Home >Industry >Infrastructure >Dredging Corp. seeks arbitration to recover dues from Sethusamudram Project

State-run Dredging Corp. of India Ltd (DCI) has asked the government to appoint an arbitrator to recover 426.41 crore for working on one of India’s most controversial and ambitious maritime projects— the stalled Sethusamudram Ship Canal Project.

Dredging Corp.’s move to recover the dues from Sethusamudram Corp. Ltd, the entity tasked with implementing the project, through arbitration comes at a time when the fate of the much-politicized project is to be decided by the Supreme Court.

The Union shipping ministry has asked for a token budgetary support of 5 crore from the government for the project for the new financial year beginning April, a spokesman for the ministry said.

“Sethusamudram Corporation owes us 426.41 crore for the dredging work we have done on the project," said D.K. Mohanty, chairman and managing director of Dredging Corp.

“Since the money has not been paid to us, we have issued a notice to Sethusamudram Corp. to recover the dues. According to the contractual terms, the ministry of shipping has to appoint a sole arbitrator not below the rank of a joint secretary to settle the dispute. We cannot go to the court because both Dredging Corp. and Sethusamudram Corp. are public sector undertakings functioning under the shipping ministry. We have asked the ministry to appoint an arbitrator but they are yet to take any action on that," Mohanty said.

The project seeks to create a shorter shipping route between the east and west coasts of the country but has been halted since July 2009 after the last dredger (specialized ships used to deepen the channel of ports and harbours) digging the new channel (lane) was pulled out of service on 27 July 2009 when a four-year contract between Dredging Corp. and Sethusamudram Corp. ended.

Billed as India’s Suez Canal, the 2,427.40 crore Sethusamudram Ship Canal Project was expected to reduce ship journeys between India’s western and eastern coasts by as much as 30 hours or up to 424 nautical miles (1 nautical mile = 1.852kms) by creating a channel between the Indian mainland and Sri Lanka. Sethusamudram Corp. Ltd is a special purpose company formed by state-run firms such as Dredging Corp., Shipping Corp. of India Ltd, Vizag Port, Ennore Port, Chennai Port, Paradip Port and V.O. Chidambaranar Port to raise funds and implement the project.

Ships now endure a long detour around Sri Lanka. In the absence of a continuous navigational channel connecting the east and west coasts, the ships sailing between the east and west coasts of India and along the international shipping routes have to circumnavigate Sri Lanka, due to the presence of a reef, known as Adam’s Bridge, located southeast of Rameswaram near Pamban in Tamil Nadu. To overcome this shortcoming, an ambitious scheme was formulated to create a continuous navigational channel around the Indian coast.

The project involved boring a new shipping lane connecting the Gulf of Mannar and Bay of Bengal through Palk Straits and Palk Bay.

Dredging work in the Adam’s Bridge region, the controversial part of the project, has been stopped in the wake of the Supreme Court’s order on 31 August and 14 September 2007 on the basis of petitions filed by individuals and groups opposed to it.

Pursuant to orders of the Supreme Court, the central government had set up a committee of experts headed by R.K. Pachauri, director general of The Energy and Resources Institute (Teri), to consider an alternative alignment for the project. The Pachauri Committee said in its report submitted last July that an alternative alignment was not “economically and ecologically feasible".

“A decision on shutting down the project will have to be taken by the Supreme Court where the case is being heard," a spokesman for the shipping ministry said. However, dredging work on the Palk Straits, the non-controversial portion of the project, was going on until July 2009 for which Sethusamudram Corp. owes 426.41 crore to Dredging Corp.

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