    2015          4,047             4,599            5,080
                    2016          4,215             4,829            5,356
                    2017          4,390             5,061            5,638
                    2018          4,572             5,305            5,935
                    2019          4,763             5,562            6,249
                    2020          4,963             5,832            6,581
                    2021          5,171             6,116            6,932
                    2022          5,389             6,415            7,302
                    2023          5,617             6,729            7,693
                    2024          5,854             7,060            8,106
                    2025          6,103             7,408            8,543


6.8.7   SSC Traffic after, DOWNTIME

Further studies carried out by the Tuticorin Port Trust and Technical Consultants, have
predicted some downtime in the operations of channel due to the monsoons. A down



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Sethusamudram Corporation Ltd                                    Information Memorandum
Sethusamudram Ship Channel Project

time of 0, 15, 45, 45, 45 days has been considered for vessels upto 10000 DWT, 10000 -
20000 DWT, 20000 – 30000 DWT, 30000 – 40000 DWT and 40000 – 50000 DWT respectively,
on the operating year of 330 days. As impact of monsoons, due to high wind and wave
conditions, all the vessels would not be able to use the channel. Hence, traffic for SSC
has been further moderated to take account of downtime in the channel operations.

            Total Vessel Traffic through SSC after considering Downtime (Nos)

             Year           Pessimistic         Moderate    Optimistic
                 2004           2,344              2,416        2,490
                 2005           2,466              2,564        2,666
                 2006           2,593              2,722        2,855
                 2007           2,722              2,883        3,046
                 2008           2,858              3,055        3,249
                 2009           3,000              3,237        3,467
                 2010           3,140              3,417        3,683
                 2011           3,286              3,607        3,914
                 2012           3,432              3,800        4,142
                 2013           3,585              4,005        4,385
                 2014           3,745              4,221        4,642
                 2015           3,900              4,432        4,895
                 2016           4,062              4,653        5,162
                 2017           4,231              4,878        5,433
                 2018           4,407              5,113        5,720
                 2019           4,591              5,361        6,023
                 2020           4,784              5,621        6,343
                 2021           4,985              5,895        6,681
                 2022           5,195              6,183        7,037
                 2023           5,414              6,486        7,415
                 2024           5,644              6,805        7,813
                 2025           5,883              7,141        8,234




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Sethusamudram Corporation Ltd                                          Information Memorandum
Sethusamudram Ship Channel Project


7. TARIFF CALCULATION

7.1 Introduction

Revenue for the Sethusamudram Channel would come from the toll levied upon the
vessels using the Channel. Since toll is the only revenue source for the Company, hence
tariff pricing for using the Channel is very crucial. Keeping the importance of tariff
charges on the eventual viability of Channel use, SSC has kept following objectives in
mind, while arriving on tariff charges for using the Channel:

      The tariff must allow profitable operation for both, the Channel Authority as well
       as users, thus creating a win – win situation.
      The tariff system must provide improved productivity to users and hence attract
       more vessels.
      Tariff structure must be simple and transparent.

With the above objectives in mind, SSC has developed a tariff structure, which relates the
toll to be paid by the users, to the savings accrued to them. It is assumed that, vessels
using the channel would save on following counts

      Savings in Fuel Cost
      Savings in Charter Cost

7.2 Savings on Fuel Cost

Since vessels using the Sethusamudram Channel, would be traveling lesser distance as
compared to existing route, it would result in savings in fuel cost to the vessels. Savings in
fuel cost have been estimated by calculating average saving in distance for the ships
going to Tuticorin Port and other ships that are not touching the Tuticorin Port. Savings in
distance are considered separately for Chennai, Vizag and Calcutta Port.

                                     Existing Routes     SSC Route       Savings in
               From          To
                                     Distance (NM)     Distance (NM)   Distance (NM)

          Cape Comorin Chennai            755               407            348
                         Vizag           1,014              724            290
                         Calcutta        1,357             1,103           254
          Tuticorin      Chennai          769               345            424
                         Vizag           1,028              662            366
                         Calcutta        1,371             1,041           330
                                                       Average             335.3

After calculating the saving in the distance, saving in fuel cost has been worked out by
comparing fuel consumption through the existing route around Sri Lanka and SSC route.
It has been assumed that ships will use IFO in the open sea and MDO in the Channel,
where there is restriction and need for better vessel response.

Following table presents the fuel rates for MDO and IFO fuels over the last year, which
have been used to convert the distance savings calculated above into financial savings
to vessels.


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Sethusamudram Corporation Ltd                                             Information Memorandum
Sethusamudram Ship Channel Project



              30-Jan-                            28-May-
Fuel Type
              04         20-Feb-04 22-Mar-04          04 29-Jun-04 31-Aug-04 29-Sep-04 5-Nov-04
IFO 380 CST
(USD / Kg)         168        170       163            187       179       188       195      199
IFO 180 CST
(USD / Kg)         171        174       167            193       184       192       199      203
MDO (USD /
Kg)                284        286       274            309       300       362       405      407

Since the fuel rates, as shown in above table are fluctuating, mid values from the above
data has been considered. Fuel rate for IFO has been assumed at USD 180 per Kg and
Fuel Rate for MDO has been assumed at USD 350 per Kg for calculating the savings on
fuel cost to the vessels. The table below provides the estimation of fuel savings to the
vessels using the channel, instead of existing route.

      DWT                              10,000         20,000    30,000     40000     50000
      Fuel Consumption (Kg/Km)           19.9           29.2      36.6       42.9      48.6
      Fuel Rate - IFO ($)                 180            180       180        180      180
      Fuel Rate - MDO ($)                 350            350       350        350      350
      Existing Route
      Distance (KM)                      1,943         1,943     1,943      1,943    1,943
      Fuel Consumption (Kg)           38,665.7 56,735.6 71,113.8 83,354.7 94,429.8
      Fuel Rate ($)                       180            180       180        180      180
      Fuel Consumption ($)             6,959.8 10,212.4 12,800.5 15,003.8 16,997.4
      Canal Route
      Canal Distance (KM)                 152            152       152        152      152
      Fuel Consumption (Kg)            30,24.8        4,438.4   5,563.2   6,520.8   7,387.2
      Fuel Rate ($)                       350            350       350        350      350
      Fuel Consumption ($)             1,058.7        1,553.4   1,947.1   2,282.3   2,585.5
      Open Sea (KM)                      1,170         1,170     1,170      1,170    1,170
      Fuel Consumption (Kg)            23,283         34,164    42,822     50,193   56,862
      Fuel Rate ($)                       180            180       180        180      180
      Fuel Consumption ($)             4,190.9        6,149.5   7,708.0   9,034.7 10,235.2
      Total Fuel Consumption ($)       5,249.6        7,703.0   9,655.1 11,317.0 12,820.7
      Savings in Fuel Cost ($)         1,710.2        2,509.4   3,145.4 3,686.8 4,176.7


7.3 Charter Savings

Since the vessels using the Sethusamudram channel would be traveling lesser distance,
there would be savings of time as well. This would result in savings on money to be paid
to the ship charter companies. The time savings for ships using the Sethusamudram
Channel is calculated below:




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Sethusamudram Corporation Ltd                                                              Information Memorandum
Sethusamudram Ship Channel Project



                                                                                      SSC Route




                                                                                                                                     Saving in Time
                              Existing Route                    Channel Length                     Open Sea




                                       @12 NM




                                                                                @8 NM




                                                                                                          @12 NM
                               (NM)




                                                         (NM)
                                      Required




                                                                              Required




                                                                                                         Required
                                            Time

                                       to travel




                                                                                    Time

                                                                               to travel




                                                                                                               Time

                                                                                                          to travel
                           Distance




                                                     Distance



                                                                   Distance




                                                                                             Distance
                                                                                                                        Total time
     From        To                                                                                                     Required
CapeComorin Chennai          755            62.9        407         82              10.3     325                 27.1          37.3 25.6
             Vizag          1014            84.5        724         82              10.3     642                 53.5          63.8 20.8
             Calcutta       1357           113.1     1103           82              10.3 1021                    85.1          95.3 17.8
Tuticorin    Chennai         769            64.1        345         82              10.3     263                 21.9          32.2 31.9
             Vizag          1028            85.7        662         82              10.3     580                 48.3          58.6 27.1
             Calcutta       1371           114.3     1041           82              10.3     959                 79.9          90.2 24.1
             Average        1049            87.4     713.7          82              10.3     632                 52.6          62.9 24.5
                                                                                                        Less : Time for Pilotage            2
                                                                                                           Net Savings in Time 22.5



Time Charter Rates of different vessels (USD/day)

Following table presents the chartering rates for various vessels over last 2 years, which
will be used to convert the charter timesaving into the financial benefits to the vessels
using the channel.

                                        Ship Size
                       Vessel Type       (DWT)                  2003               Oct-04
                       Handy Size       26-35,000               9,300               20,500
                       Handymax         40-50,000           13,735                  31,000

As it can be seen from the table, that the time charter rates for shipping vessels are
unpredictable as well as highly fluctuating, hence it was decided to take mid value of
the above figures, for calculating the savings in time charter charges to the vessels.

DWT                                                10,000         20,000             30,000             40,000     50,000
Saving in Time (Hrs)                                 22.5                 22.5         22.5               22.5          22.5
Time Charter Rate (USD/day)                        10,800         12,600             13,500             15,300      18,000
Saving in Time Charter (Ship Cost, USD)            10,125         11,813             12,656             14,344     16,875


7.4 Channel Tariff Rate

Keeping with the objective mentioned earlier in view, it has been decided that channel
tariff rates should be so decided that, tariff is linked to the savings achieved by the
vessels using the channel.




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Sethusamudram Corporation Ltd                                          Information Memorandum
Sethusamudram Ship Channel Project

Since, entire vessel related charges at major ports are based on the Gross Registered
Tonnage (GRT) of the vessel, hence even in case of SSC, tariff on the vessels using the
Channel would be related to the GRT of the vessels. However, in case of SSC, as there is
no difference in facilities provided to load or empty vessels, same charges will be applied
to all the vessels, empty or loaded. Since value of GRT varies from 1.5 to 2, hence an
average value of 1.7 has been considered for calculating the tariff rate.

