India warned its neighbour the Maldives on Monday that it might freeze $25-million annual aid to the country amid anger over the cancellation of an airport contract for an Indian firm.
Last week, the new Maldives government gave five days to Indian infrastructure company GMR to leave after prematurely ending a 25-year management lease signed for the archipelago's main international airport.
The decision angered New Delhi and raised concerns about the investor climate at a time when the Maldives is seeking foreign financing for tourism projects after a year of political turmoil.
"We are not happy with the way Maldives cancelled the GMR airport deal. This has surely left an impact on our bilateral ties," a foreign ministry official told AFP, asking for anonymity.
A second official in the ministry said that next year's financial aid of $25 million would be provided only "after every aspect of the airline deal is reviewed.
"A decision whether the money should be given or not will be taken soon," he said, also on condition of anonymity.
Bangalore-based GMR Infrastructure had signed the deal to manage the airport in 2010 under former president Mohamed Nasheed, the country's first democratically elected leader who was ousted after violent protests in February this year.
Nasheed's deputy, Mohamed Waheed, assumed the presidency in what the former government initially described as a "coup" but which has since been judged a legal transfer of power.
Waheed's government, which has aligned more closely with a hardline Islamist party, objected to the privatisation of the airport carried out by Nasheed and said the deal was corrupt.
Earlier this month, senior Indian officials welcomed an opposition Maldivian politician who claimed he was beaten up by police in what was also viewed by some as a sign that New Delhi was concerned about political violence in the country.