Letter to permit deduction of ADC was drafted by GMR

It has been revealed that the letter whereby Maldives Airports Company Limited (MACL) granted permission to GMR to deduct Airport Development Charge (ADC) of $27 from concession fees, was drafted by GMR.

Today, the Attorney General’s Office has publicised a report on the award of the airport project to GMR by the Maldivian government.

According to the 41-page report compiled after thorough research, GMR’s lawyer sent a draft of this letter to the Attorney General and the Ministry of Finance on 5 January 2012.

Finance Ministry sent a letter to MACL on the same day, ordering MACL to sign and grant permission as indicated in the letter drafted by GMR, which was attached.

The Finance Ministry’s letter was taken to MACL by an employee of GMR, and Chairman of MACL Bandhu Ibrahim Saleem signed the letter in the presence of the GMR employee, following which the same employee returned the letter to GMR.

The report of the Attorney General’s Office states that because such activities took place, the case has been filed to the Anti-Corruption Commission (ACC).

The report also notes that the government tried to appeal Civil Court’s decision that ADC cannot be imposed; however, the Attorney General refused to appeal the case by saying that the government cannot work to protect the interests of a particular company.

It explains that GMR agreed to appeal the case following repeated requests by the government, but later changed its mind when it understood that it would not make any legal progress by doing so.

The report states that the former Attorney General granted permission to deduct ADC from concession fees with reference to a ‘political event situation’ as indicated in article 18 of the agreement, however the situation that existed at the time cannot be categorised as such.

It also highlights that former Finance Minister Ahmed Inaz and Bandhu Ibrahim Saleem agreed to an amendment that would reduce the government’s revenue collected from fuel concession, and signed this amendment with GMR on 22 June 2011.

This amendment was signed by stating that it resulted from a misinterpretation of the agreement, however, accountants and lawyers from whom the government sought advice explained that GMR cannot interpret the agreement as they wish and make amendments.

Due to this amendment, the government had estimated that it would incur losses of MVR1.58 billion over the 25-year period of the contract.

The report also says that the revenue to the government would be reduced by MVR30 billion and MACL would face estimated losses of MVR6.71 billion due to the letter which permitted deduction of ADC and GMR’s amendment of the agreement in relation to the fuel concession.

The report notes that the issue related to land in Hulhumale’ remained unresolved even when the contract was terminated.

According to the contract, GMR should be given 4.8 million square meters of land, while MACL should be given 90,389 square meters of land from Hulhumale’. The report noted that GMR had claimed that it was not given land as per the contract.

Referring to the bid evaluation procedure, the report says that not sufficient evidence existed to believe that the procedure was properly followed.

In this regard, it says that GMR was not shortlisted in the first round of bidding, however, an announcement was made to open bidding for a second time.

This time GMR was included in the three companies that were shortlisted in the first phase. GMR however failed the technical bid following evaluation of the bids by IFC and government consultants. Subsequently, discussions were held by the committee, and the decision to pass GMR’s technical bid was approved by the committee when 3 out of 5 members voted in favour of doing so.

The three companies that were shortlisted were TAV, GMR and Unique GVK. Out of the three, GMR proposed the highest upfront fee with $78 million, while TAV proposed $7 million and Unique JVK proposed $27 million.

However GMR agreed to give only 1 percent of revenues to the government from 2011 to 2014, while TAV agreed to give 31 percent and Unique JVK agreed to give 27 percent.

From 2015 to 2025, TAV proposed to give 29.5 percent of revenues to the government, while GMR proposed 10 percent and Unique JVK 9 percent.

By allowing GMR to operate the businesses located at the airport, the government estimated to incur losses of MVR18.4 billion over 25 years. If GMR were to operate the airport hotel and sell jet A1 fuel as per the agreement, the government would face losses of MVR3.92 billion. If GMR were to invest in the retail, housing, health and education sectors in Hulhumale’ as allowed by the contract, the economy would incur estimated losses of MVR22.46 billion.

The report states that the contract allowed GMR to increase airport fees and ADC, which could result in immeasurable losses to local businesses.

The report concludes by saying that the aforementioned losses that would be incurred by the government over the 25-year period of the contract is likely to exceed the compensation that the government may be required to pay subsequent to the termination of the contract.