   Description                            10,000    20,000      30,000       40,000    50,000
   Saving in Time Charter ($)             10,138    11,827      12,672       14,361    16,896
   Saving in Time Charter (Rs)         466,348     544,042     582,912      660,606   777,216
   Saving in Time Charter (Rs/DWT)          46.6      27.2         19.4        16.5      15.5
   Saving in Time Charter (Rs/GRT)          79.3      46.2         33.0        28.1      26.4
   Savings in Fuel Cost ($)                1,712   2,512.1      3,145.3     3,689.9   4,176.9
   Savings in Fuel Cost (Rs)           78,752.0 115,556.6 144,683.8 169,735.4 192,137.4
   Savings in Fuel Cost (Rs/DWT)             7.9       5.8          4.8         4.2       3.8
   Savings in Fuel Cost (Rs/GRT)            13.4       9.8          8.2         7.2       6.5
   Total Savings (Rs/GRT)                   92.7      56.1         41.2        35.3      33.0


Based on the calculation of savings, it has been assumed that channel tariff would be
levied at 50% of the savings. Hence, for ships of different sizes, channel tariff would be as
follows:

                        Vessel Size                          Tariff Rates
                     Upto 10,000 DWT                     Rs 46 / GRT

                   10,000 to 20,000 DWT                  Rs 28 / GRT

                   20,000 to 30,000 DWT                  Rs 20 / GRT

                   30,000 to 40,000 DWT                  Rs 17 / GRT

                   40,000 to 50,000 DWT                  Rs 16 / GRT




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Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project


8. ENVIRONMENT AND SOCIAL IMPACT ASSESSMENT

Tuticorin Port Trust (TPT), the nodal agency identified by Ministry of Shipping, Government
of India for the implementation of the Project in pursuance of its decision to incorporate
environmental considerations in the design phase of the project, appointed, in March
2002, National Environmental Engineering Research Institute (NEERI) to conduct the
Environmental Impact Assessment (EIA) study for the project.

A brief summary of the EIA report prepared by NEERI is describing the baseline
environmental status of the project area, identifying environmental issues, predicting and
evaluating impacts due to the proposed Project and delineatingthe Environmental
Management Plan to mitigate potential adverse impacts is summarized here.

The EIA study prepared by the NEERI has primarily drawn upon the available information
on the proposed Project, the hydrography, marine water quality and ecological
resources in the project area, and the primary data generated during the course of
study.

8.1.1   Environmental Regulations

At the national level, the environmental clearance to the Project is subject to
compliance with the stipulated safeguards under the provisions of Environment
(Protection) Act, 1986; Forest (Conservation) Act, 1980; The Water (Prevention and
Control of Pollution) Act, 1974; The Water (Prevention and Control of Pollution) Rules,
1975; The Water (Prevention and Control Pollution) Cess Act, 1977. The Water (Prevention
and Control of Pollution) Act, 1981; and other rules and regulations in force. Land use on
the coastline will be subject to regulation as per the Coastal Regulation Zone (CRZ)
Notification issued by the Ministry of Environment and Forests (MoEF), Government of
India, in 1991, and subsequent amendments under the Environmental Protection Act. The
State Department of Environment and Forests will administer this notification.

The Wildlife (Protection) Act of India (1972) provides legal protection to many marine
animals including reef-associated organisms. Chapter IV of this Act dealing with
Sanctuaries, National Parks etc. is equally applicable to marine reserves, marine national
parks and biosphere reserves.

The Gulf of Mannar Marine Biosphere Reserve (GOMMBR) has been notified in 1989
through an executive communication from the Secretary to the Government of India,
Ministry of Environment and Forests to the Chief Secretary, Government of Tamil Nadu.

During the operational phase of the Project, the most important instrument to be
complied relates to the International Convention for the Prevention of Pollution from
Ships, 1973 as modified by the Protocol of 1978 (MARPOL 73/78) to which India is a
signatory.

8.1.2   Impacts due to the Project

8.1.3   Impacts on Landbased Facilities

The Project envisages construction of shore facilities to cater the needs of channel in
Adam’s Bridge area, viz. service jetties, slipways, buoy yard, repair workshop as also staff
and administration buildings for facilitating regulated traffic in the vicinity of Adam’s


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Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project

bridge area. While the plans for reclamation of Pamban Island have been dropped, an
option of 300 hectare of land to be reclaimed has been retained in the Project (As
compared to 753 hectare in previous study). Due to this land reclamation, some of the
hamlets at Arimunai and Dhanushkodi, that are engaged in fishing, might be dispaced.
These fishermen will be displaced in the event the land based facilities are planned in this
area. Temporary displacement of these fishermen is envisaged. A BSF check post will also
be temporarily affected.

During the construction of the Channel, it is anticipated that considerable sea-borne
activity in the form of logistic and support services would take place. This would have
significant adverse impact on the traditional fishing activities by the licensed fisher folk
and consequently on their income levels.

8.2 Impacts on Productivity and Ecology in GOM/Palk Bay

As the proposed alignment in Gulf of Mannar is more than 20 Km away from the existing
21 islands in National Marine Parks in the Gulf of Mannar, the marine biological resources
around these islands will not be affected to any significant level.

The existing level of primary productivity in the project area will remain practically
unaltered during the construction and operation phases of the channel. There would not
be any significant change in water quality including turbidity due to the proposed
deployment of cutter suction/trailor suction hopper dredgers for capital and
maintenance dredging.

Due to dredging the bottom flora and fauna on an area about 6 sq. Km along the
Channel alignment in Adams Bridge and about 16-17 sq. Km in Palk Bay/Palk Strait area
will be lost permanently. This loss, however, will be very insignificant compared to the
total area of 10,500 sq. Km of the Gulf of Mannar Marine Biosphere Reserve.

In Adam’s Bridge area about 40 million m3 of dredge spoil comprising about 7-8 million
m3 clay silt will be generated for achieving 12 m depth for 300 m wide channel including
allowances for slope and tolerance. It is proposed that all the spoil containing mainly
sand (particle size 125 m to 600 m) will be discharged in sea 25 km away from the
dredging area keeping safe distance from medial line at depths varying from 30-40 m to
minimise the impact.

In Palk Bay area, about 44 million m3 of dredged spoil will be generated due to
excavation activity in Palk strait and Palk Bay to achieve 12 m depth for 300 m channel
including allowances for slope and tolerance. The NHO data indicate hard strata beneth
soft sand hence spoil may contain silt, sand and hard material. The dredging may also
require blasting if a hard stratum is encountered. In the event of blasting, adverse impact
on sea bottom fauna is envisaged. The spoil is proposed to be discharged in Bay of
Bengal at suitable depth (25-40 m) to minimize impacts on coastal areas of Palk Bay. An
option of using silt/clay for beach nourishment is also recommended.

Hydrodynamic modelling studies using Depth Integrated Velocity and Solute Transport
(DIVAST) model have shown that, even for the highest spring tidal water conditions, there
will be no significant change in the magnitude and direction of current velocities along
the proposed alignment due to the construction of the Channel in Adam’s bridge area.




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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project

During the construction and operation phases of the Channel, the potential sources of
marine pollution are spillage of oil and grease, marine litter, jetsam and floatsam
including plastic bags, discarded articles of human use from the sea-borne vessels which
will have to be controlled.

The Channel may facilitate the movement of fishes and other biota from the Bay of
Bengal to the Indian Ocean and vice versa. By this way, the entry of
oceanic and alien species into the Palk Bay and the Gulf of Mannar, as also the dispersal
of endemic species outside the Palk Bay and the Gulf of Mannar could occur.

8.2.1     Socio-economic Impact

The Channel will establish a continuous navigable sea route around peninsular coast
within the Indian territorial waters; reduce shipping distance by about 254-424 Nautical
Miles and voyage time of about 21-36 hours as also the attendant operating costs. The
Channel will become a valuable asset from national defence and security point of view
enabling easier and quicker access to the Indian Naval Ships between the eastern and
western coasts.

Due to the construction of infrastructure in the island, the land access, now available to
the local fisher folk to Dhanushkodi area for traditional fishing will be hindered unless
alternative arrangements are made. The dredging and shipping operations will have to
be so regulated as to cause minimum disturbance to the normal fishing activities.

The Project will provide employment opportunities and avenues of additional income
through establishment of small ancillary industries. The Project will also trigger
development of coastal trade between the ports south and north of Rameswaram
consequently reducing the load and congestion on railways and roadways.

The project will help in saving considerable foreign exchange through reduction in oil
import bill and generate revenue income from dues levied on ships transiting the
channel, which will add to the national economy.


8.2.2     Environmental Management Plan

8.2.2.1    Construction Phase

         No dredging will be done in Gulf of Mannar except in Adam’s Bridge area
         Alignment of navigation route at Adam’s Bridge in Gulf of Mannar will be
          minimum 20 km away from marine national park
         Land acquired for mobilization and monitoring of activity will be returned to users
          after completion of dredging activity
         A proper rehabilitation plan for the fisherman at Dhanushkodi will be drawn
          during construction phase
         Dredged spoil comprising clay and sand upto 2 m of dredging depth will be used
          for reclaiming degraded land in Pamban island subject to approval of FED for
          CRZ. Balance dredged spoil will be disposed in sea at a depth 30-40 m, 20-25 km
          away from islands in National Marine Park in Gulf of Mannar. Dredged spoil
          generated in Palk Strait / Palk Bay area will be disposed in open sea in Bay of
          Bengal at 25-40 m depth, 30-60 km away from dredging area
         Safe distance (about 4 km) from international medial line will be maintained



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         During dredging activities, the equipments, vessels, barges required for dredging
          and transportation of dredged spoil will be maintained in secured area and
          spillage of oil or any toxic material including paints, anticorrosive agents etc. will
          not be allowed to spill in sea/coastal waters
         Movement of barges for transporting dredged spoil to land area will not interfere
          with movement of fishing boats in both Gulf of Mannar and Palk Bay region
          adjoining the Adam’s Bridge
         It is also recommended that existing jetties at Rameswaram which only cater to
          fishing activities presently should be augmented to cater to the requirement of
          handling dredging activities in Adam Bridge and Palk Bay area
         Transportation of heavy machinery and construction material in the vicinity of
          Adam's Bridge will be by sea route using the available navigational depths
         During transportation of heavy equipments and machinery by road, care will be
          taken to avoid traffic hazard, traffic congestion and if required roads will be
          augmented to meet the conditions of hazard free transportation.

