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.

Saeed says 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.

THE AIRPORT DRAMA
A chronology of events

Jun 28, ’10 Concession agreement executed among Maldives Airport Company Ltd (MACL), the Maldives government through its finance and treasury ministry, and a GMR consortium

Jul 28, ’11 The country’s civil aviation department sends a letter to GMR Male International Airport Ltd (GMIAL) saying it is authorised to collect $25 as airport development charge (ADC) from all international passengers departing from the airport

Dec 8, ’11  A civil court passes order, disallowing the collection of ADC by GMIAL

Dec 26, ’11  GMIAL sends a communication to MACL, making a claim to set off the shortfall on account of non-collection of ADC against the payment of future variable annual concession fees

Jan 5, ’12  GMIAL allowed to set off the shortfall

Feb 7, ’12 Maldivian President Mohamed Nasheed resigns

Apr 19, ’12 Consent letter for new arrangement retracted 

Jul 20, ’12 GMIAL files anti-suit injunction application in the Singapore High Court

Oct 25, ’12 Constitution of arbitral tribunal completed

Nov 28, ’12 The Maldives government cancels GMIAL’s contract 

The reason: A “bonanza” given out by the previous government. After a civil court, in December last year, cancelled the imposition of $25 as airport development charge (ADC) and $2 as insurance on all departing international passengers, Nasheed, right before being ousted in February, permitted GMR to set off the shortfall on account of non-collection of ADC against the payment of future variable annual concession fees.

After this, GMR sent a bill of $3.5 million to the government for the previous two quarters, since its ADC revenue was much higher than the concession fee it had to pay to the government. But, the new government cancelled the consent letter that permitted GMR the set-off under what they considered “a cosy adjustment”.

GMR, however, says the termination rules of the agreement, which require a 65-day notice, were not followed — only seven days were given. The company says it has already spent $240 million, and ADC was part of the request for proposal (RFP) as a key source of revenue, without which the project was not viable. On the basis of what it has spent and interest costs, the company could seek a compensation of at least $500 million — nearly half the nation’s GDP of $1.2 billion — for premature cancellation. The matter is now under adjudication in the courts of Singapore.