India: Legal Opinion: Private Public Partnerships (PPPs) Can Save Indian Sports

Originally published on Legallyindia.com, 5th January 2011

Historical context and present scenario

On 14 October 2010 the Commonwealth Games Delhi 2010 (CWG 2010) concluded satisfactorily leaving many of us with mixed feelings of pride for what our sport-stars achieved and trepidation about how we will manage and build upon this in the days to come.

The facilities and infrastructure passed muster notwithstanding the media's onslaught, an unfavorable response from the sportspersons and a preceding heavy spell of rains. Now what? While investigations into the unseemly bungling in procurement, project management and governance have commenced and the defaulters are being brought to the book, there is a crying need for us as a nation to capitalise on the assets: our champions and the infrastructure.

'Sports' is a state subject under the Constitution of India. The draft National Sports Policy 2007 leaves the responsibility of broad-basing sports primarily with the states, and the Government of India's (GoI) role is supplementary. Unfortunately, the GoI and most of our states have not worked with a holistic approach for a system geared to promote sports in a comprehensive manner.

Yet there is a shining example of the state of Haryana with its contribution in India's tally good enough to bring it to the fifth position amongst the Commonwealth on its own. Simultaneously, there have been initiatives to groom our sports heroes like the archery academy in the private sector and also some by the public sector. Contrast that with where the lands of Milkha Singh, Dhyan Chand and PT Usha have sunk to! The sports administration and their treatment of the players and the facilities have left much to be desired. In this context, controversial murmurs are emerging from some knowledgeable quarters about privatising sports administration.

The objective of evolving into a healthy and sporting nation requires concerted effort to secure free access to good facilities for our youth with suitable incentives including career path for them while they pursue excellence at national and international levels. A unified national structure must work in a mission-mode – with Central and State Governments functioning in close co-ordination with the Sports Authority of India (SAI), the Indian Olympic Association (IOA) and the National Sports Federations (NSFs). The National Sports Policy of 2001 and the draft National Sports Policy of 2007 are the guiding instruments which also advocate the concept of a harmonized approach.

There is a need for sustained supply of funds/liquidity to develop and maintain facilities and stadia as also skills in technical and managerial aspects for the development of sports in India.

The future of sports in India

A plausible model for sports excellence in our context is a partnership between the public and private sectors, leveraging each others' strengths. We cannot afford repeats of the IPL (Indian Premier League) mess, the cyclists' woes or the problems faced in hockey administration.

Instead we need to leverage the success stories of the DMRC (Delhi Metro Rail Corporation), JUSCO (Jamshedpur Utilities & Services Limited) and Patalganga.

Fundamental to successful design, procurement and implementation of any infrastructure project in a PPP (Public Private Partnership) format is the ability of the partners to function with the focus on a long term view of shared objectives – balancing the "value for money" and "welfare objectives" of public service with viability, bankability and earning a reasonable return on investments of private enterprise, commensurate to the risks involved.

It is essential to identify the key "viability" gaps for each stadium and evaluate the plausible model of PPP in sports infrastructure related PPPs. Globally, sports-specific PPPs have an economic rationale and for the most part should help leverage India's ability to maintain, maximize and optimize its brand new facilities and stadiums while remaining lucrative from a social benefit and private sector 'economic rent' standpoint.

Massive outlays of public funds were invested to create world class facilities in the stadia for CWG Delhi 2010. The management, operation and exploitation of revenue streams from events and collateral activities related to the stadia must be the focus of its future use thereof along with devising methods for recovery of huge capital costs incurred. This could be undertaken for making the facilities available for welfare objectives by ensuring proper maintenance and suitable access rights for free/affordable "public" sport events and training for youth.

These twin objectives perhaps would be best met through PPPs to ensure that the quality, maintenance, longevity and related benefits of sports infrastructure are preserved and enhanced. This in essence will likely be the first of many such initiatives in the Indian sports domain for synergising the aspects of partnership, helping develop technical and human capital related expertise creating value and tangible revenue streams.

PPPs in the Indian sports domain will enhance and foster efficiency while harmonising polarizing principles of profitability with social benefit. The Government of India in the ongoing eleventh five year plan has increased the sports industry's funding to Rs 4,600 crore with a stated goal of targeting PPP's in the sector.

International PPP models

The Singapore Sports Hub is one of the high profile sports infrastructure PPP project,based on the design, build, finance and operate (DBFO) model for twenty-five years where the the Singapore Sports Council is following an ongoing annual unitary payment scheme for the private partner. As the Sports Hub has multiple revenue streams from sporting and non-sporting events, commercial revenues etc, a revenue sharing mechanism has been put in place to incentivise the PPP contractor to increase usage of the hub. Some of the other international models or PPP in sports worth considering are:

  1. Leasebacks - private developer constructs the stadia and leases back (entirely or partially) the right to use the stadia to the public agency on pre-negotiated terms;
  2. Public stadia leasing - private entity leases the exclusive or partial rights to the stadia from the public agency for a fixed or variable fee;
  3. Public sector takeovers of private sports businesses that could otherwise become untenable for the community at large, preserving the facility/opportunity;
  4. Private sector pump-priming - privately owned business could use some of its assets to attract major public investment in a sports stadium being mutually beneficial to both;
  5. Private sectortakeovers of an unviable or untenable facility, whose costs exceed its benefits to the public sector agency;
  6. Upgradation of an existing public sector facility or stadia via private sector investment infusion. These could involve investments from multiple financial investors; and
  7. "Renovate, Modernize and Operate" model - private entity repairs, maintains, and operates the facility.

Each of these PPP models do offer lessons that need to be studied and customised into a set of India-specific models with suitable emphasis on the role of state to secure regulation, transparency, access and efficiency.

Conclusion

All crises present opportunities for change and evolution and who would know it better than the ruling party led by the Indian Prime Minister Dr Manmohan Singh who brought about fundamental economic changes in 1991 as the country's finance minister. Having pondered over PPPs and their role in the promotion and development of sports and sports infrastructure in India for a decade, it is time that Government of India promptly evolves consensus and implements them as a viable proposition for progress of sports in India.

The CWG 2010 is expected to be the launch-pad for PPPs to play a vital role in the strengthening of sports infrastructure ventures and processes, enabling India to become a sports powerhouse globally. Both the public sector and the private sector will mutually benefit from these partnerships and the synergies in PPPs in sports are likely to be significant. Even though the domain is nascent, unorganised and uncertain, it is simply teeming with a lot of future potential.

A word of caution is important since PPP by itself is not the magic wand to cure all that ails the Indian sports governance. An absence of checks and balances sets at play perverse incentives on both sides - whether public or private - which erodes the efficacy of the endeavour. There is a critical need of mapping the process from the project design to procurement to award through asset maintenance and use over the concession life to build suitable checks and balances to secure the twin objectives of viability and welfare. Diligence and feasibility are the rules of this game.

Co-authored by Jyoti Sagar Associate (JSA) partners Amit Kapur and Vishnu Sudarsan, and of counsel Desh Gaurav Sekhri. The article has been adapted from JSA's Position Paper on Public Private Partnerships for Infrastructure Development in Sports of July 2010.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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