India Digs Deep for Trade and Commerce

BANGALORE, India (May 31) - Seen in the light of the slowing down growth of the Indian bicycle industry, the news that the long dreamed Sethusamudram canal is becoming a reality is quite important. A century and a half after the idea was first conceived, the decks have finally been cleared for the execution of the Sethusamudram shipping canal project. This envisages increasing the navigability of the waters between India and Sri Lanka, and will involve dredging a channel in the seabed between the two countries. The canal will run through Indian territorial waters. India's cabinet committee on Economic Affairs has given the green light for the US$550 million project, and work is scheduled to begin next month. The canal is expected to be ready by 2008 for medium-sized vessels to navigate. Currently, the movement of vessels through the Palk Strait is impeded by its shallow waters. Between Pamban island near Rameshwaram in the southern Indian state of Tamil Nadu and Talaimannar in Sri Lanka's Mannar district lies a reef called Adams Bridge, where the depth of the sea is a mere two to three meters. Consequently, ships from the Arabian Sea heading to the eastern ports of India (or vice versa) have to take a circuitous route around Sri Lanka at present. The Sethusamudram project will change that. It involves dredging a 167 kilometer, 300 meter wide, 14.5 meter deep canal, which will stretch from Tuticorin port on India's southern coast to Adam's Bridge in the Gulf of Mannar, and extend northward to the Bay of Bengal. Once the canal is ready, ships will be able to avoid sailing the circuitous route around Sri Lanka, reducing travel distance by about 400 nautical miles. The reduction in travel time and distance, fuel costs and docking fees at Colombo will cut maritime transportation costs significantly. This cut in costs will obviously make Indian goods more competitive globally, and domestic consumers, too, would benefit. As Indian news papers recently reported, success for Indian manufacturers at the Shanghai show remained under expectation. One of the major reasons was the price difference between products made in China and those in India: cutting down on transport costs in one way of narrowing the gap. For Sri Lanka, the new emerging producer of bicycles, since the country also profits from very low import duties, the new canal is not such good news. There is the very real possibility that Indian ports will take away business from Colombo port – and that possible price differences will be equalized.