Government agrees to amend GMR fee while rooting for ADC

The government has agreed to deduct expected revenue from the US$25 (Rf385.5) Airport Development Charge that was to be charged from passengers departing on international flights from Ibrahim Nasir International Airport (INIA) from GMR’s concession fee to the Maldives government.

The agreement is subject to change according to a verdict from the High Court in a related case, and the passage of a bill currently before Parliament.

GMR’s request that the amount be deducted from its concession fee to the government was made to Maldives Airports Company Limited (MACL) last week, and approved following discussions between the Finance Ministry and the Maldives Airports Company Limited (MACL).

MACL officials did not respond to phone calls at time of press.

The ADC was to be charged after midnight on January 1, 2012, however the Maldives’ Civil Court blocked the fee on the grounds that it is essentially the same as a pre-existing Airport Services Charge (ASC) of US$18 for foreigners and US$12 for locals above two years of age.

Citing a contractual obligation with GMR, the government subsequently appealed the case to the High Court, where it is currently awaiting a verdict.

Having received nearly 1 million tourist arrivals in 2011, the government and GMR expected the ADC would generate US$25 million in revenue towards the current renovation of INIA.

Although the expected revenue is said to include fees charged from foreigners and Maldivians traveling abroad, it appears that at US$25 apiece the nearly 1 million tourists alone would meet the revenue needs stipulated in GMR’s original agreement.

President’s Office Press Secretary Mohamed Zuhair informed Minivan News that the notion of exempting Maldivians from the ADC had been raised in meetings, but rejected on the grounds that such an exemption would not generate the necessary revenue.

“The government and GMR have calculated to assure that shareholders and banks are properly recompensed,” he explained. “It should be a matter of pride and joy for any Maldivian to help with the development of their airport.”

Economic Development Minister Mahmoud Razee did not believe the deduction of ADC revenue from the concession fee would impact airport development.

“The government agreed to GMR’s request because the numbers were calculated accordingly” to ensure that the project was not compromised, he said.

Razee added that the agreement is only temporary.

“The government is working through the courts and the Majlis [Parliament] to find a resolution,” he said, affirming that the government continues to favor an ADC.

“When the IFC (International Finance Corporation) did the sums it took as part of the income the ADC revenue,” he explained. “Maldives receives a couple million passengers coming and going every year, but if you compare it to a place like Singapore which transits 30 to 40 million passengers a year, and you need to ensure that you are getting an internal rate of return satisfactory to the investor, you need to adjust that rate.

“So we are trying to maintain a good rate of return for the government and the airport,” he explained.

The matter is being addressed at the parliamentary level in an Amendment of Collection of Airport Tax (international travelers) Act 7/78 Bill. However, Parliament is in recess until March.

GMR previously noted that the payment of a development fee was “a common concept in many airports globally”, particularly as a part of concession agreements where airports are privatised.

“The reason for the inclusion of ADC in many global concession agreements is to address the funding needs to meet the investment model required to upgrade and develop new airport facilities at significant costs,” GMR stated.

The company further claimed that the charge was included in the concession fee proposed between GMR and the government in 2010.

Speaking at the groundbreaking ceremony for INIA’s new terminal on December 19, President Nasheed said he wished to assure GMR that the government was “200 percent behind your contract, and every single other contract the government has signed with any other foreign party in this country. Not just contracts signed by our government, but also contracts that any ruler of the Maldives has signed with any party. We will honour it.”

GMR’s 25 year concession agreement to construct and manage a new US$400 million terminal (to be competed in 2014) is the single largest foreign investment in the history of the Maldives.

Meanwhile, in April India’s Supreme Court ruled against the charging of airport development fees which are not approved by India’s Airport Economic Regulatory Authority (AERA). However Delhi airport, developed by GMR, continued to charge the fee as GMR had obtained permission to collect the sum in 2010.