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Corporate Nov 29, 2012

Airport development fee is at the crux of GMR, Maldives tussle

By Sindhu Bhattacharya

New Delhi: A mere $25 airport development charge per departing passenger is ostensibly at the bottom of the scrap between the GMR led consortium and the Maldivian government.

That country's Government has given just a week for the consortium to hand over the GMR Male International Airport (GMIAL) to Maldives Airports Company Ltd (MACL), alleging that since the conditions of a concession agreement the consortium signed with the Government have been violated through this levy, the entire agreement has been violated.

But the surprising part is this: GMR has said that this levy was never implemented and till date. Reuters

The agreement that this consortium signed with the Maldivian Government for GMIAL in June 2010 provided for the developer charging $25 fee per departing international passenger from January 2012 and a further $2 as insurance surcharge over the airport service charge.

But the surprising part is this: GMR has said that this levy was never implemented and till date, no departing international passenger has been asked to pay this sum. A GMR spokesperson told Firstpost that once it was clear that the Government was opposed to any such levy, MACL itself suggested that the required money be earned by adjusting the revenue share this consortium was to have with MACL.

Much like privatisation of Delhi and Mumbai airports, the Male airport project also envisaged that a certain percentage of the airport's earnings be shared with MACL, which is the local equivalent of the Indian airports owner, Airports Authority of India. "We have never charged this fee, merely adjusted revenue share with MACL-that too at the suggestion of MACL itself. How can the Maldivian Government accuse us of violating the concession agreement when we have not levied this charge," the spokesperson wondered.

In December last year, the Maldives Civil Court ruled that the collection of airport development charge and insurance surcharge was contrary to the laws of Maldives, despite it being a specific provision in the airport's concession agreement signed in 2010. In a letter, signed by Minister of Finance and Treasury Abdulla Jihad, the Maldives Government has acknowledged that GMR did not commence collection of the development fee and ceased collecting the insurance surcharge.

But it points out that GMIAL had the opportunity to appeal the decision of the court but did not do so. "The decision of the court is accordingly definitive and final statement of the public law and constitutional powers of the Government and MACL in relation to the said charges," this letter said. It informed GMR at about six pm yesterday that it will have to hand over the airport to MACL within seven days and should begin the handover proceedings.

But GMR is digging its heels in and is planning to take legal recourse. It has not yet begun any handover formalities and the spokesperson said every possible legal option would be explored.

GMR Male' International Airport (GMIAL) is a joint venture company comprising GMR Infrastructure Limited (GIL) (77 percent) and Malaysia Airports Holding Berhad (MAHB) ( 23 percent). In 2010, GMIAL won the right to build and operate the Ibrahim Nasir International Airport (INIA) for 25 years, which is extendable by another 10 years.

by Sindhu Bhattacharya

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