Crash-landing in Malé

The apparently sudden decision of the Maldivian government to scrap its agreement with Indian infrastructure company, GMR, for running the Malé airport has been received with shock in India. GMR, which runs the airports in New Delhi and Hyderabad, has suddenly emerged, in the past decade, as one of India’s large private players in infrastructure projects through public-private partnerships. The company won the right to upgrade and operate the Ibrahim Nasir International Airport in Malé in November 2010 through an international tender which was overseen by the International Finance Corporation, a World Bank affiliate.

The origin of the trouble between GMR and the Maldivian authorities seems to be the airport development charge (ADC) of $25 per passenger which the company started charging in 2012 and which was struck down by the courts. GMR managed to convince the then government led by Mohamed Nasheed to offset this loss of income from the revenues that GMR was ­supposed to pay the Maldivian state. According to some reports, in the very next three months, the Maldivian government’s revenues dropped from $8.7 million for the financial quarter to $0.5 million. From the next financial quarter, GMR started demanding money from the Maldivian government, rather than paying anything of its own, the amount reaching $3.5 million in the last quarter. The original agreement between GMR and Maldives envisaged an income of $1.0 billion for Maldives over the course of the 25 years that GMR was contracted to operate the airport, but with this change it became a major source of revenue loss for this small and impoverished country. As a commentator explained, this had become for the Maldives what Enron had become for India in the 1990s.