Government lost several opportunities due to GMR agreement: Audit Report

The special Audit Report on the award of Ibrahim Nasir International Airport (INIA) to Indian company GMR by the former government has revealed that the government lost several opportunities, on managing the threats and expanding the economic benefits of the agreement, due to failure by the former government to study the losses and benefits to the country from the project.

The report states that the changes made to the fees by GMR after the airport was handed over to the company resulted in a reduction in the estimated revenue to the government.

In the report, the Auditor General raised several concerns in relation to the agreement. He noted that the bid evaluation process was not complete, and that the opportunities for making such an agreement were not evaluated from an economic perspective before the agreement was drawn up.

He highlighted that the guarantee for obtaining loans from Axis Bank was not given according to the Public Finance Act, and that GMR’s reasons for making changes to the fees is unclear. He further said that Maldives Airports Company Limited (MACL) was not allowed to participate to the degree that it should have been, in the planning and implementation of the agreement.

The Audit Report states that upon taking over the airport, GMR paid $78 million to the government, and $3.7 million to IFC as part of the concession agreement. GMR had also agreed to spend $369 million as concession fees and for the development of the airport. However, changes to the annual concession fees as agreed by GMR and the former government resulted in a reduction in the revenue to the government. Following the Civil Court ruling in 2011 which stated that GMR cannot charge ADC, the former government agreed to deduct ADC from the concession fee payable to the government, which resulted in a loss of $23 million to the government by the end of September 2012.

It was also noted in the Audit Report that GMR filed a case for arbitration following the termination of the agreement by the government last year, and that the Axis Bank is currently in discussion with the government to claim $160 million issued to GMR, for which the government acted as the guarantor.

The report states that by the end of 2012, GMR had completed one-third of the airport development work planned till the end of 2014, and that GMR suspended its work following a Civil Court ruling which stated that GMR had not obtained the necessary permits.

On 27 November 2012, the government terminated its agreement with GMR on awarding the operation of INIA for 25 years; and on 7 December 2012, the government handed over the operation of INIA to MACL.