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SPECIAL: Untangling the GMR-Male row

Timeline of incidents that lead to the scrapping of the $500 million airport development deal

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On November 27, the cancelled an agreement with Indian infrastructure firm to develop an in capital Male. The $500-million (Rs 2,750 crore) deal was the largest foreign direct investment in the Indian Ocean archipelago of 1,192 islands.

Ever since the contract was awarded to GMR, the project had been at the centre of a controversy over collection of $25 as airport development fees. There also were allegations made by the current government that the previous ruling party had rushed through the bidding process, which was not transparent enough.

GMR Infra has a 77:23 joint venture with Malaysia Airport Holdings for this project. It was to upgrade, maintain and operate the existing airport, as well as build a new terminal by 2014.

The GMR-led consortium has been maintaining that the bidding process had been overseen by IFC, a World Bank-owned institution, and the entire process was transparent. GMR had even proposed to renegotiate on collection from Maldives nationals and offered various options as well.

The total cost of the modernisation and expansion project, estimated at $529 million, was being funded through a combination of debt and equity in a 70:30 ratio. The debt component of $358 million had been tied up with the Singapore branch of Axis Bank, which is acting as the sole underwriter and mandated lead arranger for the debt facility. The debt has a door-to-door tenure of 12 years, with a ballooning repayment over seven years commencing June 2015.

The cancellation of the contract drew a sharp response from the Indian foreign ministry. “The decision to terminate the contract with GMR without due consultation with the company or efforts at arbitration provided for under the agreement sends a very negative signal to foreign investors and the international community,” an Indian statement said.

The following is a chronology of how the GMR-Male controversy began and the journey so far:

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16 December | GMR seeks over $800 mn from Maldives

Indian infrastructure firm GMR will seek a compensation of over $800 million from Maldives for the termination of its airport deal here but Male is insisting on a "forensic audit" as it feels the actual amount would be less than half.

"We have sent a letter to the Maldivian government indicating a number of more than $800 million as compensation amount. This is our initial estimate. The final figure would be based upon various calculations, loss of profit among others," GMR (Airports) CFO Sidharath Kapur said.

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Malaysia to discuss Male airport row with PM

Malaysian Prime Minister Najib Tun Razak, who is scheduled to visit New Delhi for India-Asean meet between December 20-21, is likely to discuss with Prime Minister Manmohan Singh the issue of GMR's now scrapped Male Airport project in which MAHB holds 23% stake.

"The heads of the governments (Malaysia and India) are going to meet in New Delhi next week. There may be some discussion (on Male airport issue). There will be sideline meetings in Delhi," Malaysia's Consul General in Chennai Citra Devi Ramiyah told reporters in Hyderabad.

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11 December | Maldives feared forex loss from GMR deal

Officials in Maldives said eversince GMR took over the operations of Male airport, there has been a significant shortage in dollars, which is putting a strain on the country’s economy. The US dollar is a legal tender in Maldives. Though the country has Madlivian Rufiyaa as the official currency, a significant amount of day-to-day transactions take place using the dollar.

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10 December | GMR ouster a big blow to India's reputation in S Asia

The realist school of thought currently employed by Delhi, that friendships don’t matter as long as national interest is taken care of, is all very well to pursue, except in this case Nasheed exemplified both friendship and national interest. After its errors of judgement on the Maldives, India’s next opportunity will come only when elections are held.

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A terminal, two runways and some resorts

In the 1960s, Maldives was not the tourist hotspot it is today. Fishing was the main occupation. Every week, a Ceylonese (as Sri Lankans were then termed) carrier operated a flight to and from Colombo with dried fish export from the islands. One day, old timers said, Sri Lanka stopped this service, citing poor landing conditions in the aerodrome, a British-era relic with a runway of steel plates.

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09 December |
GMR remains conspicuous by its absence

Just past midnight on Friday and quite a distance from the buzz at the international terminal, the Ibrahim Nasir International Airport’s VIP lounge witnessed an unusual ceremony. Attended by four senior functionaries of the Maldives government, the event saw Maldives Airports Company Ltd ( MACL) officially taking over the airport from its operator, GMR Infrastructure, which had been awarded a $511-million contract in 2010 by the government of former president, Mohamed Nasheed, to build and operate the airport.

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Maldives breathes easy as MACL takes charge of Ibrahim Nassir

At the stroke of midnight, Maldives minister of finance and Tourism Abdulla Jihad handed over a letter from the government to MACL CEO and managing director Mohammed Ibrahim, authorizing Maldives Airport Company (MACL) to take over the operations of the Male Airport. GMR officials were conspicuous by their absence in the ceremony.

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With sunset in Male, it's darkening elsewhere too


With GMR Infrastructure forced to give up on its $511-million Male airport, the latter has become the second major global project for the Bangalore-based company to be lost. In late November 2010 two years ago, GMR Infra had sold its 50-per cent stake in US-based power generation company InterGen for $900 million, saying it intended to focus on opportunities in India.

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08 December | The GMR case shows our no-nonsense approach: Dr Mohamed Waheed

As GMR Group exited Male International Airport, handing charge to Maldives Airport Company Ltd ( MACL), the country’s president, Mohamed Waheed, responded to Disha Kanwar through an emailed interview.

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Male airport: GMR's second major exit on global scale

With GMR Infrastructure forced to give up on its $511 million Maldives Airport, it is the second major global project that the Bangalore-based company is losing out on. During late November 2010 exactly two years ago, GMR Infrastructure sold its 50% stake in US-based power generation company InterGen for around $900 million, stating that it intends focus on emerging opportunities in India.

