KhelAdhikar

Play it Even

PPP IN SPORTS

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By Rishika Mendiratta (Founder and Managing Editor at KhelAdhikar)

The sports sector in India has reached its inflexion point because of the rise of the various sporting leagues in the country. This has transformed the sporting landscape of India. The country has witnessed the blossoming of a diverse sports culture. The change has been supported by the country’s favourable demographics and the rise in the disposable income of the average Indian. There are eleven functional sporting leagues in India, of which nine were launched in the period 2013-2016. Therefore, the main challenge is to sustain the incipient transformation in the sporting environment of India. The most vital problem in promoting and broad-basing sports in India is lack of sports infrastructure and policy initiatives for achieving the desired objectives.

The diversification in the manner and ways of playing sports along with changes in technology have resulted in greater sophistication in the requirement of the sporting infrastructure. The Commonwealth Games, 2010 (CWG, 2010) and Formula One were the two mega-sporting events which India had organised recently aside from cricketing tournaments. In the recent future it will be organizing the Under- 17 FIFA World Cup and is looking for the prospects to successfully bid for hosting Under- 22 FIFA World Cup. The creation of sports infrastructure will also have various complementary benefits for the country such as the development of urban infrastructure along with booming prospects of sports tourism.

Realising the importance of the potential infrastructural development, the Ministry of Youth Affairs and Sports, (MYAS) in September 2016, has given sports infrastructure the status of an ‘industry’. The rationale behind this move is to encourage private investment in a public good that is susceptible to socio-economic externalities in a country with young population. The prospects of investment by the private sector will enable the country in becoming a sporting power in future.

The most viable form of involvement of private sector is through the means of Public Private Partnerships (PPP). Presently there is an alarming requirement for PPP in the sports because of lack of funds with the public sector and also because of their inadequacy in technical as well as management expertise. PPP model is the best form of collaboration for optimally changing the future of sports. This is because the public sector owns vast reserves of priceless land and can implement the regulatory measures because of which all approval and licenses will be easily accessible. The involvement of the government also ensures that funds can be borrowed at a lower rate of interest. Moreover NSF ( National Sports Federations) and government bodies by virtue of their status can initiate state funded sports activity in the stadia and can provide a source for steady generation of revenue and utilisation of these projects which will bring in greater ROI (Return on Investment) for these ventures. This, when combined with the liquidity, specialised expertise and management of the private sector along with their ability to absorb risks, expand, provide fringe benefits and lower labour costs present a perfect balance which if planned properly can help in building world class infrastructure for sports.

There are numerous benefits which can accrue because of the establishment of PPP models in the sports sector. The private player can enjoy leasebacks wherein it can construct the stadia and then lease over to the public agency. One of the most sought after and relevant form of Public Private Partnership in the development of sports infrastructure is the upgradation of the existing stadia by the infusion of the private funds. This is known as the RMO model, (Renovate, Modernise and Operationalise model). Besides, PPP can also be in the form of contractual agreements wherein a minimum utilisation percentage of each sports facility is earmarked and the financial advantage of the private sector is used to restrict the exorbitant fees charged from the economically weaker sections. This model also serves as a pathway through which the National Sports Federations can achieve its social objectives. Therefore the problem of lack of budgetary allocation by state and centre towards this sector which hinders the universal and barrier- free access to sports can be successfully resolved through PPP.

Internationally, there are several successful examples of PPP projects in in the sports sector which can be emulated in India. The two most prominent examples are those of the emerging Asian Giants, China and Singapore. The striking factor in the success of PPP partnership in these countries was a well chalked out approach which envisaged the reasons and aims of their collaboration. For example: the Singapore Sports Hub was a by-product of the Vision 2030 pioneered by the Sport Singapore and the Ministry of Culture, Community and Youth. The proposed plan had been to build a Sports Hub over a period of 25 years, to inculcate a sporting culture by adhering to the three pillars of Sports for Life, Sports Excellence and Sports Industry. The PPP model ensures that both the public sector and the private players together decide the feasibility and infrastructure models depending upon the cycle and maintenance costs which in turn would give guaranteed and predictable value for money. This Sports Hub, built upon design, finance, build and operate DFBO (Design Build Finance and Operate Model) is a perfect example of how a well-executed PPP project has enabled the Singaporean community to watch, play and support sports and entertainment.

