Madurai: The Rs2,400-crore Sethusamudram Channel project will give the much needed fillip to coastal shipping, apart from inducing competition amongst the ports.

Addressing the media after inaugurating the media centre T R Baalu, minister for shipping, road transport and highways, said, "The Vallarpadam container terminal in Kerala is in the process of construction. And when Sethusamudram Channel gets ready for bigger ships, coastal shipping will take off in a big way."

He also said state governments like Tamil Nadu should take upgradation of fishing harbours like Nagapattinam, which, in turn, would boost goods movement along the coast. "The Tamil Nadu government has to send a project report for upgrading the Nagapattiman fishing harbour. The centre is ready to fund the project."

Allaying apprehensions about the project's viability he said, the internal rate of return (IRR) is fixed at 10.2 per cent. Though the government of India's guideline IRR is 12 per cent, the same was fixed years ago when the interest rates were ruling high. With the reduction in interest rates, the IRR will be higher.

According to the project report prepared by L&T Ramboll, around 3,000 ships are expected to use the channel in the first year of its operations, he added. He also said that the channel would help in the nation's defence prepardness.

The Sethusamudram Channel project will be inaugurated by prime minister Dr. Manmohan Singh on July 2, 2005, where Sonia Gandhi, chairperson, National Advisory Council will also be present. Tamil Nadu governor Surjit Singh Barnala will be the chief guest. union ministers P Chidambaram (finance), Dayanidhi Maran (communications and IT), Dr Anbumani Ramadoss (health and family welfare), A Raja (environment and forests) and Mani Shankar Aiyar (petroleum and natural gas) will be the guests of honour.