8.2.2.2    Operational Phase

         All the ships originating from Tuticorin Port will comply to International Maritime
          Standards and follow MARPOL convention (MARPOL 73/78)
         Discharge of bilge, ballast, treated sewage, solid wastes, oily wastes and spillage
          of cargo will not be allowed in the Gulf of Mannar and Palk Bay area
         The traffic of crude oil tankers will be allowed in this route with strict vigilance so as
          to avoid any possibilities of spillage in this region
         It will be ensured that ships navigating in this region should not use such paints
          and anticorrosive agents on ship bottom which can cause damage to marine
          organisms
         A pilot should be trained or environmental watcher will board the ship to watch
          marine animals viz. turtle, dolphins, sea cow etc. in the region and navigate the
          ship safely avoiding any damage to this fauna.
         It will be ensured that all the ships berthing at TPT as well as all those using the
          route without touching TPT will have proper treatment facilities for sewage
          however discharge of treated sewage will not be permitted in Gulf of Manna and
          Palk Bay / Palk strait area
         Ships bypassing TPT and transiting the Channel will be inspected for their
          navigational safety measures before they are allowed to enter the proposed
          navigation route
         An oil spill contingency plan will be drawn by Tuticorin Port Trust with
          preparedness to prevent spread of spillage in Gulf of Mannar and Palk Bay area
          and its immediate recovery by deploying equipments and ships
         To benefit large fishing communities in the coastal area of Ramnathpuram and
          Rameshwaram, a corridor both in terms of space and time be provided to
          fisherman to use the Channel in Adam’s Bridge area for moving across Palk Bay
          to GOM and vice versa for fishing activity
         The jetties at Rameswaram are in dilapidated conditions. A programme to
          construct a few Jetties at Pamban island to augment fishing activity in the region
          be supported by TPT
         The traffic of ships carrying crude oil will be handled with strict vigilance so as to
          avoid the possibility of spillage
         The oil spill contingency plan, in operation at TPT, will be extended to the
          navigation activities in the Channel




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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project

       A pilot will board the vessel either from Rameswaram or appropriate place to
        navigate ship through Gulf of Manna area up to Bengal Channel in Palk Bay
       The Channel will be properly marked by navigational light buoys
       Accidents by collision of ships with fishing boats will be totally prevented by
        slowing down the cruise speed and also alerting the fisherman by cautionary
        measures. During implementation and operational phases of the project, TPT will
        take action to avoid the collisions of ships with fishing boats or damage to fishing
        nets with cooperation from fishing communities, Navy, Coast Guards and other
        Govt. authorities
       Suitable timings apart from ship transit will be given for fishermen to continue with
        their fishing activities
       Maintenance dredging of about 0.55 million m 3 per year is envisaged in the
        channel based on data available for sediment transport across Palk Bay and Gulf
        of Mannar
       The dredged material will be mostly silt and clay and will not be disposed in sea.
        Instead it will be used to reclaim degraded areas on Pamban island, Ramnad
        and Mandapam coastal stretches
       To cater to increase in trade envisaged due to this project and to transfer benefit
        to local fisherman, a minor port facility can be created at Rameswaram in
        consultation with state authorities

8.3 Environmental Monitoring

The mitigation measures suggested in the preceding sections require environmental
monitoring to check the effectiveness of the measures adhered. In the present project,
monitoring of environmental components especially marine water, sediment, marine
ecology is vital owing to the sensitiveness of the project region. Keeping in view the
ecological sensitivity of the region, a 3 level monitoring has been suggested to mitigate
the impacts during the implementation phase of SSCP. The details of the monitoring
levels are as follows:

 Monitoring
                              Description                       Monitoring Agencies
   Level

First Level     Continuous monitoring of Marine               SDMRT
                Environment during the dredging               Central   Marine      Fisheries
                operations of the implementation               Research Institute, Cochin
                period. The frequency of the                  CECRI
                sampling will be on a 4 hourly basis.         Alagappa       Institute     of
                This level of monitoring will be for the       Technology, Karaikudi
                Dredging      Zones    and     Disposal       Centre     for     Advanced
                Locations.                                     Studies in Marine Biology,
                                                               Parangipettai


Second Level    This will be confined to the Gulf of          SDMRT
                Mannar Biosphere Region and will              Central   Marine      Fisheries
                be on a continuous basis during the            Research Institute, Cochin
                dredging operations. The frequency            CECRI
                of sampling will be on 8 hourly basis.        Alagappa       Institute     of
                                                               Technology, Karaikudi
                                                                 Centre for Advanced



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Sethusamudram Corporation Ltd                                         Information Memorandum
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                                                                Studies in Marine Biology,
                                                                Parangipettai


Third Level       This will be confined to the nearest         SDMRT
                  Gulf of Mannar Island to Adam’s              Central   Marine      Fisheries
                  Bridge. The frequency of sampling             Research Institute, Cochin
                  will be once in a day during the             CECRI
                  dredging operation at Adam’s                 Alagappa       Institute     of
                  Bridge.                                       Technology, Karaikudi
                                                               Centre     for     Advanced
                                                                Studies in Marine Biology,
                                                                Parangipettai



Apart from this ambient air quality and noise need to be monitored to check the build-
up of the respective levels in Terrestrial Environment during the development of land-
based facilities.

8.3.1   Institutional Mechanism for Environmental Management Plan

In order to implement the mitigation measures and effective monitoring of environment
during the construction and operation phases, a suitable Institutional Mechanism has
been proposed. The format for Institutional Mechanism is presented below:



                                                            Sethusamudram
                                                          Corporation Ltd (SCL)

                 Environmental
              Management Unit of
               Tuticorin Port Trust

                                                               Prospective EPC
                                                                  Contractor




                                                 Environmental Management Team
                                                  (Marine biologists, Zoologists and
                                                        Engineers) – Full Time




                                                         Independent Agency for
                                                          Environment Monitoring




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Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project


9. SHIP CHANNEL – INTERNATIONAL EXPERIENCES

9.1 Panama Canal

The Panama Canal is approximately 80 kilometers long between the Atlantic and Pacific
Oceans. This waterway was cut through one of narrowest saddles of the isthmus that joins
North and South America.

The maximum dimensions of ships that can transit the Canal are: 32.3 meters in beam;
draft 12 meters in Tropical Fresh Water; and 294.1 meters long (depending on the type of
ship).

The Canal uses a system of locks -compartments with entrance and exit gates. The locks
function as water lifts: they raise ships from sea level (the Pacific or the Atlantic) to the
level of Gatun Lake (26 meters above sea level); ships then sail the Channel through the
Continental Divide.

Ships from all parts of the world transit daily through the Panama Canal. Some 13 to 14
thousand vessels use the Canal every year. Commercial transportation activities through
the Canal represent approximately 5% of the world trade.

Panama Canal Tolls

The main source of revenue for Panama Canal is toll revenue, which are determined by
the cargo volume and ship measurements. The appropriate rate is applied depending
on whether the ship is laden or in ballast (empty). The tonnage measurement system in
use in the Canal is known as Panama Canal Universal Measurement System (PC/UMS),
following the rules of the 1969 International Convention on Tonnage Measurement of
Ships.

Panama Canal’s Financial Position:

                                                      In’000s of Balboas
                   YE 31st March,                   2003        2004
                   Equity Paid Up                 1,908,682   1,904,568

                   Net worth                      2,398,052   2,667,517

                   Net Block                      1,938,647   2,007,551

                   Revenue                         920,807    1,063,487

                   PBD                             3,12,955    4,41,130

                   Depreciation                     54,988      60,797

                   Net Income                      257,967     380,333

FY – 2003 Results Analysis




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Sethusamudram Corporation Ltd                                     Information Memorandum
Sethusamudram Ship Channel Project

The operating results of the Panama Canal for FY 2003 show an increase in profitability,
as indicated by a net income to sales margin of 28.0 percent, and a 10.1 percent return
on total assets, showing a considerable increase when compared to FY 2002, 20.9
percent profitability and 7.1 percent better income to sales margin. This increase was
mainly due to toll and transit related services increase, and additional net tonnage
transit.

9.2 Suez Canal

The 100-mile (160-kilometre) Suez Canal connects the Mediterranean to the Red Sea and
separates mainland Egypt from the Sinai peninsula. The Canal has a width, minimum of
60 metres. The Canal cuts through three lakes, the Lake Manzala, in the north from which
it is protected with a bedding on the western side, the Lake Timsah in the middle, and
the Bitter Lakes further south. The Bitter Lake makes up almost 30 Km of the total length.
Along most of the length, there is only one lane available for traffic, though there are a
handful of passing bays. Modern ships extensively use the Canal, as it is the fastest
crossing from the Atlantic Ocean to the Indian Ocean. Taxes paid by the vessels using
the Canal, represent an important source of income for the Egyptian government.

The Canal allows vessels to travel from Europe to Asia without having to go all the way
around Africa. Before the Canal was built, ships had to dock and then goods were
carried over land between the Mediterranean and the Red Sea. The Suez Canal was first
built over 2,000 years ago. In 1859, the Suez Canal was built again, by the Universal Suez
Ship Canal Company, and took 10 years to build.

The Canal made it possible to easily transport goods across the world. The Canal also
allowed Europeans to travel to East Africa, and this area was soon controlled by
European powers. The success of the canal encouraged the French to start building the
Panama Canal. About 15,000 ships pass through the Canal each year, which is about
14% of world shipping traffic. Each ship takes up to 16 hours to cross the Canal.

The Canal has recently introduced a number of improvements both in its infrastructure
and the incentives granted to ships passing through it. The Canal has just completed a
five-year plan to increase its draught from 58 feet to 62 feet, enabling it to
accommodate larger vessels. By 2010 the draught will be increased to 72 feet. Once this
has been done, vessels weighing 300,000-350,000 tons will be able to pass through the
Canal, depriving the alternative routes of their competitive advantage. The Canal will
then be able to accommodate the specifications of 92 per cent of transport vessels
worldwide. All widening and deepening work has been carried out by the Canal's fleet
of dredgers and completely financed by authority resources.

The introduction of a new electronic vessel traffic control system has also increased
revenue. This system, under which the entire length of the Canal is covered by radar
surveillance, calculates the transit time for any vessel seeking to pass through the Canal.

Financial Position:

Egypt's income from Suez Canal transit fees rose 16 percent in year 2004. Suez canal
income for 2004 stood at 3.275 billion dollars, up from 2.819 billion the previous year. In
year 2003-04; 17,224 ships carrying 646 million tons of goods had crossed Suez.




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Sethusamudram Corporation Ltd                                   Information Memorandum
Sethusamudram Ship Channel Project

Tolls paid by U.S.-led coalition military ships involved in the Iraq war & growing global
trade and the use of bigger containers accounted for the 2004 increase. Booming trade
with India, China & trade with Southeast Asia accounted for 40 percent of the Suez
traffic.
                                                                           $ in Billion
YE 31  st March,               2001         2002        2003        2003       2004

Revenue                      1.947       1.963       2.612       2.819       3.275




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Sethusamudram Corporation Ltd                                      Information Memorandum
Sethusamudram Ship Channel Project


10. PROJECT AND O&M COST

10.1 Project Cost

The project is estimated to cost Rs 23,535 Million. Details of the project cost are provided
below:

               Description                                      Rs Million
               Dredging                                           1,7196
               Navigational Aids                                   109
               VTMS Equipment                                      659
               Tugs & Crafts                                       1576
               Civil Works                                         1440
               Preliminary & Administrative Cost                   150
               Consultancy & Supervision Cost                      200
               Contingency Cost                                    1000
               Financing Cost                                     1944*
              TOTAL COST                                          24274
             *Reduction in Financing Cost is anticipated.

