No Proof Required

Follow the Money

By

Surjit S Bhalla

(Business Standard, May 8, 2010)

Blurb: Why is a seemingly trivial issue of terms of employment of sports federations such a hot political potato? The trail of money may yield some clues.

The recent announcement by the Sports Minister Mr. M.S.Gill, on the tenure of sports administrators, has generated a controversy. The facts do not justify the reaction. The reality is as  follows: the terms of sports administrators has been reduced to a maximum of 12 years. Since sports organizations are not part of the government – indeed, we all want the government to stay out of other people’s business – then what right does the government have in stipulating how many terms an elected sports official can serve? She should be able to serve as long as she wants, and even bequeath it to her daughter if need be. If politicians can do that, why not mere administrators? What arrogance on the part of the government to control life-time tenures.

That would be a hasty judgment – and incorrect. For reasons, let us follow the trail of the money. First question: why does everybody assume that with sports administrators some hera-pheri is involved. I mean, how much corruption can there be in a cycling federation of India? In France, perhaps; in India, not possible.  If no corruption, then it most likely the case that the sports administrator is there, serving his term for a pittance of a salary. And why? Because he really really loves the sport.

This would be plausible if ex-sportsmen headed sport organizations; obviously, after they retire. But such a person does not exist. Instead, sports organizations are headed primarily by politicians, and in some cases, by bureaucrats. Why? For ex-bureaucrats it does make some sense, because after a lifetime of employment they are out of a job; but a politician, especially one serving the people and otherwise very busy doing so, why this passion with heading up a mere sports organization?

Maybe it has something to do with the tax status of sports organizations (hereafter, SOs). These SOs are granted tax exemption by the government of India, and indeed, in most parts of the world, this is the case. This tax exemption is granted because sports is considered a “public good”. The tax exemption does not mean that anybody working in these SOs is not taxed; all wage and salary employees are taxed on their income, as they should be. But if income received by an organization (from government donations, advertising revenue,  tournament sponsorships,  etc. – just think about the revenue that the BCCI makes from such activity and you will have a good idea) exceeds its wage expenses, coaching expenses, scholarships to athletes, upkeep of the buildings, renovation of the stadiums etc., then this income is not taxed. All the SO has to show is that such excess income is earmarked for expenses related to the sport and the income can be held in a bank account, underneath the mattress or wherever, until the expense takes place. All the organization has to do (remember its head is a bureaucrat or a politician) is to convince the tax authorities that the SO honestly intends to spend the money on the sport at some future date.

This background can help explain several “surprises” in the way sports organizations are administered in India. Every rupee spent on the athlete’s well being is that much less for the organization; every rupee spent on hiring an expensive coach is that much less; every rupee spent on renovating a stadium is less excess money for future deployment. It also helps to explain why there are no sportsmen heading such bodies – they are at the end of a long queue of people who desperately want the extra “job”.

In this context, it is a bit “rich” for evergreen sports administrators to cite the case of the International Olympic Committee’s ex-chairman Samaranch, as a father figure model for the children to follow. He did stay on the job forever, but he also contributed to the “Olympic” movement. He made the Olympics profitable ; very few of our SOs can claim a profitability for their domain. The internet is replete with allegations of corruption in the hallowed (hollow?) halls of Samaranch’s IOC. And a rule was passed in the late 1990s prohibiting a Samaranch like repeat – no president of the IOC can serve for more than 8 years.

Thus, there is virtually no case for the Congress party or the Prime Minister to not implement Mr. Gill’s recommendations with immediate effect. The ruse of the Commonwealth games not being held in Delhi because the Commonwealth games organizers will be upset is both hugely funny, and even more insulting. The example cited is that of Kuwait, a country of 2.7 million people. Think

about it – would China allow such grotesque interference in the appointment of its officials? The Commonwealth games allegedly will not be held in Delhi because the Commonwealth committee feels that its nobility and trueness and independence in appointing administrators is being questioned? And that after the Indian allowance, due to some excessive liberalness on Mr. Gill’s part, is 12 years of ownership rather than eight? If the Commonwealth committee feels so upset, why doesn’t the Indian government tell them to go fly a kite in their kite organization. If the government does not do so, then a legitimate question will be asked: why is the emerging power so intimidated by a mere sports organization? What will it do when it has to take a stand on some real issues of international power and diplomacy? Will the real paper tiger please stand up – India or the Commonwealth Federation, or whatever it is called.

The author is Chairman of Oxus Investments, an emerging market advisory and fund management firm. Please  visit www.oxusinvestments.com  for an archive of articles etc; comments welcome at surjit.bhalla@oxusinvestments.com

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