Wednesday, October 24, 2007
Friday, October 05, 2007
Monday, October 01, 2007
Sethusamudram & Swami
It is strange that in the politically and religiously charged discussion on Ram Setu, nobody is talking of the (lack of) economic benefits of the project. Entire media seems to be following only one politician’s statements vs. the other. One good article listing out the economic reasons on why the project SHOULD NOT be carried out. Courtest Swaminathan Aiyar and his website
SWAMINOMICS
150-year dream for 150-year-old ships
SWAMINATHAN S ANKLESARIA AIYAR
Religion and history do not mix well. I shrug my shoulders at those opposing the :placeSethusamudram Canal because it will damage the remains of the bridge that Ram’s army used in the Ramayana.
Now, i too oppose the canal, but on economic and environmental grounds. Its rationale is more political than economic. It will become one more public sector white elephant.
The Palk Straits, between Tamil Nadu and Sri Lanka , are so shallow that only small boats can pass through. So, east-west coastal ships have to go around :placeSri Lanka . So do ships from Europe and Africa to the east coast.
Sethusamudram will be a furrow dredged in the sea-bed of the Straits, deep enough to accommodate ships of 20,000 DWT. The canal will save ships both distance (saving fuel) and time (saving daily charges for chartering ships). So, it should be able to charge ships for passage, like the Suez :City and Panama Canals . This revenue is supposed to make the project economic.
The project is a political gift for Tamil Nadu. It will hugely help Tuticorin port, which today can receive ships only from the west, and not the east. It will improve the viability of existing and planned minor ports in the state. Hence, Tamils call the canal a 150-year dream about to come true (it was first proposed around 1850).
Dreams are costless, but canals are not. Project documents claim that the canal will save ships 36 hours of time and 570 nautical miles of distance. But a recent study by Jacob John in Economic and Political Weekly exposes these claims as highly exaggerated. Up to 70% of the traffic through the canal is projected to come from Europe and Africa . And John estimates that the time saving from Europe to Kolkata will be only eight hours, and the distance saving 215 nautical miles. From Africa to Kolkata, the time taken will actually increase by 3.5 hours (being piloted through the canal is a slow process), and distance reduced will be only 70 nautical miles.
John calculates that ships could lose up to $4,992 per passage if they are charged the tariff laid down in project documents. In which case ships will find it cheaper to go round :placeSri Lanka . If the government cuts the proposed tariff to attract traffic, John estimates that the project’s rate of re turn could fall to an uneconomic 2.5%. I expect that the project will also suffer cost overruns in capital and maintenance dredging, and hence be in the red.
The canal is supposed to be ready by November 2008, not far off. So why has the project not been able to sign up potential users? The finance mini ster has appealed to private shipping companies to participate in a project that will benefit them, yet no shipping company has come forward. The economics of the canal look much too dicey.
The Suez and Panama Canals save ships thousands of miles, and that makes them profitable. Sethusamun daram is not remotely comparable. It is designed for small ships (the project documents talk of 20,000 DWT), whereas the Panama Canal takes ships of up to 65,000 DWT and Suez takes ships up to 150,000 DWT.
The Suez and Panama canals were dug through land corridors, and once dug stayed dug — they did not face sand inundation from the sea. However, Sethusamudram will be a furrow in the sea-bed, at the constant mercy of currents bearing sand.
The government’s environmental assessment has cleared the project on ecological grounds. Yet, much of that assessment was not about sand incursion, but about fears of possible damage to coral reefs, coastal erosion, oil spills, and changes in ocean salinity and temperature. Besides, the ecological studies were done from the Indian side of the Palk Straits, and not the Sri Lankan side, and so are technically incomplete.
My major fear is not so much that the project will ruin the environment, but that the environment will ruin the project. I fear that ocean currents will keep dumping fresh sand in the furrow of the canal. The Palk Straits are shallow not by accident but because sand-bearing currents have made them so. Combating the full force of nature is perilous, expensive and sometimes impossible.
The project envisages maintenance dredging of two million cubic metres per year, infinitely more than required by the Suez and Panama canals. Jacob suspects (and so do i) that actual maintenance dredging will far exceed project projections, rendering the canal uneconomic. An extreme event (like the 2005 tsunami) could dump enough sand to close down the canal.
Finally, global shipping is shifting to ever-larger vessels. Bulk carriers and tankers often exceed 200,000 DWT, and those under 60,000 DWT are being phased out as uneconomic. Old general cargo vessels have been replaced by container ships, which started small but now exceed 35,000 DWT, and may soon touch 75,000 DWT. Such vessels cannot use the canal. So, Sethusamudram will be unsuitable for the large vessels of the 21st century. It is a 150-year-old idea for 150-year-old ships. That may be its epitaph.
