Introduction
In the last few decades, Indian sports have evolved into one of the mega sources of entertainment and revenue generation. The rules governing sports might not have experienced any significant changes in these last few decades but there has definitely been a full transformation of various major aspects of sports. Sports are no more a mere activity played only on the field but also include a major share of activities off the field too. This evolution is mainly attributed to the investments made by big firms in a move to promote sports and make it available to the common mass. The success can be seen as the revenue generated in the form of multiple times the return on investment. A greater part of this success belongs to the sport of cricket, beyond which India has never really been known as a country producing sportspersons or teams of international repute. The best Indian performance at the Olympics was in 2012 with six podium appearances, comprising of two silver medals, four bronze medals, and not a single gold medal. It is not anything but an irony that despite having a population of over a billion, India has managed to win only 28 medals in 25 Summer Olympics participation. This performance of Indian Sports has been constantly criticized on the International stage.
Multiple reasons have been attributed to this deplorable performance of Indian sports at the International level, for instance, socio-political cultural issues, unhealthy competition, and unwanted meddle by various unwanted entities in the sports industry, what now appears to be a vicious cycle. India’s demographic and socio-political structure has also resulted in extreme inequality as these factors result in a scenario where Indian citizens do not get equal opportunity to participate in sports and make a career as a professional sportsperson. Moreover, supposed nepotism, corruption scandal, poor leadership, and mismanagement have an adverse effect on India’s sports governance. Poor governance leads to lofty policies and misleading priorities, thereby leading to inefficient allocation of resources.
The Ministry of Youth Affairs and Sports came up with the Khelo India Program in 2018 with the purpose “revive the sports culture in India at the grass-root level by building a strong framework for all sports played in our country and establish India as a great sporting nation”. Prior to this, in an attempt to tackle these problems, the Federation of Indian Chambers of Commerce & Industry (FICCI) made a proposal in 2012 to the central government, to include sport as an industry which would in turn, help in developing the sports infrastructure as a whole. However this proposal was shelved as Sports being a subject of the State List required the States Government to deal with matters of sports.
However, this initiative was not done away with completely, as in 2020, the state of Mizoram declared Sports as an Industry in order to make the sports sector available for availing of subsidy, loan and assistance from private and government sources. This status of ‘industrial’ to the sports sector along with the Khelo India program would help promoting the sports sector in generating revenue, thereby helping in a holistic development of the complete sports infrastructure.
The Meaning of Industry Status
Indian law has not defined the expression of “Industry Status”, however the “Industry” has been defined in Section 2(j) of the Industrial Act of 1947 as “industry” means any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen. An “industry” status requires state and federal agencies to comprehend and consider a sector in its own light, with special schemes and subsidies commensurate with its distinct demands and requirements, which are presently not seen to a significant extent for sport. Some legal and procedural benefits that are available to sectors recognized as an industry include capital and interest subsidies, fast track clearance processes for the initial licenses, exemptions or relaxations from stamp duty, electricity tariffs and other duties, etc. The Bangalore Water Supply Case defined the term Industry in a much elaborate manner, where it was held that any activity will comprise an industry if it passes the ‘triple test’ which includes:
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The activity carried out in an organized and systematic manner;
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All the operations are carried out with the cooperation of Employers and Employees;
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All the operations carried out are for the production and then distribution of goods, irrespective of investment of capital or not.
In the sports context, a sports industry would mean a systematic and organized set of acts involving individuals, companies and other organization engaged in the development, facilitation, promotion and organization of any sports related activity. North American Association of Sports Economist[i], International Association of Sports Economists has defined the sports industry as having three primary components:
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Activities involving participation in sport
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Activities involving attendance at spectator sporting events
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Activities involving following spectator sporting events through some media.