The detailed cost for the various items of Dredging, Civil, Mechanical, Navigational &
VTMS, Electrical and Utility work is presented in Annexure – III.

      Capital cost of the dredging has been arrived upon after undertaking budgetary
       quotes from leading dredging firms. Unit rates for each of the dredging sites has
       been further revised after gathering the Vibrocoring and Borehole data of the
       dredging site.
      Apart from this, cost estimates for the marine civil works have been worked out
       using in-house data by Technical Consultants as well as comparison with similar
       works in the region.
      A provision of Rs 1200 Million has been made towards contingency cost, and
       engineering and project management cost.
      It has been assumed that all the reclaimed material will be dumped into the sea.
      Financing cost includes IDC of Rs 1268 Million on RTL/NCDs & FCL, Upfront fees of
       1% for debt processing (Rs 146 Million) and a DSR of (Rs 530 Million).

10.2 Operation & Maintenance Cost

The annual O & M expenditure on different components of the Project have been
assessed by taking into account the life of the component, repair and maintenance
requirement, wages of crew and usage of consumables.

10.2.1 Maintenance Cost

      Civil Maintenance Cost – The civil maintenance of all the structures including
       buildings, slipways, control buildings and workshop will include regular painting



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Sethusamudram Corporation Ltd                                     Information Memorandum
Sethusamudram Ship Channel Project

       and other house keeping to maintain strength of the structures. This cost has been
       assumed at Rs. 10 Million for Year 2007.

      Tugs and Navigational Aids – The tugs for pilotage will need to be sent for
       periodic dry – docking to maintain them in good shape. The equipment of tugs
       like the diesel generators, Main drive engines and other ancillary systems like fire
       fighting equipments and hoses will also be maintained on regular basis to
       improve their performance. The cost of the maintenance has been assumed at
       Rs 100 Million in the year 2007.

      Maintenance Dredging – The maintenance dredging quantity is estimated to be
       2 million cubic meter per year for 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 million cum. Maintenance dredging cost
       has been assumed at Rs 100 per cu m.

10.2.2 Operations Cost

The operating cost of the Sethusamudram Channel would include Manpower cost, Port
Craft operations, and Plant & Machinery Cost.

      Manpower Cost – The organizational set up of the Sethusamudram Channel,
       including administrative staff as well as the Technical staff like engineers, pilots,
       Tug Masters is provided in Annexure- . the manpower cost for the operations has
       been assumed at Rs 50 Million per year. The cost of VTMS has been assumed at Rs
       8.5 million.

      Port Craft Cost – The operating cost of the port craft (Tugs & Launches) would
       include the crew cost, fuel cost and other consumables like painting and
       inspections of hull etc. the cost for the same is expected to Rs 68 Million.

Summary of Operations & Maintenance Cost: A summary of the O & M cost, at constant
prices, for year 2008, is presented below. An escalation of 5% p.a. in O& M cost has been
considered in the financial projections.

S No DESCRIPTION                                                                      Rs Million
                                              Year   1     2      3      4      5     6     7
    1 Maintenance Cost
  1.1 Maintenance for VTMS                           50    50     50    50     50     50       50
  1.2 Maintenance Dredging                           200   200   170    170    140   140       140
  1.3 Civil Maintenance                              10    10     10    10     10     10       10
  1.4 Tugs & Launches (Including Operation)          100   100   100    100    100   100       100
  1.5 Plant & Machinery                              10    10     10    10     10     10       10
  1.6 Total Maintenance Cost                         370   370   340    340    310   310       310
    2 Operation Cost
  2.1 Administration & Staff Cost                    50    50     50    50     50     50       50
  2.2 VTMS                                           8.5   8.5   8.5    8.5    8.5    8.5      8.5
  2.3 Tugs                                           68    68     68    68     68     68       68




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Sethusamudram Corporation Ltd                                     Information Memorandum
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  2.4 Plant & Machinery                          20      20      20      20      20      20      20
  2.5 Total Operation Cost                      146.5   146.5   146.5   146.5   146.5   146.5   146.5
    3 Subtotal of O & M Cost                    516.5   516.5   516.5   516.5   516.5   516.5   516.5
    4 Contingencies & Project Management Cost   25.8    25.8    24.3    24.3    22.8    22.8    22.8
    5 Total O & M Cost                          542.3 542.3 510.8 510.8 479.3 479.3             479.3




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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project


11. MEANS OF FINANCE

The project is proposed to be financed by Debt Equity mix of 1.5:1. Of the total project
cost of 24274 Million, equity funding will contribute Rs 9710 Million, whereas debt funding
is expected to be at Rs. 14564 Million. Of the total debt funding, 30% of the funds will be
raised in form of Ruppe Term Loan/ NCDs, 30% in form of FCL and remaining funds in form
of Zero Coupon Bonds.

       S No   Particulars                     Amount (Rs Million)
         1    Equity Capital                  9710
         2    Rupee Term Loan / NCDs          4369
         3    Foreign Currency Loan           4369
         4    Zero Coupon Bonds               5826
              TOTAL                           24274

The promoters propose to bring in 50% of the equity contribution towards the project up-
front before seeking any disbursements from the project lenders. The balance would be
brought in pro-rata to the debt contribution. The co-promoters of GoI are Central PSU’s
and major port trusts with consistent profit track record and no difficulty is envisaged in
their bringing in the equity contribution.




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Sethusamudram Corporation Ltd                                                                                                     Information Memorandum
Sethusamudram Ship Channel Project




12. FINANCIAL PROJECTIONS


                                                           1      2      3       4     5      6      7      8      9     10     11     12     13     14     15

 Year Ending 30th June                                   2009   2010   2011   2012   2013   2014   2015 2016     2017   2018 2019     2020 2021     2022   2023

 Number of vessels upto 10,000 DWT                       1202   1452   1660   1749   1844   1943   2040   2142   2245   2353   2467   2586   2713   2845   2984

 Number of vessels of 10,001 DWT to 20,000 DWT            804    970   1110   1169   1232   1299   1363   1432   1500   1572   1648   1729   1812   1901   1993

 Number of vessels of 20,001 DWT to 30,000 DWT            477    575    656    692    729    768   807    847     888   931    976    1023   1073   1126   1181

 Number of vessels of 30,001 DWT to 40,000 DWT             58     66     74     78     82     86    91     96     100   105    110    116    121     127    134

 Number of vessels of 40,001 DWT to 50,000 DWT             87     97    108    113    119    126   132    139     146   153    160    168    177     186    195

 TOTAL                                                   2628   3160   3608   3801   4006   4222   4433 4656     4879   5114 5361     5622 5896     6185   6487

 Revenue from Coastal Vessels                             268    296    329    364    403    445   492    544     600   663    731    807    890     983   1085

 Revenue from Foreign Vessels                             669    890   1096   1213   1342   1485   1636   1803   1982   2179   2397   2637   2902   3193   3514

 Revenue from Coastal Vessels from Vessels >30,000 DWT     52     58     64     71     79     87    96    107     118   129    143    158    174     191    212

 Revenue from Foreign Vessels from Vessels >30,000 DWT     30     40     50     55     61     67    74     81      89    99    108    119    131     145    159

 TOTAL INCOME                                            1019   1284   1539   1702   1883   2085   2298 2535     2789   3070 3378     3720 4096     4513   4970

 OPERATING COSTS

 Operation and Maintenance Cost                           569    598    591    621    612    642   674    708     744   781    820    861    904     949    996

 Insurance                                                 46     49     51     54     56     59    62     65      68    72     75     79     83      87     92

 Total Operating cost                                    616    646    642     674   668    701    736    773    812    853    895    940    987    1036   1088

 PBDIT                                                    404    638    897   1028   1215   1383   1562   1762   1977   2217   2483   2780   3110   3476   3882

 Forex Fluctuation                                         0      0      0       0     0      0      0      0      0      0      0      0      0      0      0

 Depreciation                                             869    869    869    869    869    869   869    869     869   869    869    869    869     869    869

 Interest on loan                                         597    597    587    545    500    451   387    323     258   194    141    120     99      78     57

 Interest on Zero Coupon                                  555    602    653    708    769    834   905    982    1065   1156   1254   1361   1476   1602   1738

 Guarantee Fee                                            193    201    207    208    211    213   212    213     214   217    222    234    247     262    279




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Sethusamudram Ship Channel Project




 Non Operating Income

 Interest on Cash Balance                         0      0     0      0     0      0      2     12     34     68    132    221    320     437    573

 Interest on DSRA                                17     12    17     22    21     24     27     25     24     23     16     10      9      9      9

 Total Non Operating Income                      17     12    17     22    21     24     29     38     58     90    148    231    330     446    581

 PBT                                           -1795 -1619 -1402 -1281 -1112     -960   -783   -588   -373   -129   145    427    747    1111   1520

 Tax                                              0      0     0      0     0      0      0      0      0      0     11     33     57      85    117

 PAT                                           -1795 -1619 -1402 -1281 -1112     -960   -783   -588   -373   -129   134    394    690    1025   1403

 Net cash Accruals                              -371   -148   121    297   526   743    991    1263   1562   1896   2257   2624   3035   3496   4010

 Appropriations

 Legal Reserve                                    0      0     0      0     0      0      0      0      0      0     13     39     69     103    140

 Dividend Distributed                             0      0     0      0     0      0      0      0      0      0      0      0      0      0      0

 Dividend Tax                                     0      0     0      0     0      0      0      0      0      0      0      0      0      0      0

 Retained Earnings

 Retained Earnings                             -1795 -1619 -1402 -1281 -1112     -960   -783   -588   -373   -129   134    394    690    1025   1403

 Cumulative Retained Earnings                  -1795 -3414 -4816 -6096 -7208 -8168 -8951 -9540 -9913 -10041 -9908 -9513 -8824 -7798 -6395


 Note : The Guarantee fee proposed may under go a change in the event of consideration of the request for waiver of Guarantee
        Fee by the Govt.




