6 DEC, 2012, 06.21AM IST, SRUTHIJITH KK,ET BUREAU
NEW DELHI: Maldives last week terminated its agreement with the GMR-led consortium to run the Male international airport after it unsuccessfully waited 45 days for an appointment with Prime MinisterManmohan Singh for a special envoy of President Mohammed Waheed to convey a letter explaining why the deal was unsustainable, a senior official from the President's office told ET.
The unilateral termination of the deal is at the centre of a diplomatic row between India and the neighbouring archipelago. "We wanted to explain to the Prime Minister the anger among the people of this country, the pressure the government was under and how ruinous this deal was for Maldives. We wanted to seek his intervention in perhaps convincing GMR to renegotiate. But we received no response for a month and a half.
Time takes a toll on everyone. And then we had no option but to terminate the deal," Masood Imad, press secretary to the President, told ET, speaking on telephone from Male. India's external affairs ministry confirmed receiving a request, but denied that no response was made. "Yes we did receive this request. We responded saying we will receive him at an appropriate level," an external affairs ministry spokesperson said.
Despite an injunction by a competent forum— the Singapore High Court—the Maldives government has announced it will take over the operations of the airport at midnight on Friday.
The Maldives foreign minister telephoned external affairs minister Salman Khurshid on Tuesday and said the President will be sending a detailed communication to the Indian PM on the matter. Sidharath Kapur, chief financial officer of the airports division of GMR Infrastructure denied Imad's claim that Maldives wanted to renegotiate the contract and the company was unwilling to do so.
"We have never received any communication from their side about a renegotiation," Kapur said. Kapur also rebutted in detail the allegations against GMR at a press conference in the Capital and expressed hope that Maldives would honour the sanctity of the legal process and not take over the airport. "It's very unfortunate that the airport has become a football in Maldives' political arena," he said.
Kapur explained that the deal would have given Maldives revenues of more than $2.5 billion over the concession period of 25 years. This is apart from $1 billion in passenger service charges, royalties and duties. This, however, is net of the airport development fee that would be deducted till the government was able to pass laws making provisions for such a charge.
The deal, struck in 2010, started unravelling after a local court struck down the deal's provision allowing the operator (GMR) to charge a $25 airport development fee and a $2 insurance surcharge as illegal on December 8, 2011. This dramatically altered the finances of the deal. GMR's Kapur says that the then government gave them an assurance that the company's commercial interests will be protected and the loss of revenue could be adjusted against the revenues due to the state by way of payments to the Maldives Airport Company Ltd (MACL).
The former chairman of MACL issued a letter to GMR to this effect, which the company has subsequently disowned arguing the letter did not have board approval. MACL has also moved court against its former chairman. Curiously, the government of Maldives (then led by former president Mohamed Nasheed), MACL or GMIAL (the GMR-led consortium that runs the airport) did not appeal the decision of a local civil court.
Kapur says the company did not appeal the decision because the board felt at the time that the assurance from the government that GMIAL's commercial interests would be protected was adequate. The decision to rely on the assurance of one government, in a country notorious for political instability, has come back to haunt the consortium. "In hindsight, of course, you can say it was a wrong decision.
You could also ask why we did not go for political risk insurance. We didn't feel the need for it considering the close historical and cultural ties between India and Maldives. We felt that if any problems were to arise, the government of India, which was giving us full support, would be able to help," Kapur said.
When Nasheed-led government was ousted and a new government led by Mohammed Waheed came to power, it soon became clear that if the situation with regard to the airport development fee did not change, the Maldives exchequer would soon be paying GMR rather than the other way around. Imad, the press secretary, said that the former president tried unsuccessfully to get the Maldives parliament, the People's Majlis, to legislate the airport development fee. "Our economy is a tourismbased economy. We already have a departing tax of $24.
The unilateral termination of the deal is at the centre of a diplomatic row between India and the neighbouring archipelago. "We wanted to explain to the Prime Minister the anger among the people of this country, the pressure the government was under and how ruinous this deal was for Maldives. We wanted to seek his intervention in perhaps convincing GMR to renegotiate. But we received no response for a month and a half.
Time takes a toll on everyone. And then we had no option but to terminate the deal," Masood Imad, press secretary to the President, told ET, speaking on telephone from Male. India's external affairs ministry confirmed receiving a request, but denied that no response was made. "Yes we did receive this request. We responded saying we will receive him at an appropriate level," an external affairs ministry spokesperson said.
Despite an injunction by a competent forum— the Singapore High Court—the Maldives government has announced it will take over the operations of the airport at midnight on Friday.
The Maldives foreign minister telephoned external affairs minister Salman Khurshid on Tuesday and said the President will be sending a detailed communication to the Indian PM on the matter. Sidharath Kapur, chief financial officer of the airports division of GMR Infrastructure denied Imad's claim that Maldives wanted to renegotiate the contract and the company was unwilling to do so.
"We have never received any communication from their side about a renegotiation," Kapur said. Kapur also rebutted in detail the allegations against GMR at a press conference in the Capital and expressed hope that Maldives would honour the sanctity of the legal process and not take over the airport. "It's very unfortunate that the airport has become a football in Maldives' political arena," he said.
Kapur explained that the deal would have given Maldives revenues of more than $2.5 billion over the concession period of 25 years. This is apart from $1 billion in passenger service charges, royalties and duties. This, however, is net of the airport development fee that would be deducted till the government was able to pass laws making provisions for such a charge.
The deal, struck in 2010, started unravelling after a local court struck down the deal's provision allowing the operator (GMR) to charge a $25 airport development fee and a $2 insurance surcharge as illegal on December 8, 2011. This dramatically altered the finances of the deal. GMR's Kapur says that the then government gave them an assurance that the company's commercial interests will be protected and the loss of revenue could be adjusted against the revenues due to the state by way of payments to the Maldives Airport Company Ltd (MACL).
The former chairman of MACL issued a letter to GMR to this effect, which the company has subsequently disowned arguing the letter did not have board approval. MACL has also moved court against its former chairman. Curiously, the government of Maldives (then led by former president Mohamed Nasheed), MACL or GMIAL (the GMR-led consortium that runs the airport) did not appeal the decision of a local civil court.
Kapur says the company did not appeal the decision because the board felt at the time that the assurance from the government that GMIAL's commercial interests would be protected was adequate. The decision to rely on the assurance of one government, in a country notorious for political instability, has come back to haunt the consortium. "In hindsight, of course, you can say it was a wrong decision.
You could also ask why we did not go for political risk insurance. We didn't feel the need for it considering the close historical and cultural ties between India and Maldives. We felt that if any problems were to arise, the government of India, which was giving us full support, would be able to help," Kapur said.
When Nasheed-led government was ousted and a new government led by Mohammed Waheed came to power, it soon became clear that if the situation with regard to the airport development fee did not change, the Maldives exchequer would soon be paying GMR rather than the other way around. Imad, the press secretary, said that the former president tried unsuccessfully to get the Maldives parliament, the People's Majlis, to legislate the airport development fee. "Our economy is a tourismbased economy. We already have a departing tax of $24.
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