Singapore stays cancellation, GMR to continue in Male

In a major relief to the GMR Group, a Singapore High Court today stayed the cancellation of GMR’s $511 million airport contract in Maldives, enabling the company to continue operations at the Male international airport for the time being.

The news sent GMR shares soaring.

At 11.43 am, the stock was 4.29 percent higher, while the Sensex was down 0.22 percent.

The option of legal action in Singapore is provided in the contract GMR had signed with the Maldivian government.

Last week, Maldives had cancelled the airport development deal with GMR because the contract contained a $25 airport development charge per outgoing passenger which was not authorised by the Maldives parliament.

The airport development contract awarded to the GMR Group in 2010 has been mired in controversy as the contract was firmed up during the Presidency of Mohammed Nasheed who was ousted in February this year.

Hasan Saeed, the current president Mohammed Waheed’s special advisor, told the Business Standard that GMR’s contract was terminated because it was financially unviable and would prove to be a massive blow to the government’s coffers which would have to shell out around Rs 2,781 crore to GMR over 25 years as concession, rather than earning revenues.

“After a civil court cancelled imposition of a $25 airport development charge (ADC) and $ 2 as insurance charge from all departing international passengers in December last, Nasheed just before he was ousted in February, permitted GMR to set off the short fall amount (for the reason of non-collection of ADC charge) against the payment of future variable annual concession fee,” the Business Standard report said .

The termination was seen as a major setback in the bilateral relations of India and Maldives. The GMR-led consortium has so far invested $230 million in the project, out of which $160 million has been funded by Axis Bank. The company has 80 expatriates working at the airport and they may have to be evacuated in case the matter continues to remain unresolved in seven days.

The government on Sunday also reviewed overall relationship with Maldives at the highest level and discussed various options in view of anti-India sentiment that could hurt India’s interests “directly”.

The Cabinet Committee on Security, chaired by Prime Minister Manmohan Singh, took into account the developments surrounding cancellation of the contract and its possible wider consequences_._

The meeting was told that anti-India sentiment exists in Maldives among a small section but such people are even in the government.

In view of this, India is not ruling out the possibility of its interests being hurt “directly”, a reference to its citizens or assets being harmed, the sources said.

It was noted that rule of law is weak and India will have to be ready with proportional response to deal with any contingency. Accordingly, various options were considered, which included stronger measures to protect India’s interests, the sources said.

It was decided that this measure should not be resorted to as of now and the situation should be dealt with through diplomacy.

The Maldivian government has given assurances that India’s interests would be protected, the sources said, adding however that “nothing can be ruled out” considering the fact that small sections are raising anti-India sentiments.

Win inputs from PTI