SWAMINOMICS
150-year dream for 150-year-old ships
SWAMINATHAN S ANKLESARIA AIYAR
Religion and history do not mix well. I shrug my shoulders at those opposing the :placeSethusamudram Canal because it will damage the remains of the bridge that Ram’s army used in the Ramayana.
Now, i too oppose the canal, but on economic and environmental grounds. Its rationale is more political than economic. It will become one more public sector white elephant.
The Palk Straits, between Tamil Nadu and Sri Lanka , are so shallow that only small boats can pass through. So, east-west coastal ships have to go around :placeSri Lanka . So do ships from Europe and Africa to the east coast.
Sethusamudram will be a furrow dredged in the sea-bed of the Straits, deep enough to accommodate ships of 20,000 DWT. The canal will save ships both distance (saving fuel) and time (saving daily charges for chartering ships). So, it should be able to charge ships for passage, like the Suez :City and Panama Canals . This revenue is supposed to make the project economic.
The project is a political gift for Tamil Nadu. It will hugely help Tuticorin port, which today can receive ships only from the west, and not the east. It will improve the viability of existing and planned minor ports in the state. Hence, Tamils call the canal a 150-year dream about to come true (it was first proposed around 1850).
Dreams are costless, but canals are not. Project documents claim that the canal will save ships 36 hours of time and 570 nautical miles of distance. But a recent study by Jacob John in Economic and Political Weekly exposes these claims as highly exaggerated. Up to 70% of the traffic through the canal is projected to come from Europe and Africa . And John estimates that the time saving from Europe to Kolkata will be only eight hours, and the distance saving 215 nautical miles. From Africa to Kolkata, the time taken will actually increase by 3.5 hours (being piloted through the canal is a slow process), and distance reduced will be only 70 nautical miles.
John calculates that ships could lose up to $4,992 per passage if they are charged the tariff laid down in project documents. In which case ships will find it cheaper to go round :placeSri Lanka . If the government cuts the proposed tariff to attract traffic, John estimates that the project’s rate of re turn could fall to an uneconomic 2.5%. I expect that the project will also suffer cost overruns in capital and maintenance dredging, and hence be in the red.
The canal is supposed to be ready by November 2008, not far off. So why has the project not been able to sign up potential users? The finance mini ster has appealed to private shipping companies to participate in a project that will benefit them, yet no shipping company has come forward. The economics of the canal look much too dicey.
The Suez and Panama Canals save ships thousands of miles, and that makes them profitable. Sethusamun daram is not remotely comparable. It is designed for small ships (the project documents talk of 20,000 DWT), whereas the Panama Canal takes ships of up to 65,000 DWT and Suez takes ships up to 150,000 DWT.
The Suez and Panama canals were dug through land corridors, and once dug stayed dug — they did not face sand inundation from the sea. However, Sethusamudram will be a furrow in the sea-bed, at the constant mercy of currents bearing sand.
The government’s environmental assessment has cleared the project on ecological grounds. Yet, much of that assessment was not about sand incursion, but about fears of possible damage to coral reefs, coastal erosion, oil spills, and changes in ocean salinity and temperature. Besides, the ecological studies were done from the Indian side of the Palk Straits, and not the Sri Lankan side, and so are technically incomplete.
My major fear is not so much that the project will ruin the environment, but that the environment will ruin the project. I fear that ocean currents will keep dumping fresh sand in the furrow of the canal. The Palk Straits are shallow not by accident but because sand-bearing currents have made them so. Combating the full force of nature is perilous, expensive and sometimes impossible.
The project envisages maintenance dredging of two million cubic metres per year, infinitely more than required by the Suez and Panama canals. Jacob suspects (and so do i) that actual maintenance dredging will far exceed project projections, rendering the canal uneconomic. An extreme event (like the 2005 tsunami) could dump enough sand to close down the canal.
Finally, global shipping is shifting to ever-larger vessels. Bulk carriers and tankers often exceed 200,000 DWT, and those under 60,000 DWT are being phased out as uneconomic. Old general cargo vessels have been replaced by container ships, which started small but now exceed 35,000 DWT, and may soon touch 75,000 DWT. Such vessels cannot use the canal. So, Sethusamudram will be unsuitable for the large vessels of the 21st century. It is a 150-year-old idea for 150-year-old ships. That may be its epitaph.
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