OC lands in yet another mess

Sun, Aug 01 10 12:17 PM

New Delhi, Aug. 1 -- Another crucial component of the 2010 Commonwealth Games - procuring sponsorships for the event - seems to be getting derailed. The Singapore-based Sports Marketing and Management (SMAM), with whom the Organising Committee (OC) had signed a contract for negotiating and procuring sponsorship and licencing contract, has failed to generate adequate sponsorships. The contract was inked in 2007. SMAM had at the time of signing the contract promised to raise sponsorship worth R 470 crore (US $100 million). Of this, it has so far managed to get R 125 crore. Adding insult to injury, the flawed contract agreement that the organising committee signed with SMAM has ensured that despite the latter failing to deliver, it will get commission from sponsorship that it did not procure on its own (like those coming directly to OC from public sector undertakings). PSUs such as Air India, Central Bank of India, NTPC and Railways have committed sponsorship worth R 250 crore. Sources say in a recent meeting, unhappy with SMAM's performance, the OC was mulling terminating its agreement but was advised against it by its legal team. "The exit clauses of the agreement are very tough. If we scrap it, we will not only end up paying money to the company but the latter has threatened to go into arbitration against us," said a source. Hemmed in from all sides, OC could only tell SMAM that it was not making enough effort and has asked it deliver. The OC sources say not only has SMAM failed to deliver but it is also using the flawed contract to get commission from sponsorship it did not procure on its own. Of the R 125 crore that SMAM has managed to raise so far, R 36. 5 crore is value in kind. For instance, Swiss company Omega will be providing all TSR (Testing Scoring Result) gadgets worth R 19 crore, while Agility, an international logistic firm is providing logistical support to the game. Amity International is providing training to volunteers at a total cost of R 5 crore. "There were loopholes in the contract. The OC should have drafted the agreement more carefully to safeguard its interest. This was not done," said an official, requesting anonymity.

The contract had clauses for commission that sources say was very high. Also, according to the contract, the OC had agreed that the total income tax liability of SMAM under the income tax Act will be limited to 10.54 per cent.

Source: Published>