India Maldives relationship which is characterized by the warmth has recently reached a new low after GMR row in Maldives. Approximately 29,000 Indians live and work in Maldives and almost 22,000 of them live in Male', the capital city. They comprise nurses, teachers, managers, doctors, engineers, accountants and other professionals. Besides them, there are skilled and unskilled personnel such as technicians, masons, tailors, plumbers, and other labourers. There are over 5,000 expatriates from the Maldives who live in India, in what is recorded as the largest population of Maldivians living abroad.

 

The tension erupted between the two governments after the Government of Maldives recommended to terminate the contract awarded to Bangalore based infrastructure developer to upgrade the airport at Male at a cost of $530 million. The project was awarded to GMR Infrastructure during the previous regime of the island nation during mid of 2010. GMR Infrastructure said that this move is unilateral and completely irrational move the Government of Maldives intending to take over the possession and control of the Ibrahim Nassir International Airport under the pretext that the Agreement is void. 

 

The Government of India also threw its weight behind GMR Infrastructure and said that the Maldives' decision to terminate contract with GMR without due consultations sends "very negative" signal to foreign investors. 

 

The current traffic at the Ibrahim Nasir International Airport in Male is at 2.6 million passengers per annum. The first stage of the project will include increasing the traffic at the airport to 3 million passengers per annum by way of constructing a new terminal and thereby increasing the traffic to 5 million passengers per annum.

 

Ever since the contract was awarded to GMR Group, the project has been at the centre of controversy over collection of $25 as airport development charges and to various allegations from the current government that the prior ruling party rushed through the bidding process and the same was not transparent enough. 

 

Earlier this year GMR was forced to stop collecting airport development fee from foreign travelers due to a ruling by Civil Court of Maldives. GMR has appealed against this order and arbitration is on at a court in Singapore. GMR had secured a stay from the Singapore High Court against the Maldives government notice of November 27, through which its contract was terminated and the company was asked to handover the airport within seven days.

 

Ever since the controversy broke out with uncertainties looming large, GMR has paused the construction of the new terminal. Meanwhile, the GMR-led consortium has been maintaining that the bidding process was overseen by World Bank owned institution IFC and the entire process was transparent. GMR had even offered to renegotiate on the collection of ADC for natives of Maldives and had offered various options in that segment as well.

 

GMR had been given a notice of seven days by the Maldives government to handover the airport and 30 day period to remove its assets. The move to terminate the contract has threatened a diplomatic row between India and Maldives.

 

Maldives government has defended its move by insisting that the decision was made purely on legal grounds as the contract was invalid from the beginning. Meanwhile, Maldives Civil Aviation Authority informed GMR Group that the permit (Aerodrome Certificate) to operate the airport will cease to be in effect from December 7 (end of the seven day notice). Immigration Department has also decided not to renew visas and work permits of foreign employees of GMR, while insisting that employees can remain in Maldives until the end of their current visa period. 

 

India on its part had conveyed its displeasure to Maldives immediately after the termination of the project and asked it to ensure that Indian interest was fully protected. It also underlined that the scrapping of the biggest single Indian FDI in the Maldives will negatively impact bilateral trade ties and the larger relationship. In a move to put pressure on Male, India has yet to disburse $25 million budgetary support to the Maldives and is keeping all its options open as levers to pressure the Indian Ocean Island, better known for pristine beaches and exotic resorts.

 

Meanwhile, Maldives government decided to take control of the international airport despite a Singapore court staying the suspension of the contract given to India's GMR-led consortium.

 

Thus the controversy between India and Maldives is unlikely to settle down any time soon. While Maldives is adamant on its decision, GMR decided to explore all possible legal remedies including knocking the doors of International Court of Justice. India on its part has also displayed its displeasure on scrapping of GMR contract. While the controversy is likely to take its time to settle down, diplomatic relations between India and Maldives already showing new low. 

 

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