Don't take any coercive measure: India to Maldives on GMR row

New Delhi: India has told Maldives that no arbitrary and coercive measure should be taken pending the outcome of the legal proceedings and that the resort to any such action would inevitably have adverse consequences for bilateral relations. On Monday, Maldives said will wrest control of its international airport from GMR Infrastructure, cancelling its biggest foreign investment project, despite an order from a Singapore court suspending the project's termination.

Maldives Foreign Minister Abdul Samad Abdullah today spoke to External Affairs Minister Salman Khurshid amid speculation that India could freeze proposed aid. Mr Abdullah is learnt to have told Mr Khurshid that Maldives President Mohamed Waheed will write to Prime Minister Manmohan Singh to explain the decision to cancel the contract. Mr Khurshid is said to have reminded the Foreign Minister of Maldives of his earlier discussions noting that the legal processes involved in the GMR case should be permitted to take their own course and that the Maldivian government should not allow the situation to go out of hand.

The standoff over the $511 million project threatens to cloud foreign investor sentiment on Maldives, which is seeking overseas cash for many of its tourism projects. The country terminated an agreement with GMR last week, rattling its relations with India. "We will continue the airport takeover and Inshallah next Saturday onwards MACL (state-controlled Maldives Airport Company Ltd) will be running the airport," Mohamed Nazim, defence minister and acting transport minister, told a press conference in the capital Male on Monday.

GMR has won a stay order from a Singapore court, which the company says has jurisdiction over disputes in the agreement, on cancellation of the airport contract. GMR said it would continue to operate the airport as normal. "We have obtained an injunctive stay on the operations of that (contract termination) letter," said Arun Bhagat, spokesman for the GMR group.

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The project cancellation exacerbated already strained relations with neighbouring India, which last week warned it would "take all necessary measures to ensure the safety and security of its interests and its nationals in the Maldives".

The government of the Maldives, a tropical island chain south-west of India famous for its luxury beach resorts and white sands, cancelled the 2010 agreement saying that it was not valid. The cancellation follows President Mohamed Waheed's failure to renegotiate terms, sources close to president's office told Reuters, and comes after a year of political turmoil that saw the ousting of its former president and months of unrest.

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The contract to upgrade and operate the airport and build a new terminal came after a global tender overseen by the World Bank and signed under former president Mohamed Nasheed's administration. The project was implemented through a joint venture company comprising GMR Infrastructure Limited and Malaysia Airports Holding Berhad. However, Nasheed's rivals filed legal action saying the contract was invalid as it contained a $25 airport development charge per outgoing passenger which was not authorised by parliament."Waheed cannot ignore international law at his whim and fancy. Rules are rules and they must be respected," Nasheed told Reuters in an e-mail on Monday.

(With inputs from Reuters)