Scrapping of GMR contract in Male worries Assocham

Last Updated: Fri, Nov 30, 2012 16:20 hrs

New Delhi, Nov 30 (IANS) A leading Indian business association Friday expressed concern over the unilateral decision of the Maldives government to scrap an airport management contract with an Indian infrastructure major.

According to the Associated Chambers of Commerce and Industry of India (Assocham), the Maldives government's move is against the spirit of international concession agreement that was signed after the GMR Group won the bid to operate and develop the Male airport.

In a communication to the Maldives envoy to India, Assocham secretary general D.S. Rawat urged the Maldives government to provide an opportunity to GMR Group to discuss and find an amicable solution to the dispute.

"This (to discuss and find an amicable solution) will certainly further strengthen the spirit of economic relations amongst the South Asian Association for Regional Cooperation (SAARC) nations," Assocham said in a statement.

The industry lobby has also urged the Indian government to take immediate steps to protect the interests of GMR, its employees people working in Male and Indian investments in the project.

The GMR Group has termed the cancellation of the contract as unlawful and is planning to take legal action against the Maldives government for scrapping its investment of more than $500 million in the project.

Several Indian banks like Axis Bank, Indian Overseas Bank and Indian Bank have contributed about $368 million to the project. This is also the single largest Indian foreign direct investment in the Maldives.

The project was awarded to the GMR Group through an international tender advertised by the Maldives government under the tenure of former president Mohamed Nasheed, who was ousted in February 2012.

The Indian government Thursday said the move will "inevitably affect bilateral ties" and expressed apprehensions at the way the issue has become "a platform for anti-India elements" in the archipelago nation.

India has also asked the Maldives government to ensure the security of around 30,000 Indian nationals living there.

Official sources said that India wants legal process to be followed in resolving the commercial dispute and has made it clear to the Maldives government that the scrapping the contract is sending a negative message not only to Indian investors but also to international investors.

However, the Maldives government Wednesday defended its decision to terminate the GMR contract, saying the deal was dogged by "legal, technical and economic issues".

"GMR is taking legal steps against the Maldives government. The legal process should be played out," said a source.

There are many interests at work, the source added, indicating that the external affairs ministry was closely looking at reports that suggest that a pro-China lobby in the Maldives was behind the cancellation of the contract.

"It has become an election issue and it has ceased to be a purely commercial matter," said a source.

Elections are scheduled to be held in the Maldives late next year, but there are indications that these could be held early next year.

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