THE Government today decided to set up a Special Purpose Vehicle (SPV) for implementing the Rs 2,000-crore Sethusamudram project which involves the commissioning of a navigable channel from Gulf of Mannar to Bay of Bengal through the Palk Bay.

The SPV, to be known as Sethusamudram Corporation Ltd and headquartered in Chennai, will have equity shares of the Shipping Corporation of India (SCI), Tuticorin Port Trust and others. The decision was taken at a Cabinet meeting chaired by the Prime Minister, Dr Manmohan Singh.

The SPV will have an authorised capital of Rs 800 crore with a debt equity ratio at 1:1.5. While the SCI and the Tuticorin Port Trust would contribute Rs 50 crore each towards the equity while the remaining five organisations — DCI, Chennai Port Trust, Ennore Port Ltd, Visakhapatnam Port Trust and Paradip Port Trust — will contribute Rs 30 crore each. The balance will be subscribed by the Union Government and its other agencies.

The project envisages cutting of a ship canal to connect the Gulf of Mannar and Palk Bay so that most of the ships, depending on draft required, moving between the East and West coast of India could have continuous navigable sea route around the peninsula within India's own territorial waters.

This will save about 400 nautical miles and up to 36 hours of sailing time for ships between the East and the West coasts.