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Corporate Dec 5, 2012

Maldives airport controversy: 10 rebuttals by GMR

By Sindhu Bhattacharya

New Delhi: GMR Infrastructure has not revealed its next course of action over the threat of eviction from GMR Male International Airport (GMIAL) by Saturday but the company today gave a point by point rebuttal of its stand vis-a-vis that of the Maldives government.

The government of Maldives had earlier issued a letter informing GMR of eviction by Saturday, alleging that the company violated the airport concession agreement by seeking to levy a $25 airport development charge (ADC) per departing international passenger and an insurance surcharge of $2 over the passenger fee.

Since this levy was disallowed by a civil court of the country, the government has declared the entire airport concession agreement void.

Maldives has also alleged that GMR did not pay the entire $100 million upfront fee mandated in the agreement to it at the time of signing the contract, and that the contract was signed under dubious circumstances and that if the current arrangement continues (where GMR deducts the ADC from the revenue share it pays to the Maldives Airport Company MACL), the Maldives government will have to pay GMR instead of the airport operator paying the government in the normal course of things.

Here are 10 things GMR said in its defence today:

The Maldives government continues to collect $18.5 as passenger service fee even when the airport development charge collection has been denied to GMR. Reuters

1) The airport concession agreement envisages payment of over $2.5 billion in revenue share plus another billion dollars in passenger service fee collection by GMR to the Maldives government over the next 25 years. It paid $78 million in 2010, as much as $38 million the next year and will pay $30 million annually until 2015.

Then between 2016 and 2021, it will pay $50 million every year; $100 million a year between 2022 and 2030; and $150 million thereafter each year as long as the concession agreement is valid. So it is incorrect to say that the government of Maldives will be paying GMR anything.

2) The Maldives government continues to collect $18.5 as passenger service fee even when the airport development charge collection has been denied to GMR. So the government's revenue collection is not negative.

3) Until now in 2012, the airport operator has paid GMR $18 million after deducting the revenue share in lieu of ADC and after taking into account a fixed concession fee.

4) The Maldives government had assured GMR some months back the issue of ADC will be taken to the country's Parliament, or Majlis, for approval but this has not been done.

5) GMR paid the mandated $100 million at the time of the agreement but the breakup was: $78 million in cash to the government, $3.73 million to IFC, $22.5 million to MACL and remaining $0.85 million to various project consultants. So the government's charge that only $78 million was paid is factually incorrect.

6) Since GMR took over operations of the airport in June 2010, the CAGR of international tourist arrivals has increased to 12.5 percent while the CAGR of international traffic movements has gone up to 7.5 percent. Here again, GMR says charges of its operations leading to a fall in traffic and tourist business are incorrect.

7) Number of Maldivian employees at the airport has risen from 1,483 in November to 1,663 in December this year and GMR says that though the concession agreement allows it to retrench some employees after two years, not a single employee has been asked to leave.

8) GMR says they did not go to the Male airport project to leave it and claim compensation but that compensation is built into the concession agreement for project lenders and for covering damages which would be claimed if it was to be actually evicted from the airport project.

9) It has quoted a statement made by the Maldives Attorney General in September this year which spoke of $700 million in compensation. But in the same breath, GMR officials point out that the government of Maldives is in no position to offer this type of compensation since its Budget is all of a billion dollars and the tiny country's GDP is $2 billion. If Maldives were to award compensation to the tune of $700 million, it would be 35 percent of the country's GDP.

10) GMR says it has been assured by the Defence Minister of Maldives that it will not be evicted from the airport and no force would be used against it. GMR termed eviction unlawful and said if force is used, it would be seen as force being used against Indian interests.

Below are documents in support of GMR
Attorney General Office Certificate

by Sindhu Bhattacharya

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