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Sethusamudram Ship Channel Project




                                                             16     17   18    19    20    21    22    23    24    25    26     27     28     29     30

    Year Ending 30th June                                   2024   2025 2026 2027 2028 2029 2030 2031 2032 2033 2034           2035   2036   2037   2038

    Number of vessels upto 10,000 DWT                       3131   3284 3284 3284 3284 3284 3284 3284 3284 3284 3284           3284   3284   3284   3284

    Number of vessels of 10,001 DWT to 20,000 DWT           2092   2194 2135 2135 2135 2135 2135 2135 2135 2135 2135           2135   2135   2135   2135

    Number of vessels of 20,001 DWT to 30,000 DWT           1239   1300 1630 1630 1630 1630 1630 1630 1630 1630 1630           1630   1630   1630   1630

    Number of vessels of 30,001 DWT to 40,000 DWT           141    147   171   171   171   171   171   171   171   171   171   171    171    171    171

    Number of vessels of 40,001 DWT to 50,000 DWT           205    215   243   243   243   243   243   243   243   243   243   243    243    243    243

    TOTAL                                                   6808   7140 7463 7463 7463 7463 7463 7463 7463 7463 7463           7463   7463   7463   7463

    Revenue from Coastal Vessels                            1198   1322 1456 1529 1606 1686 1770 1859 1952 2049 2152           2259   2372   2491   2615

    Revenue from Foreign Vessels                            3869   4259 4676 4910 5155 5413 5684 5968 6266 6579 6908           7254   7617   7997   8397

    Revenue from Coastal Vessels from Vessels >30,000 DWT   234    258   314   330   347   364   382   401   421   442   465   488    512    538    565

    Revenue from Foreign Vessels from Vessels >30,000 DWT   176    192   225   236   248   261   274   287   302   317   333   349    367    385    404

    TOTAL INCOME                                            5476   6031 6672 7006 7356 7724 8110 8515 8941 9388 9858 10350 10868 11411 11982

    OPERATING COSTS

    Operation and Maintenance Cost                          1046   1099 1153 1211 1272 1335 1402 1472 1546 1623 1704           1789   1879   1973   2072

    Insurance                                                96    101   106   111   117   123   129   135   142   149   157   165    173    181    191

    Total cost                                              1142   1200 1260 1323 1389 1458 1531 1608 1688 1772 1861           1954   2052   2154   2262

    PBDIT                                                   4334   4831 5412 5683 5967 6265 6579 6908 7253 7616 7997           8396   8816   9257   9720

    Forex Fluctuation                                         0      0    0      0    0     0     0     0     0     0     0      0      0      0      0

    Depreciation                                            869    869   869   725   725   725   725   725   725   725   725   725    725    725      0

    Interest on loan                                         37     16    0      0    0     0     0     0     0     0     0      0      0      0      0

    Interest on Zero Coupon                                 1885   1875 1850 1806 1742 1654 1538 1391 1207         982   711   385      0      0      0

    Guarantee Fee                                           297    291   283   277   267   253   236   213   185   150   109    59      0      0      0

    Non Operating Income

    Interest on Cash Balance                                690    785   909   988   995   988   966   930   876   804   709   589    517    537    576




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Sethusamudram Corporation Ltd                                                                              Information Memorandum
Sethusamudram Ship Channel Project




    Interest on DSRA                    8     8     4      0    0     0     0     0     0     0     0      0      0      0      0

    Total Non Operating Income        698   793    913   988   995   988   966   930   876   804   709   589    517    537    576

    PBT                              1944   2573 3323 3863 4228 4621 5046 5509 6012 6562 7161            7816   8608   9069 10295

    Tax                               149   198    255   297 1032 1900 2056 2224 2406 2605 2821          3057   3342   3508   3689

    PAT                              1794   2376 3068 3566 3196 2720 2990 3285 3606 3957 4340            4759   5266   5560   6607

    Net cash Accruals                4549   5120 5787 6097 5663 5099 5254 5401 5538 5664 5776            5869   5991   6286   6607

    Appropriations

    Legal Reserve                     179   238    307   357   320   272   299   328   361   396   434   476    527    556    661

    Dividend Distributed                0     0     0 3209 2876 2448 2691 2956 3245 3561 3906            4283   4739   5004   5946

    Dividend Tax                        0     0     0      0    0     0     0     0     0     0     0      0      0      0      0

    Retained Earnings

    Retained Earnings                1794   2376 3068    357   320   272   299   328   361   396   434   476    527    556    661

    Cumulative Retained Earnings     -4601 -2226   842 1199 1518 1790 2089 2418 2778 3174 3608           4084   4610   5166   5827




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Sethusamudram Corporation Ltd                                                                                          Information Memorandum
Sethusamudram Ship Channel Project




12.1 Sensitivity Analysis

In order to analyze the project strength and it ability to withstood the adverse economic and business conditions, a sensitivity analysis
was carried out for different scenarios. Results of sensitivity analysis is presented below:

                             Average     Min     Max     Project IRR (pre- Project IRR (post-   Equity    NPV @      Pay Back    Additional
                              DSCR      DSCR     DSCR          tax)              tax)            IRR       12%        period      Funding
Base Case                     1.92       1.11    10.15        9.69%              8.89%          8.75%    (5556.76)      16          1531

Revenue down by 10%           1.76       1.06     8.80        8.79%              8.09%          7.04%    (7457.31)      17          2602
Construction cost increase
                              1.90       1.18     9.33        9.68%              8.88%          8.37%    (5588.36)      16          2137
by 10%
Rupee devaluation @ 5%
                              1.86       1.11     8.84        9.21%              8.44%          7.83%    (6688.64)      17          2149
p.a
O&M cost increase by 10%      1.89       1.11     9.87        9.49%              8.71%          8.37%    (6034.85)      16          1895
Combination of all the
                              1.66       1.05     6.58        7.98%              7.35%          4.99%    (9190.55)      19          5069
above




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Sethusamudram Ship Channel Project




12.2 Project IRR


    PROJECT IRR CALCULATIOn                                                                                                            Rs Million
    Year Ending 30th June            2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
    Capital Expenditure              7587    7966   8721
    Less: INFLOWS
    Terminal value - WDV of asset
    Profit after Tax                                       -1795 -1619 -1402 -1281 -1112 -960 -783 -588 -373 -129          134   394   690 1025
    Finance Charges                                         791   798   793      753   711   664   599   536   473   411   363   354   346   340
    Non-cash charges                                       1424 1471    1522     1578 1638 1703 1774 1851 1935 2025 2123 2230 2346 2471
    Net Inflow post tax              -7587 -7966 -8721      420   650   914      1050 1237 1407 1590 1799 2035 2307 2620 2978 3382 3837
    ADD : Tax                                                 0     0        0     0     0    0     0     0     0     0     11    33    57    85
    Net Inflow (pre tax) i.e PBDIT   -7587 -7966 -8721      420   650   914      1050 1237 1407 1590 1799 2035 2307 2631 3011 3439 3922


    Post Tax Project IRR             8.89%
    Pre Tax Project IRR              9.69%




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Sethusamudram Ship Channel Project




      PROJECT IRR CALCULATION                                                                                            Rs Million
      Year Ending 30th June            2023    2024   2025 2026   2027   2028 2029    2030 2031 2032 2033 2034 2035 2036 2037 2038
      Capital Expenditure
      Less: INFLOWS
      Terminal value - WDV of asset                                                                                                       817
      Profit after Tax                 1403    1794   2376 3068   3566   3196 2720    2990 3285 3606 3957 4340 4759 5266 5560 6607
      Finance Charges                   336    333    306   283   277     267   253   236   213   185   150   109   59       0        0    0
      Non-cash charges                 2607    2755   2745 2719   2531   2467 2379    2263 2116 1932 1707 1436 1111        725   725       0
      Net Inflow post tax              4346    4882   5426 6070   6374   5930 5353    5489 5614 5723 5815 5884 5928 5991 6286 7424
      ADD : Tax                         117    149    198   255   297    1032 1900    2056 2224 2406 2605 2821 3057 3342 3508 3689
      Net Inflow (pre tax) i.e PBDIT   4463    5032   5624 6325   6671   6962 7253    7545 7837 8130 8419 8705 8985 9333 9794 ###


      Post Tax Project IRR             8.89%
      Pre Tax Project IRR              9.69%



Other financial projections for the project like Cash Flows, Balance Sheet, Equity IRR and Pay back period calculations are presented
in the Annexure – IV, V, VI & VII respectively.




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project




13. RISK ANALYSIS & MITIGATION

        RISK                                  MITIGATION MECHANISM
Development Risk

Environmental                   Project has already achieved the environmental clearance
Clearance                        from the Ministry of Environment and Forest.

Construction Risk

                                Project is being coordinated by Tuticorin Port Trust, which is a
                                 major port and has prior experience of undertaking capital
                                 dredging works.
                                Apart from this, Dredging Corporation of India, a leading
                                 dredging company in India, is a stakeholder in the project,
Design & Project
                                 hence it will be providing all the necessary support to the
Management Risk                  completion of the project.
                                Dredging contracts will be awarded for a 2 year fixed time
                                 contract basis, with penalty claudses for delay in the
                                 project, which will offset the additional costs incurred, if any.

Cost & Time Overrun

                                The project is being promoted by the GoI along with the
                                 other GoI PSU’s and Major port trusts, hence tying up the
Funding Risk
                                 equity will not be an issue. Apart from this, the GoI is
                                 guaranteeing debt for the project; hence chances of
                                 default are low.

                                The project has already received all the environmental
                                 clearance. TPT is also planning to put a comprehensive EMP
Environment Risk
                                 plan, with stron monitoring mechanism during the
                                 construction phase of the project, which would ensure that
                                 no harm is done to the environment surrounding the project.
Operating Risk

                                Monitoring navigation by VTMS
Collision Risk – Bulk
                                Training pilots and tug masters
Carrier with Small Craft
                                Provision of two way channel,


                                Monitoring navigation by VTMS
                                Ensure availability of adequate pilots and tug masters
                                Training pilots and tug masters
                                Controlled speed movement of vessels
Grounding of LPG/POL
                                Publication of up to date bathymetric data of channel
Vessels in Channel
                                Availability of environmental conditions such as tide wave,
                                 current etc.
                                Not permitting vessels for channel beyond the prescribed
                                 draft limit



Collision with vessels          Mooring in anchorage areas in the Palk Bay is resorted to
moored at anchorage              only during exigencies




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project

           RISK                              MITIGATION MECHANISM
areas                           Monitoring navigation by VTMS
                                Training pilots and masters
                                Training on Anchoring and mooring with the aid of VTMS


                                Monitoring navigation by VTMS
                                Training pilots and tug masters
                                Controlled speed movement of vessels
Grounding During                Publication of upto date bathymetric data of channel
Inward / Outward Transit        Availability of information on environmental conditions such
                                 as tide wave, current etc.
                                Not permitting vessels in channel beyond the prescribed
                                 draft limits


                                Generally, tugs are not required to escort unless the ship is in
                                 distress. Under distress operations are carried out with extra
Collision with Tugs              caution.
                                Monitoring navigation by VTMS
                                Adequate training to tug masters
                                Policy/system for tug movement

                                Training pilots and Tug masters.
Personal Injury to Pilots       Adequately skilled and qualified pilots will be hired
while boarding                  Pilots (Dis) embarking only with in permitted environmental
                                 parameters

Revenue Risk

                                Traffic has been considered at moderate growth rate
                                Adverse effect of draft restrictions as well as downtime in the
                                 channel has already been incorporated
Throughput levels
                                Channel offers, on an average 1 day saving in travel time to
                                 vessels, hence improving efficiency, apart from the obvious
                                 financial savings, as indicated.


