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Corporate Dec 3, 2012

GMR row: Has Maldives killed the proverbial goose?

By Sindhu Bhattacharya

New Delhi: Is GMR Infra's Male airport deal really a "sweet deal gone sour" or is the Government of Maldives trying to bump off one of the few hens which lay golden eggs for this country?

Had the Government, under a new President, not revoked a clause in the airport's concession agreement which allowed GMR to raise revenue through levy of an airport development charge and an insurance charge, Maldives would have earned over a billion dollars from this venture over the next quarter of a century.

But the situation reversed when earlier this year, a civil court of Maldives scrapped the provision of this airport charge and insurance levy - $25 plus $2 as insurance surcharge over service charge - per departing international passenger and the Government did nothing to take this decision to the country's Parliament and get it revoked.

Then, the Government allowed GMR to actually adjust revenues it would have earned by levying this charge by lowering the revenue share it was to pay as per the concession agreement.

Is GMR Infra's Male airport deal really a "sweet deal gone sour" or is the Government of Maldives trying to bump off one of the few hens which lay golden eggs for this country? AFP

"Had the Civil Court not disallowed the airport and insurance charges, we at GMR would have paid $25 million on an annualised basis to Maldives for the next 25 years. The Maldives Government had to pay us for the April-September period instead because they scrapped these levies," a GMR spokesperson told Firstpost from Male.

A Business Standard report this morning suggests that GMR got a sweet deal from former Maldivian president Mohamed Nasheed that eventually turned sour as a new government came to power under President Mohammed Waheed. It quoted Waheed's special advisor, Hassan Saeed, as saying the Indian firm's contract to manage the Male airport was terminated last week because the project had turned unviable for the government.

The paper said the country's government, instead of earning revenues, would have had to shell out a staggering eight billion Maldivian rufiyaa (Rs 2,871 crore) over 25 years to give GMR the concession to run the airport. That would have been a massive blow to the island nation's coffers.

But GMR has already earned relief. According to a GMR statement, A Singapore Court today stayed the Maldives government's decision to terminate the $500 million contract awarded to GMR-led consortium for modernising the Male international airport, paving way for the operations to continue.

Based on the directions of the new Maldivian government, Maldivian Airport Company Limited (MACL) had on November 27 terminated the contract given to GMR in 2010 during the previous regime of President Nasheed.

The GMR spokesperson pointed out that when traffic was healthy at the Male airport in the March quarter of 2012, GMR paid the Maldives Government $750,000 in revenue share.

But since the period from April to September sees a dip in traffic, the Government was instead asked to pay GMR $3.5 million in this period. As per the contract, 1% of the airport's gross revenues and 17% of fuel revenues are charged by the Maldives Government as revenue share fee. Since traffic fell in the six-month period between April-September, so did the revenue share amount.

The concession agreement between MACL and GMR INfra was signed in June 2010 and it specifically 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.

GMR Male' International Airport (GMIAL) is a joint venture company comprising GMR Infrastructure Limited (GIL) (77%) and Malaysia Airports Holding Berhad (MAHB) ( 23%). 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. ends

by Sindhu Bhattacharya

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