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Untangling the GMR-Male row

BS Reporters/New Deli 10 Dec 12 | 03:27 PM
 GMR Infrastructure Ltd

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On November 27, the Maldives cancelled an agreement with Indian infrastructure firm GMR to develop an airport 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.

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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 ADF 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:

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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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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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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