                                Only 50% of the total savings will be charged from the
                                 vessels
                                Fuel rates as well as Charter rates have been considered at
Tariff Levels
                                 moderate levels, as compared to the existing high levels of
                                 rates in the market, hence eventual savings to ships might
                                 be much higher.




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project


14. INDICATIVE TERM SHEET

An indicative term sheet for Foreign Currency loan is as under:

Borrower                Sethusamudram Corporation Ltd. (SCL)
Nature of facility      Foreign Currency Loan (FCL)
Purpose                 Sethusamudram Ship Channel Project
Amount                  USD 100 million of equivalent
Tenure (including the    20 Years.
moratorium period)
Moratorium Period        8 years from the date of first drawl (including completion period of
                        36 months).
Principal Repayment     In 24 equal semi - annual Installments beginning from the end of 8
                        years from the date of first draw down.
Rate of Interest (To be
determined on Book FCL : 6 month USD LIBOR + 125 - 175 basis points, payable half
Building Basis)         yearly
Put / Call option       None
Expenses                All expenses viz., Stamp Duty, legal fees, site visit etc. will be to the
                        account of the Borrower.
Security                The Facility and all amounts in respect thereof shall be secured by:
                              Unconditional and irrevocable guarantee of the
                               Government of India;
                              First mortgage & charge on all the movable and
                               immovable assets relating to the project;
                              First charge on the project revenues and receivables;
                              Assignment in favour of the Lenders/ Security Trustee of all
                               EPC contracts in respect of the Project;
                              Assignment in favour of Lenders/ Security Trustee of all
                               insurance policies noting the interest of Lenders/ Security
                               Trustee.

                        The aforesaid mortgage and charge will rank pari-passu amongst
                        the Lenders for the Project.

                        The Company shall create security for the said Facility, as stated
                        above, within a period of 180 days from the date of execution of
                        the Facility Documents.

Debt Service Reserve    The company shall maintain a Debt Service Reserve (DSR)
                        equivalent to debt service requirements for the following two
                        quarters from the start of operations, which shall be built up to the
                        requisite levels within a period of 6 months from the
                        commencement of operations, and agree that the company
                        would be allowed to draw from DSR only when the operational
                        cash flows are not adequate for meeting the debt service
                        obligations. Further, the DSR funds shall only be deployed in
                        securities approved by the Lenders.




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project

An indicative term sheet for Rupee Debt is as under:

Borrower                Sethusamudram Corporation Ltd. (SCL)
Nature of facility      Non Convertible Debentures (NCDs) / Rupee Term Loan (RTL)
Purpose                 Sethusamudram Ship Channel Project
Amount                  Rs. 4,369 million
Tenure (including the
                        13 Years
moratorium period)
Moratorium Period       5 years from the date of first drawl (including completion period of
                        36 months).
Principal Repayment     In 16 equal semi annual Installments beginning from the end of 5
                        years from the date of first draw down.
Rate of Interest (To be
determined on Book 7.50% to 8.00% p.a., payable monthly.
Building Basis)
Put / Call option       None
Interest Reset          At the end of every 5th year commencing from the date of first
                        drawdown, linked to then prevailing Bank PLR maintaining the
                        current spread. Should the interest rate, so reset, not be
                        acceptable to the Company, the Company shall have a right to
                        prepay the outstanding facility amount without any prepayment
                        premium / penalty.

Expenses                All expenses viz., Stamp Duty, legal fees, site visit etc. will be to the
                        account of the Borrower.
Security                The Facility and all amounts in respect thereof shall be secured by:
                              Unconditional and irrevocable guarantee of the
                               Government of India;
                              First mortgage & charge on all the movable and
                               immovable assets relating to the project;
                              First charge on the project revenues and receivables;
                              Assignment in favour of the Lenders/ Security Trustee of all
                               EPC contracts in respect of the Project;
                              Assignment in favour of Lenders/ Security Trustee of all
                               insurance policies noting the interest of Lenders/ Security
                               Trustee.

                        The aforesaid mortgage and charge will rank pari-passu amongst
                        the Lenders for the Project.

                        The Company shall create security for the said Facility, as stated
                        above, within a period of 180 days from the date of execution of
                        the Facility Documents.




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project

Debt Service Reserve    The company shall maintain a Debt Service Reserve (DSR)
                        equivalent to debt service requirements for the following two
                        quarters from the start of operations, which shall be built up to the
                        requisite levels within a period of 6 months from the
                        commencement of operations, and agree that the company
                        would be allowed to draw from DSR only when the operational
                        cash flows are not adequate for meeting the debt service
                        obligations. Further, the DSR funds shall only be deployed in
                        securities approved by the Lenders.


An indicative term sheet for Zero Coupon Bonds (ZCBs) is as under:

Borrower                Sethusamudram Corporation Ltd. (SCL)
Nature of facility      Zero Coupon Bonds (ZCBs)
Purpose                 Sethusamudram Ship Channel Project
Amount                  Rs. 5,826million
Tenure (including the
moratorium period)      30 Years
Moratorium Period       18 years from the date of first drawl (including completion period
                        of 36 months).
Principal Repayment     In 12 annual Installments beginning from the end of 18 years from
                        the date of first draw down.
Yield
Put / Call option       None
Expenses                All expenses viz., Stamp Duty, legal fees, site visit etc. will be to the
                        account of the Borrower.
Security                The Facility and all amounts in respect thereof shall be secured by:
                              Unconditional and irrevocable guarantee of the
                               Government of India;
                              First mortgage & charge on all the movable and
                               immovable assets relating to the project;
                              First charge on the project revenues and receivables;
                              Assignment in favour of the Lenders/ Security Trustee of all
                               EPC contracts in respect of the Project;
                              Assignment in favour of Lenders/ Security Trustee of all
                               insurance policies noting the interest of Lenders/ Security
                               Trustee.

                        The aforesaid mortgage and charge will rank pari-passu amongst
                        the Lenders for the Project.

                        The Company shall create security for the said Facility, as stated
                        above, within a period of 180 days from the date of execution of
                        the Facility Documents.




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Sethusamudram Corporation Ltd                                       Information Memorandum
Sethusamudram Ship Channel Project

Debt Service Reserve    The company shall maintain a Debt Service Reserve (DSR)
                        equivalent to debt service requirements for the following two
                        quarters from the start of operations, which shall be built up to the
                        requisite levels within a period of 6 months from the
                        commencement of operations, and agree that the company
                        would be allowed to draw from DSR only when the operational
                        cash flows are not adequate for meeting the debt service
                        obligations. Further, the DSR funds shall only be deployed in
                        securities approved by the Lenders.




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Sethusamudram Corporation Ltd                                        Information Memorandum
Sethusamudram Ship Channel Project


15. CONCLUSION

The Channel once operational will be beneficial to Indian coastal traffic, as well as the
foreign vessels touching the ports on eastern coast of India, as it will enable ships to travel
less. Ships using the channel will be saving an average of 335 NM in distance as
compared to the existing route. Less travel would result in saving in fuel consumption as
well as saving in time to the tune of almost 24 hrs, which would result in savings in time
charter rates paid to the shipping companies. Around 50% of this expected saving will be
charged by the SCL as toll charges for using the channel. This will offer more efficiency to
shipping liners as well as allow them to retain part of the savings. Whereas, toll charges
will offer revenue to SCL, which will allow them to recover the investment as well as
operate and maintain the channel efficiently.

The cost of implementation the Project is proposed to be met through equity contribution
and shortfall funding from GoI and various Port Trusts on the eastern coast along with SCL
and DCI, who would also be meeting the shortfall in cash flow during initial years of the
project operations and senior term debt in the form of foreign currency term loans and
issue of bonds in the domestic debt market. The foreign currency term loans and the
domestic bonds would be guaranteed by GoI.

Critical Success Factors for the successful implementation and operations of the Project
would be:
    Early formalization of commitments by GoI towards the Project and expeditious
     accordance of requisite approvals and permissions;
    Strict adherence to the implementation schedule;
    Ensuring timely implementation of the Project within the envisaged cost;
    Efficient toll collection mechanism;
    Regular Operation & Maintenance of the ship channel.

With the expected levels of the Project cost and throughput as well as the proposed fare
structure and support expected to be obtained from GoI, SCL should be able to meet its
commitments to its Senior Lenders. Sethusamudram Ship Channel Project, thus, has the
makings of a successful example among Ship Channel Systems.




