IPL googlies may usher in strict norms

Published>Wed, Oct 13 10 04:46 PM

Strict norms regarding foreign investment inflow in sports bodies, disclosure of shareholding patterns of promoters and capping the overall FDI in sports are some of the measures being considered by the government following the alleged irregularities committed by Rajasthan Royals and Kings XI Punjab in the ongoing IPL fiasco.

The department of industrial policy and promotion (DIPP) will soon shut doors on re-routing of foreign funds in sporting bodies through firms incorporated in tax havens, including Mauritius and Bahamas. Also, there will not be any step-down inflow of FDI into sports bodies and franchises via joint-venture firms.

The DIPP also plans to bring FDI in sports under the approval route and any sports body seeking foreign investments will have to go through the foreign investment promotion board (FIPB). Also, all firms engaged in managing sports teams like the current IPL franchise owners will have to mandatorily disclose their shareholding patterns every quarter. Any foreigner employed or contracted by such sports bodies in the country will require government clearance.

These rules will form part of the new policy on FDI in sports set to be subsumed in the revised Press Note slated for March 2011, sources in DIPP told FE.

In a parallel move, insiders say the sports ministry is planning to recommend capping of FDI in sports bodies at 49% and will give its inputs to the commerce ministry soon. Currently, 100% foreign investment is allowed in sports manufacturing under the automatic route, in which the foreign investor or its Indian partner has to inform RBI within 30 days of the transaction.

"The issue regarding foreign investments in sports franchises is under active examination. So far, no final decision has been arrived at," an official said.

If implemented, the new norms would force all current IPL teams to file their shareholding patterns, tax return details, earnings and balance sheets. Also, Shahrukh Khan's IPL team Kolkata Knight Riders may have to seek FIPB clearance as a promoter has invested via a company incorporated in Mauritius.

According to sources, DIPP was asked to look into the matter in April-May this year after Jaipur IPL Company Private Ltd (JIPLC) sought FIPB permission regarding induction of foreign equity into the company. However, the application was rejected twice on grounds of insufficient information on source of funding (October 2009) and irregularity in transfer of shares in lieu of money paid to the BCCI (May 2010). Additionally, there were instances of frequent changes in shareholding pattern of the promoting firms of Rajasthan Royals in the past three years. Similar charges of violations in shareholding of KPH Dreams have been leveled by BCCI in addition to the investigations by the enforcement directorate on foreign exchange violations.

Source: Web Search