Due to shallow waters, Sethusamudram presents a formidable hindrance to navigation through the Palk strait. Though trade across the India-Sri Lanka divide has been active since at least the first millennium BCE, it has been limited to small boats and dinghies. Larger ocean going vessels from the West have had to navigate around Sri Lanka to reach India' eastern coast.

Eminent British geographer Major James Rennell, who surveyed the region as a young officer in late eighteenth century, suggested that a "navigable passage could be maintained by dredging the strait of Ramisseram". However little notice was given to his proposal, perhaps because it came from "so young and unknown officer", and the idea was only revived 60 years later. Efforts were made in 1838 to dredge the canal, but did not succeed in keeping the passage navigable for any vessels except those with a shallow draft.

Possibly conceived in 1860 by Commander A. D. Taylor of the Indian Marines, the project has been reviewed many times over the years but no decision was ever made. It is usually descibed as 150 years of Tamil's dream to bring in Economic prospects for the Costal districts of Tamil Nadu. However successive governments since Indian Freedom did not implement this project though it was part of the election manifestos of all political parties during elections.

After it was conceived, almost once in every decade a committee or a prominent expert made a recommendation in favour of the construction of the canal. In 1955, for the first time since Independence, the Government of India constituted the Sethusamudram Project Committee under A Ramaswamy Mudaliar to examine the feasibility and desirability of connecting the Gulf of Mannar with Palk Bay and its impact on the port of Tuticorin. The committee recommended that the canal project be linked to the Tuticorin Harbour Project and that both projects be undertaken simultaneously. The cost of the joint, project was then estimated at Rs.9.98 crore. The Sethusamudram Project Committee report was, however, put in cold storage. In 1963, the government sanctioned only the Tuti-corin Port project.

The government's enthusiasm to set up committees did not wane. Successive committees revised the cost of the project upwards. In 1994, the Tamil Nadu government appointed the Pallavan Transport Consultancy Services in Chennai to appraise and revalidate a 1983 report. The new report, submitted in March 1996, further revised the project cost to Rs.760 crore for 31 feet draft.

Hope on the project was revived in January 1999 when defence minister George Fernandes announced that the government would complete the digging of the Sethusamudram channel in three years. This was backed by the prime minister Vajpayee’s assurance that his government was committed to the project. Indeed, the government took a concrete step towards the execution of the project when Union finance minister Yashwant Sinha, in his Budget 2000-01, allocated Rs.4.8 crore for a feasibility study of the Sethusamudram project.

Finally, the United Progressive Alliance Government of India headed by Prime Minister Manmohan Singh announced the inauguration of the project on June 2, 2005.

Ironically the Sethusamudram Ship canal project currently opposed by the BJP and Sangh Parivar for votebank Politics was cleared when L.K.Advani was the Indian Home Minister.