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Sethusamudram Corporation Ltd                                                                                       Information Memorandum
Sethusamudram Ship Channel Project




                                                                                                                             ANNEXURE - I
                                                  ORGANTIOZATIONAL CHART

                                                         Organizational Setup


                                                               SSCP – SPV
                                                                  CMD
                                                                                                Project Execution and Operation Period


                                                    Corporate office at Chennai (14)                   Operation and Maintenance Period

                                                           General Manager
                                                          Support Staff 13 Nos.                                 Project Execution Period




                                                                                                                      Project office at
    Project Cell at Tuticorin                                                                                        Rameswaram (41)
              (7)                                    Canal Master office at Rameswaram
                                                                                                                       Chief Engineer
   Superintending Engineer                                            (30)
                                                                 Canal Master
                                                    Pilots – 24                                                    Engineering Staff – 22
   Engineering Staff – 1                                                                                           Accounts staff – 3
   Accounts staff – 1                               Support Staff – 5
                                                                                                                   Support Staff – 15
   Support Staff - 4
                                                                                                                   3     Nos      Project
                                                                                                                   Executive     Divisions
                                                                                                                   (33)
                                                                                                                   Engineering Staff – 23
                                VTMS (44)                 TUGS (114)              Crafts / Launches
                                                                                                                   Support Staff - 10
                                                                                  (130)
                                    Dock master           MEO – 28                Driver – 21
                                Engineering Staff – 4     Tug Master – 28         Tug master – 22
                                VTS Staff – 27            Support Staff -         Support Staff - 87
                                Support staff - 12        58

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Sethusamudram Corporation Ltd                                                     Information Memorandum
Sethusamudram Ship Channel Project




                                                                                         Annexure – II
                              IMPLEMENTATION SCHEDULE FOR SETHUSAMUDRAM CHANNEL




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Sethusamudram Corporation Ltd                                                Information Memorandum
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                                                                                    Annexure – III

                                     DETAILED CAPITAL COST ESTIMATE
                                                                                               Amount
SL.NO                  Description Work                Unit      Quantity         Rate (Rs.)    (Rs.
                                                                                               Crores)
   1      Preliminary Expenses                                L.S.                                  10.0
          Cost of Land Acquisition / Administrative
   2                                                          L.S.                                     5.0
          Costs
   3      Dredging
  (I)     Mobilization                                                                                40.0
  (ii)    De-Mobilization                                                                             10.0
  (iii)   Site Installations                                                                          15.0
  (iv)    Site Overheads                                                                              40.0
  (v)     Deredging in Palk Bay by TSHD
          Section 5 (E - E1 - E2)                     cum 10,500,000                 180           189.0
          Section 6 (E2 - E3 - E4)                    cum 24,000,000                 154           369.6


  (vi)    Dredging in Adam's bridge
          By CSD                                      cum 18,000,000                 340           612.0
          By TSHD                                     cum 30,000,000                 148           444.0
          Sub - Total of Dredging Cost                cum 82,500,000                              1719.6
   4      Navigational Aids
          Provision of tamper-proof lighted FWB at
  (I)     either end as per IALA/DGLL              No.                2              15                0.3
          specifications
          Provision of tamper-proof lighted
  (ii)    navigation buoys along the SSC as per        No.            30             15                4.5
          IALA / DGLL specs (Buoys 1 to 30)
          Supply, installation, testing and
  (iii)   commissioning (SITC) of DGPS as per          No.            2              100               2.0
          specs at Rameswaram and Pt Calimere
          Legally valid navigation charts and
  (iv)                                                 No.            10             10                1.0
          publications including ENC's
          Spare Buoys at appropriate locations
  (v)                                                  No.           1 set            -                2.5
          with due sea conditions needs
          Mooring of buyos at appropriate
  (vi)                                                 No.     01 set of 32           2                0.6
          locations with due sea conditions needs
          Sub - Total of Nav. Aids                                                                    10.9




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Sethusamudram Corporation Ltd                                         Information Memorandum
Sethusamudram Ship Channel Project



   5      Supply and Commissiong of Tugs and Crafts
          i. Sullage Barge                                      No.        1        400         4.0
          ii. Water Barge                                       No.        1        550         5.5
          iii. Tugs 30T B.P.                                    No.        4        2250       90.0
          iv. Tugs 10T B.P.                                     No.        2        1000       20.0
          v. Patrol Crafts                                      No.        5        250        12.5
          vi. Work-cum- Mooring Boats                           No.        8         20         1.6
          vii. Hydrographic survey Launch with survey,
                                                                No.        1        300         3.0
          equipment
          viii. Buoy Servicing Vessel                           No.        1        1500       15.0
          ix. Pilot Launches                                    No.        4        150         6.0
          Sub - Total of Flotilla                                                          157.6
   6      VTS EQUIPMENT

          Supply, installation, testing and commissioning of
          "S" band and "X" band radars, both associated
   (I)                                                          No.    4 stations   800        32.0
          computer equipment, digital equipment, UPS,
          intercoms.

          Supply installation, testing and commissioning of
  (ii)    AIS Base stations with equipment / accessories        No.        6         15         0.9
          and integration of DGPS.

          Supply, installation, testing and commissioning of
  (iii)   VTMS Master Control center at Rameswaram              No.        -         -            -
          island as per specs

          Supply, installation, testing and commissioning of
  (iv)    Microwave communication links (Voice/date)            No.        -         -            -
          including HF.

          Supply, installation, testing and commissioning of
  (v)                                                           No.        -         -            -
          Repeater stations, where required

          Supply, installation, testing and commissioning of
  (vi)    Hydorgraphic and Meteorological equipment /           No.     6 Sets      185        11.0
          systems at specified locations

          Supply, installation, testing and commissining of
  (vii)                                                         No.        -         -            -
          VHF common links connecting desired locations

          Supply, installation, testing and commissioning of
 (viii)   diesel generator sets, power supplies, UPS, etc. at   No.      4 sets     200         8.0
          all locations




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Sethusamudram Corporation Ltd                                          Information Memorandum
Sethusamudram Ship Channel Project



  (ix)    Integration of VTS                         No.          -            -     -
          Training of Personnel to specs
  (x)                                                No.         60           10                6.0
          (Operation and Maintainance)
          Provision of GSM Mobile facility along
  (xi)    entire SSCP and through reliable private   No.          4           200               8.0
          opeators.
          Sub - Total VTMS                                                                  65.9
   7      CIVIL WORKS
          Construction of sesmic proof RCC towers
   (I)    for Radar Station with Support facilities & No.         2           120               3.0
          as per specs a. On Shore (2)
           b. Off shore (2)                          No.          2          1000           20.0
          Construction of seismic proof Technical
  (ii)                                               S.Ft.     20,000        0.01               2.0
          buildings, Port Facilities etc.
  (iii)   Construction of quarters for staff         S.Ft.     100000        0.008              8.0
  (iv)    Security - related work                    No.     As per scale      -            10.0
          Construction of storage tanks (water,
  (v)                                                No.         20           10                2.0
          POL, etc.)
  (vi)    Services jetties                           sqm        6000         50000          30.0
  (vii)   Slipway                                    No.         1No          L.S,              7.0
 (viii)   Buoy yard                                  No.          -           L.S,              1.0
  (ix)    Repair Workshop                            sq.m.      1000         10000              1.0
          Other Developmental Works (such as
  (x)                                                                         L.S,          60.0
          fishing harbors etc)
          Sub - Total Civil Works                                                          144.0
   8      Consultancy and Supervision                                                       20.0
   9      Contingency                                          approx         5%           100.0




                                               86
Sethusamudram Corporation Ltd                                                                                          Information Memorandum
Sethusamudram Ship Channel Project




                                                                                                                              ANNEXURE – IV
                                             CASH FLOW STATEMENT (2009 – 2023)



      Year Ending 30th June                  2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021                 2022   2023
      Sources of Fund
      Net Cash Accruals                      -371 -148    121   297    526   743   991 1263 1562 1896 2257 2624 3035          3496   4010
      Withdrawal from Debt Service Reserve    231    0     0     21     22    0     32    32    33    32   300    10     11     10    10
      TOTAL                                  -139 -148    121   318    549   743 1023 1294 1594 1928 2557 2634 3046           3507   4020
      Application of Fund
      Funding of Debt Service Reserve          0     0    268    0      0    158    0     0     0     0     0     0       0     0      0
      Repayment of Loan                        0     0    546   546    546   910   910   910   910   910   364   364    364    364   364
      Dividend Payment including tax           0     0     0     0      0     0     0     0     0     0     0     0       0     0      0
      Redemption of Zero Coupon Bonds
      Total                                    0     0    814   546    546 1068    910   910   910   910   364   364    364    364   364
      OpeningCash Balance                      0     0     0     0      0     3     0    113   497 1181 2199 4392 6662        9344 12486
      Net Surplus/(Deficit)                  -139 -148 -693 -228        3 -325     113   384   684 1018 2193 2270 2682        3143   3656
      Closing Cash Balance                   -139 -148 -693 -228        3 -322     113   497 1181 2199 4392 6662 9344 12486 16143
      Zero Coupon Bonds (if reqd.)            139   148   693   228     0    322    0     0     0     0     0     0       0     0      0
      Actual Closing Cash Balance              0     0     0     0      3     0    113   497 1181 2199 4392 6662 9344 12486 16143


      DSCR
      Year Ending 30th June                  2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021                 2022   2023
      Balance in DSR                          299   299   566   545    523   681   649   617   584   552   252   242    232    221   211
      Net Cash Accrual                       -371 -148    121   297    526   743   991 1263 1562 1896 2257 2624 3035          3496   4010




                                                                  87
Sethusamudram Corporation Ltd                                                                                   Information Memorandum
Sethusamudram Ship Channel Project




      Zero Coupon Bond                139    148   693   228     0    322    0     0     0     0     0     0       0     0       0
      Interest charges                597    597   587   545    500   451   387   323   258   194   141   120     99    78      57
      Total                           665    896 1967 1615 1549 2197 2027 2203 2404 2643 2650 2986 3366                3796   4278


      Interest                        597    597   587   545    500   451   387   323   258   194   141   120     99    78      57
      Repayment                         0     0    546   546    546   910   910   910   910   910   364   364    364   364     364
      Total                           597    597 1133 1091 1046 1361 1297 1234 1169 1104            505   484    463   442     421


      DSCR                            1.11 1.50 1.74 1.48 1.48 1.61 1.56 1.79 2.06 2.39 5.25 6.17 7.27                 8.58   10.15


      Min DSCR                        1.11
      Max DSCR                       10.15
      Avg. DSCR                       1.92




                                                           88
Sethusamudram Corporation Ltd                                                                                       Information Memorandum
Sethusamudram Ship Channel Project




                                                                                                                 ANNEXURE – IV…Contd
                                              CASH FLOW STATEMENT (2024 – 2038)


Year Ending 30th June                  2024    2025   2026   2027   2028     2029   2030   2031   2032    2033   2034   2035    2036   2037   2038
Sources of Fund
Net Cash Accruals                      4549    5120   5787   6097   5663     5099   5254   5401   5538    5664   5776   5869    5991   6286   6607
Withdrawal from Debt Service Reserve     10      10   190      0         0     0      0      0       0       0     0       0      0      0      0
TOTAL                                  4559    5131   5976   6097   5663     5099   5254   5401   5538    5664   5776   5869    5991   6286   6607
Application of Fund
Funding of Debt Service Reserve           0      0      0      0         0     0      0      0       0       0     0       0      0      0      0
Repayment of Loan                      2370    2540   2361   2562   2780     3016   3272   3550   3852    4179   4535   4920      0      0      0
Dividend Payment including tax            0      0      0    3209   2876     2448   2691   2956   3245    3561   3906   4283    4739   5004   5946
Redemption of Zero Coupon Bonds                                                                                                 1531
Total                                  2370    2540   2361   5771   5656     5464   5963   6507   7097    7741   8441   9203    6270   5004   5946
OpeningCash Balance                    16143 18333 20923 24538 24865 24872 24507 23797 22691 21132 19056 16391 13057 12778 14059
Net Surplus/(Deficit)                  2190    2590   3615   326         7   -365   -710 -1106    -1559   -2076 -2665   -3334   -280   1281   661
Closing Cash Balance                   18333 20923 24538 24865 24872 24507 23797 22691 21132 19056 16391 13057 12778 14059 14719
Zero Coupon Bonds (if reqd.)              0      0      0      0         0     0      0      0       0       0     0       0      0      0      0
Actual Closing Cash Balance            18333 20923 24538 24865 24872 24507 23797 22691 21132 19056 16391 13057 12778 14059 14719


