Games revenue target too optimistic: CAG

Games revenue target too optimistic: CAG
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First Published: Wed, Oct 28 2009. 12 31 AM IST

Lagging behind: The Commonwealth Games village in Delhi. The organising committee’s own timetable had called for sponsorship rights sales to begin last November, and raising of Rs40 crore in sponsorsh
Lagging behind: The Commonwealth Games village in Delhi. The organising committee’s own timetable had called for sponsorship rights sales to begin last November, and raising of Rs40 crore in sponsorsh
Updated: Wed, Oct 28 2009. 12 31 AM IST
New Delhi: If there is too much pessimism outside the Commonwealth Games Organising Committee (OC), there may also be too much optimism within it. Far from being profitable, as its treasurer A.K. Mattoo suggested last week, or even “revenue neutral”, the OC could fall short of its expected revenues of Rs1,780 crore by as much as Rs450 crore, according to an audit report prepared by the Comptroller and Auditor General (CAG).
The report, compiled over a three-month period earlier this year, evaluated the committee’s preparedness in seven key areas, and it reserved a large portion of its alarm for a chapter titled “Financial Management”. Noting that the OC had nearly doubled its projected revenue, from an initial figure of Rs900 crore, the CAG team concluded that the “available documentation… could not satisfy us of the soundness of the increased estimate”.
The stream of revenue that appeared to most mystify CAG was sponsorship fees, which leaped from an estimate of Rs450 crore to one of Rs960 crore. It was by working these numbers that CAG arrived at “figures of targeted revenue ranging from Rs1,330 to Rs1,366 crore”.
A significant fraction of sponsorship benefits will also arrive in kind, the report notes, and so may not offset any operating expenses; nearly one-third of the revenues from the Commonwealth Youth Games 2008 in Pune, for example, was “value-in-kind”.
“Steps for generating sponsorship and other revenue should be further expedited as the window of opportunity…is fast shrinking with the passage of time,” the report had warned in July. No sponsorship contracts had been signed at all when the report was written; four months later, only one sponsorship deal—predictably with Air India, for transportation—has been struck. “Nothing else has been officially finalized as yet,” said Vineet Dixit, the OC’s deputy director general of communications. “But things are in the pipeline.” One member of the OC structure, who did not want to be named because he is not authorized to speak to the media, confirmed that the economic slowdown had delivered an effective kick in the shins to sponsorship-raising efforts. “Even Air India—I think it’s better image-building for them than any revenue for us,” he said. “The Melbourne and Manchester Commonwealth Games were profitable because of sponsorship. I think the OC is trying its best to make ticket sales a success. We will get some sponsorship revenues, but it will all arrive at the last minute.”
Lagging behind: The Commonwealth Games village in Delhi. The organising committee’s own timetable had called for sponsorship rights sales to begin last November, and raising of Rs40 crore in sponsorship by June. Ramesh Pathania/Mint.
Ticket sales, however, are only expected to generate Rs100 crore, a small fraction of the total and just one-third of another intriguing item in the OC’s revenue break-up: a miscellaneous category, comprising lotteries and donations from corporate trusts. “We’ve just signed an agreement to hold a lottery in Mizoram, and we’re hoping that other non-lottery states will permit this in the interest of sport,” Mattoo, the OC’s treasurer, said. Sales of tickets for the Mizoram lottery will begin on 1 November; 85% of the proceeds will accrue to the OC, while 15% will go to the Mizoram government. “Perhaps we should have started the lottery a year ago. The time available is short, so we have to find these avenues of revenue.”
Mattoo and Dixit insisted that the CAG report is unreliable, and that it had worked with outdated information, even though it was researched between March and May. Mattoo said that, when the audit was being conducted, only broadcasting rights were close to being finalized; but even today, no other major revenue deals have been struck, and even the television rights have not been entirely fleshed out.
Mattoo also said that “sponsorship only begins to come in towards the final stages” of preparation for the Games. The OC’s own timetable, however, had called for sponsorship rights sales to begin last November, and for raising Rs40 crore in sponsorship revenue by June.
Neither transpired. By comparison, Manchester had secured one-third of its break-even revenue by September 2000, for the Commonwealth Games to be held in July-August 2002—and that was considered, by analysts at the time, to be a dangerously lethargic pace.
Claiming that “75-100 companies are showing interest in sponsorship,” Mattoo saw “no deterrent to reaching that figure (of Rs1,780 crore). This isn’t a mathematical model, where we can get so much in the first year, so much in the second year, and so on”. But he acknowledged: “As far as the realization (of Rs1,780 crore) is concerned, that is anybody’s guess. This is an estimate for our revenues, and hopefully we’ll come to that figure. That is what one hopes for.”
Tomorrow: So exactly how prepared is Delhi?
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First Published: Wed, Oct 28 2009. 12 31 AM IST