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India Criticizes Maldives Decision to Scrap GMR Airport Contract

Nov. 29 (Bloomberg) -- India criticized the Maldives after the island-nation scrapped a contract to run its largest airport without consulting the operator, a group led by Bangalore-based GMR Infrastructure Ltd.

The decision “sends a very negative signal to foreign investors” and India is “prepared to take all necessary measures to ensure the safety and security of its interests,” the Ministry of External Affairs said in a statement Nov. 27.

The contract was awarded to GMR and Malaysia Airports Holdings Bhd. in 2010 by then-Prime Minister Mohamed Nasheed, who was ousted in February. GMR, controlled by billionaire G.M. Rao, along with its partner had planned to spend about $510 million in upgrades.

The contract never received the necessary approval from parliament and was signed under “dubious circumstances,” Masood Imad, a spokesman for President Mohamed Waheed, said in a phone call from Male, the Maldives capital, yesterday. Waheed took power after Nasheed resigned.

The cancellation was “unilateral and completely irrational,” GMR said in a statement on Nov. 27, adding that it will challenge the decision.

Malaysia Airports, which owns 23 percent of GMR Male International Airport Pvt. Ltd., is studying its legal position on the notice from the Maldives government, the company said in a statement yesterday.

The Malaysian company said it has invested a total of $6.9 million in the equity of the joint venture and has accounted for about $13.2 million of associate profits.

The Maldives, a group of 1,190 coral islands with a population of about 400,000 people, is located southwest of India. About 198 of the islands, spread across 900 kilometers (559 miles), are inhabited.

To contact the reporter on this story: Andrew MacAskill in New Delhi at amacaskill@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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