GMR deducts US$8.1 million from concession fees for 2012 first quarter

Indian infrastructure giant GMR, appointed by former President Mohamed Nasheed’s administration to manage and develop of the Ibrahim Nasir International Airport (INIA), has deducted US$8.1 million from concession fees paid to the government for the first quarter of 2012.

GMR took over the management of INIA from the government-owned company Maldives Airports Company Limited (MACL) in September 2010. According to a statement from the MACL, the company only received US$525,355 out of an expected US$8.7 million in concession fees for the first quarter of 2012, after GMR deducted payment for airport development fees and insurance surcharge.

The Airport Development Charge (ADC) was intended to be a US$25 fee charged to outgoing passengers from January this year, as stipulated in the contract signed with GMR in 2010. The anticipated US$25 million the charge would raise was to go towards the cost of renovating INIA’s infrastructure.

However the then-opposition Dhivehi Qaumee Party (DQP), which had ardently opposed the handing of the airport to GMR, won a case in the Civil Court last year blocking GMR from charging the ADC.

The Civil Court blocked the fee on the grounds that it was essentially the same as a pre-existing Airport Services Charge (ASC), and that any new fees would constitute a new tax and was subsequently required to go through the People’s Majlis.

Following the court ruling former President Nasheed’s administration agreed that the ADC would have to be deducted from GMR’s concession fee paid to the MACL.

Managing Director of MACL Mohamed Ibrahim told Minivan News the company would not comment on the matter.

GMR paid MACL US$ 7.79 million in variable annual concession and fuel concession fees for the fourth quarter of 2011, after deducting US$ 100,000 as payment for insurance surcharge.

New Finance Minister Abdulla Jihad has previously said the ADC issue will bankrupt the MACL.

“I don’t believe that GMR can deduct that amount from the payment owed to the government. The estimated US$30 million for this year must be paid. If the payment is not received it would be difficult to run the Airports Company,” Jihad said.

“The Civil Court ruled against that charge. Hence that amount must not be deducted from the payment to the government which would reduce its income,” Jihad argued. ”The Airports Company might face losses if that happens,” he said.

Meanwhile, new Foreign Minister Dr Abdul Samad Abdulla assured his Indian counterpart that all existing investment agreements would be honoured despite the change of government on February 7.

According to Indian newspaper The Hindu, Samad assured Indian External Affairs Minister S.M. Krishna that the government’s policy was unchanged, after his counterpart expressed the desire that the Maldives remained friendly to outside investors.

Longstanding opposition

The contentious Civil Court case was filed by DQP in a longstanding campaign against Nasheed’s government awarding the airport redevelopment to GMR. DQP leader Dr Hassan Saeed is now President Mohamed Waheed Hassan’s special advisor, while DQP Vice-President Dr Mohamed Jameel is the new Home Minister.

A 24-page book released by the DQP while it was in opposition presents the government’s lease of Ibrahim Nasir International Airport (INIA) to developer GMR as a threat to local industry that will “enslave the nation and its economy”.

Former President’s Office Press Secretary Mohamed Zuhair at the time of the pamphlet’s publication said that he felt the title’s wording was “very strong”, and drew a faulty comparison between international cooperation for mutual benefit and foreign occupation of a people and market for selfish purposes.

“The purpose of all this is to make Maldivians mistakenly feel like they are under occupation and the country is being sold out,” said Zuhair, who pointed out that the government “wouldn’t have gone out for an international bid [on the airport project] if there was a way to borrow money and do it internally.”

He explained that the airport now yields “a bulk” of the national revenue, in dollars: “If foreign visitors increase, income increases. It’s simple math.”

GMR has also drawn the ire of local company MVK Maldives Pvt Ltd after INIA, backed by a civil court ruling, refused to renew MVK’s lease and ordered the MVK to vacate the Alpha MVKB Duty Free shop and hand the premises to GMR.

Consequently, DQP MP Riyaz Rasheed submitted a resolution to the Majlis to prevent GMR from taking over the management of duty free shops and bonded warehouses from local businesses. However, Rasheed withdrew the resolution on April 2.

The decision to finalise a deal to develop Ibrahim Nasir International Airport (INIA) was agreed under the administration of former President Mohamed Nasheed in 2010. GMR emerged victorious in the bidding process, amid political opposition on largely nationalistic grounds.

Confidence in GMR’s $511 million dollar INIA project appeared to take a hit after the resignation of President Nasheed in February was accompanied by a five percent drop in GMR’s share prices before bouncing back shortly after.