Another pertinent example is of China, and the construction of its National Olympic Stadium famously known as the Bird’s Nest.  The project was modelled on the PPP partnership model. The basic idea behind it was to create a sporting infrastructure that would in addition to exemplifying  the ideals of Olympic games also bring about a transformative change in Beijing’ socio-economic growth. The success of this project has shown the impact of PPP projects in developing world quality sports infrastructure. The important lessons from this venture include, a clear formulation of policy so as to ensure a comprehensive support from the government and also laying down the scope of the project in the form of customised shareholder agreements, construction contracts and Joint Venture agreements and dispute resolution mechanisms to ensure that there no disagreements in the later stages which obstruct the implementation and execution of the project.

Taking cue from international examples, India should look towards developing sports infrastructure the PPP way. However the main concern is that Sports being a State subject, the National Sports Policy 2001, left it to the state to outline a holistic approach for the development of the sports in a comprehensive manner. Unfortunately, most of the states have not taken concrete steps to achieve the same. To enable the successful beginning and implementation of this sort of ventures there can be a scenario wherein the PPP policy of the states provides for certain contractual templates to the National Sports Federations and the government bodies so that so that the pre-conditions of a PPP arrangement are clearly explained.

On a brighter note, there has been some progressive development by some Indian states, who are leading by example in their aim to develop India as a sporting nation. The leader of the pack is the state of Gujarat whose successful program for broad-basing sports- Khel Mahakumbh has been replicated at the national level in the form of “Khelo India” initiative. Besides, the city also boasts of constructing India’s first convertible stadium through a PPP model, “the Arena Project” by Transtadia which was the venue for the recent Kabaddi World Championship held in October, 2016. This is an example of how private support can help in rebuilding disused and inoperative areas in developing world-class sports infrastructure. The Arena project was built on a defunct Abad Dairy property in Gujarat. The land was allocated on a lease for a period of 35 years in 2013, and has been modelled on DBOT (Design, Built, Operate, and Transfer) where, in addition to pre-designed profit sharing arrangement, two percent of their revenue will be given to the state authorities for the development of sports in Gujarat.

After this successful venture, Gujarat government has come up with a policy of developing a Sports Smart City in Baroda, with an aim to build a fully integrated sports city that includes stadiums, multiple recreational and leisure zones, gyms, parks and other facilities. Such PPP practices help in ensuring that private sectors are productively engaged through increased investments in catalysing the development of the sports sector in particular and the economic development of the nation in general.

Another leading example is the Hyderabad based- GVK tennis academy, which was successfully established because of a partnership with the Hyderabad Municipal Corporation. Recently, even Naya Raipur Development Authority has initiated the development of a sports facility which would have facilities like tennis, aquatic and an indoor stadium built on the lines of the  PPP model (specifically, BOT). The innovative step taken with respect to this project was of earmarking some amount of area for a residential complex that would cross-subsidize the sports facilities making it a profitable venture.

The Karnataka government has also taken certain pro-active steps recently with respect to the development of PPPs. The State government has prepared a feasibility report for the utilization of PPP in sports in the creation of Integrated Sports Development Centre. The proposed project by the Government of Karnataka is a Build-Operate-Own (BOO) model where the government will provide land and other utilities at the pre-agreed rental rate to a private investor who would invest in the development of the facilities. In this BOO model, the entire capital investment, construction, operation and risk-bearing will be borne by the private player while performance planning and monitoring will be within the work profile of the government. The revenue sharing in this model will be through a pre-decided agreement. Interestingly, the feasibility report lists out the important criteria, of diagnostic and need assessment analysis of the sports sector before coming up with a suitable PPP mode for the development of sports infrastructure.

