Sethusamudram project unviable: CAG

CAG says traffic projection, which was the basis of the project, is unrealistic and this was well knowm at the time of sanction

The Comptroller and Auditor General (CAG) of India has, in effect, said the commercial viability touted for the controversial Sethusamudram channel project along the Pall Strait is based on imagination rather than reality. In a report presented in Parliament on Friday, CAG said the traffic projection, official basis of the project, was “not realistic and this fact was sufficiently obvious at the time of the sanction of the project”.

The project, pushed by the DMK, the principal opposition party in Tamil Nadu (the project, now stalled by court order, was cleared when it was in power and an ally of the ruling coalition in Delhi), is to dredge a shipping channel linking the Palk Bay and the Gulf of Mannar.

The minimum draft (depth of water needed to float a ship) of 10.5 metres that Sethusamudram Corporation (SCL) wanted to achieve would not have been sufficient for a majority of vessels. The detailed project report had stated the trend was towards larger vessels, which require even deeper draft.

“The Detailed Project Report indicated that any attempt to increase the dredged depth to accommodate higher vessel sizes required a large amount of dredging even in the Palk Bay and would render the project unviable,” the CAG report mentioned.

The report has further criticised the award of the contract to the Dredging Corporation of India (DCI) on a nomination basis, without following the procedures of a global tender. “As future events would prove, no contract could be awarded for any chainage on the basis of global competitive tender and DCI finally was awarded all stretches on a nomination basis,” the auditor said. The amount payable to DCI was supposed to be determined by prevalent market rates but was decided on the basis of “enquiry-cum-negotiation by a two-member committee constituted by the government,” the report said.

DCI also did not have adequate data on subsoil conditions and nor was it explained to the Union cabinet as to how the company would be more successful in dredging at a much lesser cost than the international bidders.

The report also noted the difference of opinion between DCI and SCL over the rate to be paid for the dredged quantity, reflected in their respective books of accounts.

The Chennai-headquartered project was sanctioned on June 1, 2005, at a cost of Rs 2,427 crore in the 10th five-year Plan. A total quantity of 28.42 million cubic metres of dredging was done in the Adam's Bridge region. This was stopped following the Supreme Court's orders of August 31 and September 14, 2007.