DSCR
Year Ending 30th June                  2024    2025   2026   2027   2028     2029   2030   2031   2032    2033   2034   2035    2036   2037   2038
Balance in DSR                          200     190     0      0         0     0      0      0       0       0     0       0      0      0      0
Net Cash Accrual                       4549    5120   5787   6097   5663     5099   5254   5401   5538    5664   5776   5869    5991   6286   6607




                                                                    89
Sethusamudram Corporation Ltd                                                                                    Information Memorandum
Sethusamudram Ship Channel Project




Zero Coupon Bond                        0      0      0      0         0     0      0      0      0      0      0      0      0      0      0
Interest charges                       37     16      0      0         0     0      0      0      0      0      0      0      0      0      0
Total                                4786    5326   5787   6097   5663     5099   5254   5401   5538   5664   5776   5869   5991   6286   6607


Interest                               37     16      0      0         0     0      0      0      0      0      0      0      0      0      0
Repayment                            2370    2540   2361   2562   2780     3016   3272   3550   3852   4179   4535   4920     0      0      0
Total                                2406    2556   2361   2562   2780     3016   3272   3550   3852   4179   4535   4920     0      0      0


DSCR                                  1.99   2.08   2.45   2.38    2.04    1.69   1.61   1.52   1.44   1.36   1.27   1.19


Min DSCR                              1.11
Max DSCR                             10.15
Avg. DSCR                             1.92




                                                                  90
Sethusamudram Corporation Ltd                                                                                      Information Memorandum
Sethusamudram Ship Channel Project




                                                                                                                          ANNEXURE – V
                                            PROJECTED BALANCE SHEET (2006 – 2023)

BALANCE SHEET
Year Ending 30th June                2009   2010   2011   2012   2013   2014   2015   2016   2017   2018    2019   2020   2021   2022   2023
ASSETS
Fixed Assets
   Gross Block                       24443 24443 24443 24443 24443 24443 24443 24443 24443          24443 24443 24443 24443 24443 24443
   Less: Accumulated Depreciation     869   1739   2608   3477   4347   5216   6086   6955   7824   8694    9563 10432 11302 12171 13041
Net Fixed Assets                     23573 22704 21835 20965 20096 19227 18357 17488 16619          15749 14880 14010 13141 12272 11402
Current Assets
   Deposits                           299    299    566    545    523    681    649    617    584    552     252    242    232    221    211
   Working Capital Assets
   Cash Balance                         0     0      0      0      3      0     113    497   1181   2199    4392   6662   9344 12486 16143
Total Current Assets                  299    299    566    545    526    681    761   1114   1765   2751    4644   6904   9575 12708 16354
Total Assets                         23872 23003 22401 21511 20622 19907 19119 18602 18384          18500 19524 20915 22716 24979 27756


LIABILITIES
Shareholders Fund
   Shareholders Equity               9710   9710   9710   9710   9710   9710   9710   9710   9710   9710    9710   9710   9710   9710   9710
   Reserves& Surplus                 -1795 -3414 -4816 -6096 -7208 -8168 -8951 -9540 -9913 -10041 -9908 -9513 -8824 -7798               -6395
Total Shareholders Fund              7915   6296   4894   3613   2501   1541    758    170   -203    -332   -198    196    886   1911   3314
Unsecured Loans from Promoters        139    288    981   1209   1209   1531   1531   1531   1531   1531    1531   1531   1531   1531   1531
Long Term Liabilities - Debt         15818 16420 16526 16689 16911 16835 16829 16901 17055          17301 18191 19187 20299 21537 22910
Total Liabilities & Owners Equity    23872 23003 22401 21511 20622 19907 19119 18602 18384          18500 19524 20915 22716 24979 27756




                                                                   91
Sethusamudram Corporation Ltd                                                                                      Information Memorandum
Sethusamudram Ship Channel Project




                                                                                                               ANNEXURE – V… Contd
                                             PROJECTED BALANCE SHEET (2024 – 2038)

BALANCE SHEET
Year Ending 30th June                 2024   2025   2026   2027   2028   2029   2030   2031   2032   2033   2034   2035   2036   2037   2038
ASSETS
Fixed Assets
   Gross Block                       24443 24443 24443 24443 24443 24443 24443 24443 24443 24443 24443 24443 24443 24443 24443
   Less: Accumulated Depreciation    13910 14779 15649 16374 17099 17824 18549 19275 20000 20725 21450 22175 22900 23626 23626
Net Fixed Assets                     10533   9664   8794   8069   7344   6619   5893   5168   4443   3718   2993   2268   1542    817    817
Current Assets
   Deposits                            200    190     0      0      0      0      0      0      0      0      0      0      0      0      0
   Working Capital Assets
   Cash Balance                      18333 20923 24538 24865 24872 24507 23797 22691 21132 19056 16391 13057 12778 14059 14719
Total Current Assets                 18533 21113 24538 24865 24872 24507 23797 22691 21132 19056 16391 13057 12778 14059 14719
Total Assets                         29066 30776 33333 32934 32216 31126 29691 27860 25575 22774 19384 15325 14320 14876 15537


LIABILITIES
Shareholders Fund
   Shareholders Equity                9710   9710   9710   9710   9710   9710   9710   9710   9710   9710   9710   9710   9710   9710   9710
   Reserves& Surplus                 -4601 -2226     842   1199   1518   1790   2089   2418   2778   3174   3608   4084   4610   5166   5827
Total Shareholders Fund               5108   7484 10552 10908 11228 11500 11799 12127 12488 12884 13318 13793 14320 14876 15537
Unsecured Loans from Promoters        1531   1531   1531   1531   1531   1531   1531   1531   1531   1531   1531   1531     0      0      0
Long Term Liabilities - Debt         22426 21761 21250 20494 19457 18095 16361 14201 11556           8359   4535     0      0      0      0
Total Liabilities & Owners Equity    29066 30776 33333 32934 32216 31126 29691 27860 25575 22774 19384 15325 14320 14876 15537




                                                                    92
Sethusamudram Corporation Ltd                                                                                                                    Information Memorandum
Sethusamudram Ship Channel Project




                                                                                                                                                           Annexure – VI
                                                              Equity IRR Calculation

Equity IRR Calculation
Year Ending 30th June                      2006    2007   2008   2009 2010        2011      2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Equity Contribution                        4855    1366   3489
Terminal Inflow
PAT                                                              -1795 -1619 -1402 -1281 -1112 -960 -783 -588 -373 -129                                  134   394     690 1025
Non-cash charges                                                 1424 1471        1522      1578 1638 1703 1774 1851 1935 2025 2123 2230 2346 2471
Less: Loan Repayments                                                0       0        546       546       546   910     910      910     910     910     364   364     364     364
Less: Redemption of Zero Coupon Bonds                                0       0         0         0         0        0       0        0       0       0     0       0       0       0
Net Inflow                                 -4855 -1366 -3489     -371    -148     -426      -249          -20 -167          81   352     652     986 1893 2260 2671 3132
Equity IRR                                 8.75%



   Equity IRR Calculation
   Year Ending 30th June                      2023     2024 2025     2026 2027         2028      2029      2030 2031 2032 2033 2034 2035 2036 2037 2038
   Equity Contribution
   Terminal Inflow                                                                                                                                                         817
   PAT                                        1403     1794 2376     3068 3566         3196      2720      2990 3285 3606 3957 4340 4759 5266 5560 6607
   Non-cash charges                           2607     2755 2745     2719 2531         2467      2379      2263 2116 1932 1707 1436 1111                    725    725         0
   Less: Loan Repayments                       364     2370 2540     2361 2562         2780      3016      3272 3550 3852 4179 4535 4920                       0       0       0
   Less: Redemption of Zero Coupon Bonds           0      0      0       0        0         0         0         0       0        0       0       0       0 1531        0       0
   Net Inflow                                 3646     2179 2580     3426 3536         2883      2084      1981 1850 1686 1485 1241                  949 4460 6286 7424
   Equity IRR                                8.75%




                                                                             93
      Sethusamudram Corporation Ltd                                                                                                                     Information Memorandum
      Sethusamudram Ship Channel Project




                                                                                                                                                                 Annexure – VII
                                                          PAYBACK PERIOD CALCULATION

      PAYBACK PERIOD
      CALCULATION                                           1          2          3          4         5          6          7       8      9      10      11         12        13      14
      Year Ending 30th June       2006     2007    2008   2009       2010       2011    2012      2013       2014      2015       2016   2017    2018     2019       2020 2021 2022
      Initial Investment
      Investment                  7587     7966    8721
      Revenue                                             -371       -148       121         297    526        743       991       1263   1562    1896     2257       2624 3035 3496
      Net Revenue                -7587 -15553 -24274 -24645 -24793 -24672 -24375 -23849 -23106 -22115 -20852 -19290 -17394 -15137 -12513 -9478 -5981


      Pay Back Period            NA      NA          0      0          0          0          0         0          0          0       0      0       0       0          0         0          0


      Pay Back Period (Years)       16



PAYBACK PERIOD CALCULATION        15          16     17      18         19             20         21        22         23          24      25      26        27            28         29         30
Year Ending 30th June           2023       2024    2025    2026       2027        2028        2029         2030       2031        2032    2033    2034     2035        2036          2037       2038
Initial Investment
Investment
Revenue                         4010       4549    5120    5787       6097        5663        5099         5254       5401        5538    5664    5776     5869        5991          6286       6607
Net Revenue                     -1971      2578    7698   13484      19582       25245       30344     35598      40998          46537   52201   57976    63846       69837      76122 82729


Pay Back Period                     0         16      0          0          0           0         0          0          0           0       0       0            0          0          0          0


Pay Back Period (Years)           16




                                                                                       94
Sethusamudram Corporation Ltd             Information Memorandum
Sethusamudram Ship Channel Project




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