Sports sickened in India: IPL, FDI and much more

Updated: Feb 22 2014, 02:28am hrs
By any and all accounts, its been a difficult 12 months for sports in India. With an extremely sluggish economy partnering a controversy-ridden year in sports administration and overall governance, 2013 was arduous and 2014 has been more of the same. Allegations of unethical practices have hurt the sports sector, and above all else, it continues to remain unregulated at a time when accountability is clearly the buzz-word across industries.

Indias most famous sports property- the Indian Premier League (IPL), courted controversy in its 6th season, and laid bare the ambiguity and chaotic administrative systems that govern professional sports in India. The indignant response across all corners to the alleged match-fixing and illegal gambling activities during IPL 6 led to calls for a systematic overhaul. Even today, the proceedings against team owners and players are continuing, although its uncertain what the outcome will be. What is certain however is that Sports in India remain unregulated and seemingly operate independent for the most part of any legal jurisdiction.

The legislation that have been proposed remain at the draft bill stage. The draft National Sports Development Bill, 2013, and the draft Prevention of Sporting Fraud Bill, 2013, are now dormant in that they are unlikely to be introduced before Parliament until the national elections are completed, and the new government commences its duties. Unless the current government returns to form the cabinet, there is a strong likelihood that the issue of sports legislation in India will be re-opened and the two bills will likely be intensively revised before they are introduced in Parliament by the Sports ministry. So, the issue of transparency, governance and accountability will remain catchwords in sports, but there doesnt seem to be any likelihood that they will be addressed at least until June. Sports legislation in fact have the most uncertain future, given that sports is a state subject under the Constitution of India. So, to introduce sports-related legislation due to prevailing national interest will require the full support of the central government at the time.

In an election year that is this uncertain, with no clear favourites emerging yet, there is greater risk for investing in, or sponsoring any sports-related activity in India, given that the risk quotient is prohibitively high. Its understandable that sports in India need a significant stimulus in the form of foreign direct investment (FDI), but with the current political and economic situation being what it is, there is unlikely to be any major activity in the sports sector for the next few months at least. Ideally, the dollar strengthening would have meant an increased level of investment in a good-value sector such as Sports, but the absence of any regulation, and a full menu of controversy meant that FDI in sport remains minimal and tentative.

In fact, the upcoming elections are already impacting the sponsorship and possible investment in the IPL. Now that IPL 7s relocation to South Africa is being contemplated, each franchise is looking at serious losses in their profitability through the curtailment of gate revenues, and the aversion of sponsors to support an event that isnt conducted in India. This will likely drive away any interested investors looking for a stake in one of the teams, given that the IPL teams are facing higher costs and less revenue as per the agreed commercials between teams and the central IPL. All said and done, the move to South Africa could mean that even Season 7 would be a loss-making one for a league that is struggling to consolidate its first mover advantage and clear monopoly over sports entertainment in India, at least until 2015. Cricket is also suffering due to the dip in performance of the Indian cricket team. Fresh off a series of underwhelming performances, and in the wake of the high profile retirements of Sachin Tendulkar and Rahul Dravid, there is a dearth of superstar icons in cricket today, with the sole exception of Virat Kohli. M.S. Dhoni has come under fire, perhaps unfairly, for the performance of the Indian team, and his star seems to have somewhat waned due to his association with India Cements and the CSK team- the focal point of the illegal gambling enquiry.

Momentum has also been lost in private sector initiatives that have huge potential, with the Indian Formula One race at BIC being skipped in 2014. A difficult and non-receptive environment has not been conducive to profitability or ease of conducting the race, and while it has been announced that the circuit will return in 2015, a sports property such as F-1 needs regularity and consistency to convert it from a novelty to a dependable sports event, and this years omission is ill-timed and unfortunate. Indian sports leagues other than IPL will find it difficult to convert novel ideas into sustainable and profitable business models. Much depends on domestic stars excelling at the international stage and the capacity to attract increasing viewership and revenues. So, the ability to build during the sophomore seasons of the leagues will determine the long term viability. It hasnt yet been proven that sponsors or fans have an appetite for professional leagues in sports that are still catching up in terms of exposure. Perhaps football and basketball have an advantage as already popular viewership-based sports, but its possible that promoters of both sports will tread carefully until theres evidence of the economy recovering, better governance parameters, and a clearer political picture.

Until there is clarity as to the political landscape as well as the policies that the new government will mobilize, there is unlikely to be much traction in sports. And, the sluggish economy adds to the risk aversion that Indian corporate or multi-national corporations have, given the ongoing allegations against allied sports activities. All in all, its unlikely that there will be a sea change in how administration, unethical activities, or private sector involvement are tackled until the second half of 2014. After that, lets hope that there is rapid progress and consolidation in this growth sector.

Desh Gaurav Sekhri

The author heads the Sports initiative at J. Sagar Associates. Views are personal.