Malé Maelstrom

Nov 29 2012, 03:52 IST
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SummaryIndia does well to stand up for GMR, but MNCs have their own tales of woe in India.

The government has done to stand up for local GMR Group in its stand off with the Maldives government which has recommended terminating the group’s contract to upgrade the Male airport—Q2 revenues from Male account for a third of GMR’s airport revenues and about a fifth of ebitda. The facts of the case are simple enough. When GMR, in a 77:23 partnership with Malaysia Airport Holdings, took over the airport concession, it was entitled to collect $25 of an airport development fee from each passenger. Three years later, however, the Maldives court struck this down; GMR then asked the government to adjust the loss against the fees it had to pay, the government agreed. When the new government came in, it changed its mind and GMR went into arbitration—the process was still on when the contract got terminated.

The problem, however, is that there are some amazing similarities with what’s happening in India. Though the 2G licences were cancelled by the Supreme Court, several foreign firms threatened to take India to arbitration court. In the case of 3G services, local and foreign firms have gone to court against the government’s attempts to shut down intra-circle roaming; termination notices, in this case, were stayed by the courts. In the case of Qualcomm, the government arbitrarily snipped off 18 months from its licence, only to have the courts restore this later. Someone needs to ponder over this.

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