Are you feeling lucky today?

Font Size

Print

Feedback

Email

Discuss

When Harshavardhan Nawathe became the first crorepati on Kaun Banega Crorepati (KBC) in 2000, he became an instant hit with the Indian masses.

But a few weeks ago when Uppin Kumar, a 60-something hardware merchant from Sangli won Rs 5.68 crore on Playwin’s Super Lotto Jackpot, there was no accompanying media frenzy. Not even a line’s mention, even though Uppin happens to be the 70th such winner and anybody who has ever played Lotto would tell you that its as much a no-brainer as the questions posed on KBC.

Why this bias against lotteries, but not against other games of chance or multimedia products at video parlours that a five-year-old child gets so easily addicted to? Why lotteries remain the most underadvertised gaming product in India?

The answer is simple. Lotteries are a regulated business in India, but unlike other regulated businesses (liquor and tobacco, for instance) the state doesn’t earn as much from lotteries as from liquor and tobacco. The price payout ratio for lotteries is over 90% (on some schemes) so it’s the consumer (and not the state) that gains the most from lottery sales.

“That’s the reason you see surrogate advertising for liquor or tobacco but not for lottery products,” explains Amar Sinha, the CEO of Subhash Chandra (of Zee Entertainment) promoted Pan India Network Infravest, that launched the first online lottery products by the name of Playwin in 2001. Playwin claims 26% of market share in online products, which are nothing but paperless forms of traditional lotteries.

“Put together (paper and paperless), the organised business in lotteries would be around Rs 15,000 crore on the available market size (in 11 states). But it has potential to grow to over Rs 50,000 crore per annum,” states Kamlesh Vijay, CEO, Sugal and Damani Group that claims 35-45% share of the paper lottery business. Club to this the unorganised market—which is the illegal betting market of satta and matka would be Rs 15-20,000 according to Vijay, and it would appear that the stakes are indeed high for lottery players in India. Vijay, however, says the market has been on a steady decline over the past 10 years—from Rs 50,000 in 1998 to Rs 15,000 currently.

The reason for this is not difficult to guess. Officially, the price to pay-off in India is one of the highest in the world, that is, 70% to 90%, although this varies from scheme and state to state. Of the 11 lottery promoting states, each earns 1-6% on the sales (1% as direct commission and the rest as administrative costs) while the balance, 10%-30% is split between the lottery distributor, sub-distributors and retailers.

“In the US, which is one of the biggest lottery promoting markets in the world, the split comes to 40-50% to the winner; 15-20% for the middlemen (operating costs) and the balance to the beneficiaries/states,” explains Dr Usman Fayaz, president of All India Federation of Lotteries and Allied Industries (AIFLTAI), a national-level representative body of lottery distributors, stockists, agents etc.

“Since, profits are really small in India (5%-6%) when compared to the US (30-45%), the industry is highly fragmented, and non transparent. Regulated better, it could accrue significant sums not just to the players, distributors and retailers, but also to some cash-strapped, geographically disadvantaged states like Megalaya and Mizoram,” he adds.

A good example of this is a new sports lottery that the State Lotteries Directorate in Kerela to fund the development of a new sports infrastructure. “A less regulated market would see better products, more variety and better profile of players,” says Playwin’s Amar Sinha. Pre-sently, since the cost of entry is so low (some lottery tickets are priced as low as Rs to 5 in India), players lar-gely come from a particular category (SEC C, D) who, because of the possibility of high payout, become addicted to the games.

Under the Lotteries (Regulation) Act, 1998, lotteries are played in just 11 states (Aruna-chal Pradesh, Goa, Kerala, Maharashtra, Manipur, Meghalaya, Mizoram, Nagaland, Punjab, Sikkim and West Bengal). “It represents one of the major economic activities, providing employment to over 2 million people,” says Fayaz.

“Lately the online format is becoming very popular in India and paper lotteries are beginning to lose some of their shine, mainly because the online format is more transparent and easy to operate. The ease is for everybody: the player, the lottery operator and the government,” explains Kamlesh Vijay of Sugal and Damani.

Further, while all paper lotteries can be transferred to an online format, the vice versa is not true. For instance, shifting Lotto 6/49 or Bingo into paper format could be a cumbersome exercise although these are gradually becoming very popular.

“Online lotteries have done away with the usual distribution and collection hassles. The result declaration is more transparent and it has made lottery agents more accountable. Tickets can now be bought from a host of vendors, ranging from a local shop to retail showrooms,” says Amar Sinha of Playwin Lotteries. No wonder in just five years (2002-2007) the number of online terminals has increased from 3,000 (in 2002) to 1,00,000 (in 2007), according to Dr Fayaz.

Nearly all online terminals have now introduced smart cards. With this credit card, a player receives a 12-digit account number and a four-digit password with which he/she can play Lotto, Thunderball or Bingo even over the phone or Internet. The cards (Done Card, Itz & I Cash Card) are available across retail channels. “These are the largest transacted e-commerce suits in the country today,” claims Amar Sinha.

Plans are afoot in some states to make lottery tickets more attractive as collector’s items. The reverse side could also carry public service ads.

How they stack up

The fact that there is very little official data to come by proves this market is highly fragmented. The last official data pertains to a Reserve Bank of India report titled 'State Finances—A study of Budget 2002-03’—which estimated the size of the market at Rs 10,741 crore in 2002-2003.

The combined profit of the 11 states were reported to be 6.65% in 2001-2002. The highest profit, incidentally was posted by Meghalaya (93.96%), followed by Mizoram (93.5%) and the lowest by Goa (1.58%) and Haryana (0.19%). The extreme variance suggested two things: either, states like Meghalaya and Mizoram were fleecing their lottery players or that other states such as Haryana and Goa were running their business inefficiently. The four states that were estimated to have the biggest share in the market in 2001-2002 were:

* Punjab (USD 42 million).

* Maharashtra (USD 25 million).

* West Bengal (Online USD 1.7 million per day, paper USD 1.2 million per day)