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07 December | Maldives can take control of airport: Singapore SC

The tussle between the Maldives government and India’s GMR Group over the handover of Male’s Ibrahim Nasir International Airport got murkier on Thursday, with conflicting claims from both sides. Even as the island nation’s government claimed GMR had agreed to vacate the airport Saturday, following an order of the Singapore Supreme Court, the company categorically denied it had had any such discussion with the government.

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06 December | Male airport exit: GMR Group, Maldives play chicken

GMR Group has dared the Maldivian government, saying the company would not exit the GMR Male International Airport (GMIAL) on Friday midnight, as directed. Trouble started brewing over the Male airport after the Maldives’ terminated GMR’s 25-year contract November 27, which the company termed “arbitrary”. GMR secured a stay order from the Singapore High Court, but the Maldives termed its decision "non-reversible and non-negotiable".

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05 December | Male was a learning experience: G M Rao

During pressing times such as the current one, it is spirituality that keeps GMR Group Chairman G M Rao going. While investors and analysts have reacted negatively to the news that GMR lost its airport project in the Maldives, Rao says it has given him humility and a good experience which will help him in future international projects.

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Too many trouble spots for Indian companies abroad

GMR may be going through a nightmarish experience in Maldives, but the script is all too familiar for some of the top Indian companies — from the Tatas to Jindals to Vedanta’s Anil Agarwal and others. Many companies that have made investments abroad have had to fight local governments and political risk has become a top decider for ventures abroad.

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Edit | A classic MNC problem

The ongoing dispute between the Indian company GMR Infrastructure and the Maldives government over the former’s contract to build an airport for the Maldives’ capital, Malé, throws up some knotty questions. Most importantly, to what degree should the Indian government step in to protect the interests of its corporate citizens abroad? Some would argue that even if the Maldives have entered into a poor deal, the sanctity of contracts requires it to be kept. In this case, GMR Infrastructure was authorised by the Maldives’ civil aviation authorities to collect $25 (Rs 1,365, at current prices) from international passengers as an airport development fee. 

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04 December |
Airport lenders ask Maldives govt for compensation

Axis Bank-led lenders, who have exposure to the Male International Airport Development Project, have written to the Maldives government, reminding the island nation that it is liable to compensate the lenders in the event of the project contract being terminated, according to an agreement signed by the Maldives government and banks.

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03 December |
GMR row: India to withhold aid to Maldives

India will proceed with extreme caution in its relations with the Maldives because of ‘concerns that the situation in the Maldives is unstable and rule of law is not being followed'. P
ersons familiar with developments in the tiny atoll state say $25 million in standby credit that India had offered to the Maldives may have to be held in abeyance lest "it fall into the wrong hands".

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GMR vows to continue court battle after Maldives rejects stay

GMR Infrastructure on Monday said that its airport company in Maldives - GMR Male International Airport Pvt Ltd - has won a stay in the High Court of Singapore in its ongoing legal tussle with the Government of Maldives. The High Court of Singapore granted injunctive relief against the applicability and operations of Letter issued by the Ministry of Finance & Treasury, Government of Maldives which cancelled the concession agreement with GMR Infrastructure.

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GMR gets stay on Maldives airport contract termination


GMR Infrastructure has said that its airport company in Maldives - GMR Male International Airport Pvt Ltd - has won a stay in the High Court of Singapore in its ongoing legal tussle with the Government of Maldives. The High Court of Singapore granted injunctive relief against the applicability and operations of Letter issued by the Ministry of Finance & Treasury, Government of Maldives which cancelled the concession agreement with GMR Infrastructure.

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GMR's Male sojourn: A sweet deal gone sour?

Did GMR Infra get a sweet deal from former Maldivian president Mohamed Nasheed that eventually turned sour as a new government came to power under President Mohammed Waheed? If Waheed’s special advisor, Hassan Saeed, is to be believed, the Indian firm’s contract to manage the Male airport was terminated last week because the project had turned unviable for the government.

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The 'Ugly Indian'?

By T N Ninan

Most people in India have assumed that the Maldives is guilty of breach of contract in the case of the Malé airport, and GMR the victim. But is there another side to the story? The contract was a revenue-sharing arrangement (one per cent till 2014, 10 per cent after that; also 15 per cent and 27 per cent revenue share on fuel). The contract allowed GMR to charge an airport development fee (users of Delhi airport, also run by GMR, will be familiar with this issue). The issue went to court in Malé, which in late 2011 struck down the fee as illegal.

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01 December |
Maldives to absorb staff after GMR exit, fate of expatriates hangs fire

Maldives Airports Company Limited (MACL) has provided a breather to the 1,800 employees working at the Ibrahim Nasir International Airport in Male. It has said after GMR’s exit from the project, expected by December 7, most of the staff would be employed by the company, directly under the government of Maldives.

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29 November |
Male setback could take severe toll on GMR's bottom line

With the Maldives government giving just seven days to the GMR Infrastructure-led consortium to hand back an airport it was upgrading in Male after cancelling the concession agreement, the $240 million that GMR has invested so far in the project is at stake.

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27 November | GMR may lose Male airport contract

In a major blow to Bangalore-based GMR Infra, the Maldives government has recommended termination of the contract awarded to it for upgrade of the Male airport. This was decided at a meeting of the country’s Cabinet and a notice was subsequently sent to the GMR group, Maldivian President’s press secretary, Masood Imad, said in a statement.

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