Foreign Trade and the SSCP-Part-2

published on October 24, 2007


COST BENEFIT ANALYSIS


                                     


                                        By 


 

Capt (Retd) H.Balakrishnan, I.N.

 

1.     The official project paper of the SSCP states that the estimated

investment of Rs. 2400 crores will “ earn an operating profit from its very FIRST YEAR of operation and that the capital will be recovered with 9% interest WITHIN THE FIRST 25 YEARS after which THERE WILL BE A MAMMOTH PROFIT GENERATION in the next 25 years”. However, according to reports appearing in sections of the media, the cost of the Project has already escalated to Rs. 4000/- crores, and the shipping channel is nowhere near completion!!

 

2.     The Detailed Project Report (DPR) admits that given the

existing fleet in the world, and the vessels under order, ‘the future trend is for larger size vessels’. However, it analyses details of worldwide container vessels fleet in the Clarkson’s Register (figures for April 2002) and says there has also been an annual increase of about 5% in the number of vessels of size up to 30,000 DWT. Also, it optimistically posits a theory that there can actually be a growth in the number of ships built specifically for the purpose of passing through the Sethu canal.

 

3.     However, the DPR does not appear to have taken into

consideration a U.S. programme known as “Container Security

Initiative” (CSI), in the post 9/11 period . In the words of Vice Admiral

(retd) A.K. Singh, former Flag Officer, Commanding – in – Chief,

Eastern Naval Command as also the former DG Coast Guard, “ The

CSI compliant & efficient deep water port of Colombo is in close

proximity to Tuticorin, and, almost in the direct route for

West/East bound international shipping .Since India has no CSI

compliant port yet ( JNPT has been earmarked, but is not

ready/cleared yet), we lose a lot of money in sending our USA

bound seaborne containers to CSI compliant Colombo & Dubai

ports.” CSI requires the stationing of five U.S. Customs officials in

our ports from where containers are shipped to the U.S.A. Given the

realities of the current Indian scenario, main line container vessels will

not call at our ports.

 

4.     However the major revenue earner for the SSCP will be the ships

that navigate through the channel. The DPR anticipates a major portion

of this earning to accrue from foreign trade vessels.

 

5.     This paper analyses the cost benefits that accrue to the ships

engaged in foreign trade and  navigating through the Sethusamudram Channel.

 

 

ESTIMATE OF SHIPS THAT WILL ANVIGATE THROUGH THE SETHUSAMUDRAM CANAL

 

6.     According to the consultants for the SSCP, the number of

ships that are expected to navigate through the SSC is 3055 in 2008 and 7141 in 2025.

 

7.     In an earlier analysis, it was appreciated that at the most, it

may be possible that 1000 vessels would use the SSC annually, though this figure may not be realized, and is nowhere near the projected 3055 vessels in 2008. This is on account of the fact that global shipping trends are towards larger vessels of 60,000 DWT and above, and the SSC being restricted to vessels of 30,000 DWT- 34,000 DWT, with a draught limitation of 10.7 Metres.

 

 

COST RECOVERY


 

8. It had earlier been appreciated that the ‘pilotage rates’ that would be charged for every ship availing of the SSC would be  RUPEES TWENTY LAKHS AND FORTY THOUSAND (at a very conservative estimate ), for the Sethsamudram Corporation to ‘break even’. In U.S. Dollar terms this works out to $ 55,979.64 (at an exchange rate of $ 1 = Rs 39.30 as on 22 OCT 2007)



 

FUEL COSTS FOR VOYAGE – MUSCAT TO CHITTAGONG AND ADEN TO SINGAPORE –  AROUND SRI LANKA/ SSCP

 

9.  Vessels use Heavy Fuel Oil (HFO). The cost of 1 Metric Tonne (MT) of HFO as per prevailing price at Singapore on 19 OCT 2007 =$462/M.T.

 

10. VOYAGE – MUSCAT TO CHITTAGONG 

 

(a) Distance Muscat to Chittagong around Sri Lanka      = 2973 nm

 

(b) Distance Muscat to Chittagong via SSCP                 = 2759 nm

 

(c )Time taken at 12 knots for (a) above                       = 247.8h

 

(d) Time taken at 15 knots for (a) above                       = 198.2 h

 

(e) Time taken at 12 and 6 knots for (b) above              = 236.9 h

 

(f) Time taken at 12 and 8 knots for (b) above               = 233.4 h

 

(g) Time taken at 15 and 6 knots for (b) above               = 192.3 h

 

(h) Time taken at 15 and 8 knots for (b) above                = 188.8 h

 

11. Fuel consumption rate for these vessels is         = 1 MT/h

 

12. Thus, total voyage fuel consumption will be as follows:

     

(a) For Para 10 (c) above                           = 247.8 MT     

 

(b) For Para 14 (d) above                           = 198.2 MT

     

(C ) For Para 14 (e) above                         = 236.9 MT

     

(d) For Para 14 (f) above                           = 233.4 MT

     

(e) For Para 14 (g) above                           = 192.3 MT

     

(f) For Para 14 (h) above                           = 188.8 MT

 

13. Total voyage fuel costs

 

(a)     Para 12 (a) above = $ 462 X 247.8          = $ 1,14,483.60

 

(b)    Para 12 (b) above = $ 462 X 198.2          = $ 91,568.40

 

(c)     Para 12 (c ) above =$ 462 X 236.9          = $ 1,09,447.80

 

(d)    Para 12 (d) above = $ 462 X 233.4          = $ 1,07,830.80

 

(e)     Para 12 (e) above = $ 462 X 192.3          = $ 88,842.60   

 

(f)      Para 12 (f) above = $ 462 X 188.8           = $ 87,225.60

 

14. Total voyage costs including pilotage and allied costs.  In addition to the foregoing, pilotage and other allied charges as at Para 8 above have to be added to the values at Paras 13 (c ) to 13 (f). Thus the total costs will work out as follows:

 

(a)              $ 1,09,447.80 + $ 55,979.64   = $ 1,65,427.44

 

(b)             $ 1,07,830.80 + $ 55,979.64   = $ 1,63,810.44

 

(c)              $ 88,842.60    + $ 55,979.64   = $ 1,44,822.24

 

(d)             $ 87,225.60    + $ 55,979.64   = $ 1,43,205.24

 

15.  Voyage – Aden to Singapore

 

(a)              Distance Aden to <SPAN class=yshortcuts id=lw_1193258359_8 style="CURSOR:

Welcome to Haindava Keralam! Register for Free or Login as a privileged HK member to enjoy auto-approval of your comments and to receive periodic updates.

Leave a Reply

Your email address will not be published. Required fields are marked *

 characters available

Responses

Latest Articles from Bharath Focus

Did You Know?