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UTI Bank to handle funds for Sethusamudram project

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The entire cost of Sethusamudram Ship Channel Project is estimated at Rs 2,427 crore.

Chennai , June 15

SETHUSAMUDRAM Corporation Ltd, the special purpose vehicle for the Sethusamudram Ship Channel Project (SSCP), has appointed UTI Bank to handle the financial arrangements for the project.

At a press conference on Wednesday, the Sethusamudram Corporation's Chairman and Managing Director, Mr N.K. Raghupathy, said that UTI Bank, which was selected through a competitive tendering process will be the `arranger' of funds, including the rupee and foreign currency loans and handle the public issue or private placement, if any.

The Prime Minister, Dr Manmohan Singh, would inaugurate the project in the first week of July, he said.

The Sethusamudram ship channel envisages dredging of a 167-km channel along the Palk Straits, Palk Bay and Adam's Bridge between Sri Lanka and India to connect the Bay of Bengal and the Gulf of Mannar. This would enable ships to take a shorter route between the two countries instead of having to sail around Sri Lanka.

In four days' time he would ink an agreement with the Suez Canal Authority, which would share its 145-year experience in construction and maintenance of a similar ship channel facility, Mr Raghupathy said.

The entire cost of the SSCP is estimated at Rs 2,427 crore, which includes the project cost of Rs 2,233 crore and the balance constituting the financial cost and interest during the construction. The debt equity would be 1.5:1, he said.

The equity component would be Rs 971 crore with the Union Government taking a 51 per cent stake of Rs 495 crore. The balance would be shared between the Tuticorin Port Trust and the Shipping Corporation of India, which would each contribute Rs 50 crore and the other five partners, Chennai Port Trust, Ennore Port, Visakhapatnam Port Trust, Paradip Port Trust and the Dredging Corporation of India would bring in Rs 30 crore each, Mr Raghupathy said.

Through a public issue or private placement the Sethusamudram Corporation would raise Rs 230 crore, he added.

The debt component would be in the form of equal portions of rupee loan and foreign currency loan. The Cabinet has approved a proposal for extending the Government guarantee. The financial institutions have assured that financial closure could be taken for granted with the only issue being finalisation of the interest rate, he said.

The project involves dredging up about 82.5 million cubic metres of soil, which is expected to take about 30 months, Mr Raghupathy said. Initially, the Dredging Corporation of India would dredge 13 million cubic metres and the balance would be allotted on the basis of international competitive bidding. The Dredging Corporation would be paid the same as the bidding rate that is accepted, he said.

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