The aforementioned instances are some examples of states where there have been attempts to inculcate the PPP model in the development of sports culture. Apart from the efforts by some states the National Sports Policy 2001, also outlined the importance of establishing Centres of Excellence through private investment and giving the corporate entities fiscal benefits equivalent to their financial contribution. In 2012, the FICCI report also stressed the importance of giving industry status to sports so that the private sector can utilise its expertise through investment in sports infrastructure, endorsement as well as sponsorships. The regularisation of the sports industry would help in broad-basing the impact of sports. The National Skill Development Report for the year 2017- 2022 has suggested that sports is a unique sector for skill development with large spillover effects on employment as well as the GDP of the country. Therefore, to fill in the deficiency of skill development in this sector there should establishment of elite institutions so as to provide proper facilities to the identified talent and provide them with a proper platform for sports training as well as vocational courses. This again is one of the major reasons for the urgent requirement of PPP initiatives in the sports sector as the private players are equipped with resources to increase the employment opportunities in this sector.

Presently in India, a ‘PPP Cell’ has been created in each state and has been staffed with an administrative officer. The problem with this initiative is that the mandate of this sector has not been clearly defined. The novel step taken by the government is the establishment of India Infrastructure Project Development Fund (IIPDF). As per the governmental scheme according to the quality of a PPP proposal from the state government and on analysing the viability of the initial feasibility studies, the IIPDF will provide state governments with funding to bear the costs of hiring transaction advisors who will assist in the development of the projects. This is a big boost for the states to come up with successful plans because if the project is successful the grant amount can then be paid back from project revenues.

Nevertheless, the major hurdle in the future of such projects is the absence of an enabling PPP legislation in the country. Since there is no guiding legislation, there are various regulatory and policy factors which have not been delineated. This brings in uncertainty in important factors such as the schemes of entry and exit, the means of enforceability and implementation of contracts, the means of arbitration and settlement of disputes. A proper legal framework consisting of a stakeholder involvement at critical stages will result in the optimal allocation of risks and responsibilities and would ensure that both the sectors are awarded value for money (VFM) outcomes which ensure the viability of projects in the long run. A legislation would also help in deciding the type of model that would be best suited for a particular project.

According to a FICCI study, about 1.3 million young people in India are likely to consider sports as a profession by 2017, therefore demand for sports infrastructure is likely to increase in the coming years. It is in the light of these developments that even the Niti Aayog Bill has spoken extensively in favour of encouraging the development of sports infrastructure through private or PPP modes. Therefore, a pro-PPP legislation would provide considerable reassurance and recourse to the public officials in encouraging partnerships with the private sector. The States could, therefore, take initiative in developing policies which could be enacted into a law in a piecemeal manner. Recently at a PPP Round Table conference held at IIT-Madras, it was discussed how political will is one of the key determining factors to the success of PPP projects. Therefore concrete steps taken by the government would certainly encourage more private investment. The Kelkar Committee recommendations in 2015 on the aspect of revitalising PPP should also be taken into consideration. The suggestions of making PPP project-specific agreements under a Model Concession Agreement along with the establishment of Infrastructure PPP Project Review Committee and Infrastructure PPP Adjudication Tribunal (IPAT) will help in ensuring that the future of sporting infrastructure projects of the government reaches the required level of excellence. The Government of India has recently revamped the Khelo India Initiative. It includes within its ambit the two policies of Urban Sports Infrastructure Scheme (USIS) and National Sports Talent Search Scheme (NSTSS). The success of this hugely depends on the manner in which the government can tap the potential involvement of the private player. Any project modelled on PPP design and involving a strong interaction of all the stakeholders could create the possibilities of successful projects where for instance, trainees could train at infrastructure provided by SAI and private companies could fund player scouting & training or vice versa.  The National Sports Policy 2001 already has an expansive aim for the development of the sports culture. Some states, for example, Manipur has a state sports policy through which it wants sport and recreation to be made a mass movement by making it a way of life. Therefore a proactive approach on behalf of the states along with a Pro- PPP central legislation, structured on the recommendation of Kelkar Committee could help India achieve its dream of “Sports For All”.

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