Tag: concession fee

Independent MP contests government agreement with GMR over ADC

Independent MP Mohamed Nasheed has said the government is circumventing the Civil Court’s ruling against a US$25 Airport Development Charge (ADC) by agreeing to deduct the anticipated revenue of US$25 million from GMR’s concession fee.

Nasheed also contends that the government has not breached its contract with GMR, but rather that the contract was breached by outside forces.

The minority Opposition Dhivehi Quamee Party (DQP) has also announced that it will investigate the recent amendment to the government’s contract.

GMR was set to collect US$25 from all passengers departing on international flights starting January 1, 2012. The expected revenue was to cover certain costs for the development of Male’s Ibrahim Nasir International Airport (INIA).

According to Nasheed, any agreement between the government and GMR will not undo the Civil Court’s ruling against the ADC. He argued that the court ruling rendered the clause allowing for an ADC null and void.

“That’s the only decision that interprets or explains the local law at the moment, and it has not been overturned, it has not been struck down by a superior court, therefore that is the position. You can’t circumvent it by deducting receivables from GMR,” said Nasheed.

“Now, the only viable option for the government would be to amend the legislation, allow for the GMR or any other party to collect ADCs or these kind of taxes in future, and then bring the GMR issue within the legislation as an amendment,” he said, adding that an amendment to the law would protect the government from incurring losses to ensure a base line of revenue for GMR.

A related bill is currently awaiting Parliamentary review in March. Nasheed understood that the ADC would be collected by the government only three times per year, yet “it is only January 10 and already the government is trying to make this agreement and circumvent the court decision.”

Meanwhile, the government is also awaiting the High Court’s verdict on the Civil Court case, which was appealed in December. Nasheed said a contract cannot be revised while it is before a court.

Previously, members of the government including President Mohamed Nasheed have expressed firm support for the contract with GMR. Speaking at the groundbreaking ceremony of a new terminal construction project at INIA, the President said the Maldives was “200 percent” behind the contract, while Press Secretary Mohamed Zuhair yesterday stated, “it should be a matter of pride and joy for any Maldivian to help with the development of their airport.”

DQP previously voiced strong opposition to the deal with GMR, filing a case at the Civil Court and releasing a booklet entitled “Handing the Airport to GMR: The beginning of slavery.”

In MP Nasheed’s opinion, however, the government has allowed itself to be bullied into a compromise of terms.

The agreement implies that the government has taken responsibility for the ADC as stipulated in the original contract with GMR. If the ADC is charged for the duration of the 25-year contract, the government could potentially be facing a total payment of US$625 million for GMR’s investment of US$400 million in the airport project.

“The government gets peanuts at the end of the day,” Nasheed said.

“My argument to the government would be, Maldives government too must have gotten into this relationship based on certain calculations. Why should the Maldivian government suffer their calculations to keep GMR’s calculation unaffected by the court decision, over which the government has no control?”

Addressing the matter in a press statement yesterday, the Ministry of Finance claimed that the contract between GMR and the government would be violated in the event that GMR could not collect a stated fee. Therefore, the government had breached its contract.

The ministry did express support for the government’s recent agreement, however, stating that any damages should be deducted from GMR’s concession fee due the government.

Expressing shock at the Ministry of Finance’s statement, Nasheed clarified his intent to defend the government from the ministry’s first point.

“I would like to defend my government and say that the government did nothing on its own or within its control to breach an agreement. They have allowed certain charges to be made based on an opinin of the Attorney General that that charge was permissible under Maldivian law. Now, the Civil Court has said otherwise, and the government has not done anything to breach the contract. It’s a frustrating event that’s happened outside the contract and the government won’t take any responsibility for that.”

Nasheed today said he understood that a only small fraction (12 to 15 percent) of internationally-bound travelers leaving INIA are Maldivians.

“If the ADC was allowed, the burden of payment would have been born by international passengers, and only 12 percent Maldivians. And the government won’t have to bear any burden because the fee would be collected directly from passengers by GMR,” he said, reiterating that under the current arrangement the government would be paying revenue to GMR.

Minivan News asked whether exempting Maldivians from the ADC could put the matter to rest.

Nasheed believed exemption could improve the situation, and added that parliamentarians have discussed exemptions for Maldivians traveling to SAARC countries.

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GMR and government to seek “win-win situation”: Razee

Infrastructure company GMR has said it will deduct revenue received from collecting a US$25 (Rf385.5) Airport Development Charge (ADC) from every passenger departing on an international flight from the concession fee to be paid to the government.

GMR informed Maldives Airports Company Limited (MACL) last Thursday of its decision. MACL officials had not responded to inquiries at time of press.

GMR planned to begin collecting the ADC at midnight on January 1 this year as per its contract with the Maldives government. Revenue was expected to amount to US$25 million (Rf385.5 million) in 2012, and would be put towards the ongoing development of Ibrahim Nasir International Airport (INIA).

However, a Civil Court ruling in December blocked the ADC on the grounds that it was identical to an existing Airport Services Charge (ASC) of US$18 (Rf277.56). The company’s shares on the Mumbai stock exchange subsequently fell 7.57 percent, India’s Economic Times reported.

The government subsequently appealed the case to the High Court. Meanwhile, GMR is not collecting the ADC.

Economic Development Minister Mahmoud Razee said that the concession agreement between GMR and the government assured each party a certain level of income.

“Because the ADC was included as revenue, until the matter is resolved any money that was going to be received from the ADC should be deducted from what GMR owes the government,” Razee explained.

Razee said that the Ministry of Finance will work with GMR and the government to resolve the matter, adding however that much of the decision rests on a verdict from the High Court.

He added that the related Amendment of Collection of Airport Tax (international travelers) Act 7/78 Bill is also before the Parliament, which is currently in recess until March.

Razee was optimistic about the outcome, however far in the future.

“The contract between the government and GMR allows for certain changes which are mutually respected and agreed upon by both parties,” Razee observed. “They will reach a win-win situation, even if some revenue is lost.”

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.

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.

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.”

The public response has not been so positive. Following GMR’s closure of duty-free shop Alpha MVKB, company CEO Ibrahim Shafeeq organised a protest under the slogan “Go GMR Go!” The protest was held on the grounds that the company was “demonstrating our opinions and dislike of what GMR has done to us and to get public responses,” Shafeeq told Minivan News at the time.

Kulhudhuffushi-South Independent MP Mohamed Nasheed also proposed an amendment to the Business Registration Bill in a bid to reserve airport shops and services for local ownership and “clip GMR’s wings”.

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