Compensation as a route ruled out; legal process preferred

Bangalore-based GMR Group hopes that the Maldives Government will honour its commitment to international law with regard to cancelling the company’s licence to modernise the Male international airport.

Addressing a press conference here on Wednesday, Sidharath Kapur, Chief Financial Officer, GMR Airports, said the company was not really interested in settling the matter through payment of compensation for cancelling the contract.

"We expect and appeal to the Maldives Government to honour international law. Any termination is unlawful and against the due process of law. Any force will be seen impacting Indian interests. We have been assured by the country’s Defence Minister, who is also the acting Transport Minister, that force will not be used to remove us from Maldives airport,” Kapur said.

He added that use of any force would be seen impacting Indian interests.

On December 1, the Maldives Cabinet cancelled the contract after which GMR will have to vacate the Male airport within the next 48 hours. GMR officials said it would be difficult to comment on how things would play out over the next two days.

Pointing out that there was a compensation clause in the agreement, officials said that the exact amount had not been calculated yet. "We are not using compensation as a route. We have seen report of $700 million. Looking at the finances of the Maldives, it will have a very serious detrimental impact on the finances of the country. Our plea is that we want to settle the issues through a legal process,” Kapur said.

Officials said compensation was a complicated calculation as it covered payments to vendors and was supposed to be done before termination. "It covers entire equity infusion, return on equity it covers damages and termination of any sub-contracts, which we have so any cost of construction. If we have any damage on that account, it is covered as part of compensation,” Kapur said.

GMR officials rebutted the allegations that the award of contract to GMR group was leading to revenue loss to the Maldives Government.

The company said that it would give more than $2.5 billion to Maldives over the concession period. Moreover, the Government will also receive another $1 billion through taxes and royalties.

Also, the company cannot increase the charges at Male airport. The charges were increased by Maldives Airports Company before GMR took over, which contradicts Maldives Airports Company's statement that since GMR took over there has been a fall in tourist arrivals.

On Maldives Government's move, GMR said that this could affect international investor interest in Maldives. "It is difficult to comment on politics. We cannot rule it out but cannot say it directly. You cannot rule out anything.''

The company's total debt and exposure payable over 12 years is about $160 million.

(This article was published on December 5, 2012)
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