1. Financial Development
Sports Industry would benefit a lot from attaining the status of an industry as this would be the first step in giving the sports industry an independent identity. This would in-turn help in more effective and efficient revenue generation, which would encourage investments from private players, thereby leading to a holistic development. Big Corporations like Jindal Group, the Reliance Group, Bajaj Auto Ltd., Steel Authority of India Ltd , Oil and Natural Gas Corporation , HDFC ,Tata Group and various others have continue to invest in sports s a part of the legally mandated Corporate Social Responsibility Policy. Despite the contribution from so many organizations, the data shows that as of 2019, CSR contributions to sport only amount to about a paltry 2% of all CSR funds. Attaining the Industry status would provide ensure special incentives to investors in the sports industry, and thereby will attract major private investors not only from India but also from other Global corporations. Moreover, an industry status would help in creating a single window clearance mechanism to promote investments in India which is presently ranked 63rd across the world as per the World Bank’s Doing Business ranking with a DB Score of 71 due to large number of approvals required at various levels which in turn deters prospective investments. This single clearance mechanism would help in creating new sports focused entities thereby promoting major investments.
Sports Projects and Infrastructure requires huge inflow of Capital in order to meet it recurring as well as nonrecurring expenses. Taking this into consideration, attaining Industry status would help in simplifying raising capital as well as avail various subsidies. This ease mode of raising capital as well as interest subsidies would help in developing technological embedded sports facility, enhancement of sports through artificial intelligence, developing sports performance trackers as well as provide access to the latest technology.
2. Generate Employment
Sport is regarded as one of the largest industries worldwide in terms of generating employment and revenue. Sports sector is a multi-billion dollar global industry propelled by enormous consumer demand. The attainment of Industry Status to the Indian Sports sector would help in expanding sports infrastructure not only at the urban levels but also at the rural level. This expansion of Sports infrastructure would help in securing the livelihood of many people in the state, not only during the period of developing the physical infrastructure, but also post that for the maintenance of the infrastructure as well as for carrying out the programs and functions at these newly developed facilities. The expansion would also help encouraging young athletes in rural or under-developed regions, to take up sports as a career, thereby encouraging employment even at the grassroots level. It’s not just the athletes, officials, coaches and scouts, umpires and referees, but also those working in sports equipment stores and sporting and recreational facilities. The attainment of an industry status can reap rich dividends as employment and the massive market opportunities which will open up within this industry as new sports initiatives require professional human capital, which will promote employment generation.
3. Infrastructural Development
Sports is a profession where one cannot do without proper infrastructure. This need has been recognized by the Government, under its sports-centric program Khelo India created the ‘Playfield Development’ project for developing, promoting, and maintaining playfields through the setting up of State & District Playfield Associations. Industry status would provide enough funds to the states to identify and allocate state owned lands not only to government funded institutions but also raise funds by renting these infrastructure to private professional leagues and private enterprises, thereby resulting development not only at the grass-root level but also generating revenue at the same time. Industry status would also make it possible to form Public Private Partnerships in case of ownership and maintenance of Sports stadiums and complexes, like that followed in Australia. Such a model would help in ensuring that Private players will not only limit their investment to their primary contribution while establishing the facility but also top their initial investment for the maintenance and development of the same. Innovative delivery methods like Build-Own-Operate-Transfer would help in ensuring that private stakeholders get access to several concessions and gains, and government projects would be completed on-time completion while also maintaining the quality.
4. Operations Subsidies
Industry Status would ensure availability of operational subsidies like deduction in tax charged on the sports facilities and operation, rebates and exemption from public utilities cess. In the Sports Manufacturing sector, an industry status would mean subsidies in the form of reduced Goods and Services Tax, deduction and freight and octroi charges. India’s sports good export manufacturing industry is valued at about US$ 404.13 million as of FY20, which has made India emerge as the leading international sourcing destination for inflatable balls and other sports goods for international brands such as Mitre, Lotto, Umbro and Wilson. However, there exists a severe competition from cheaper Chinese products, due to which special focus needs to be given in providing incentive and exemption of taxes in order to promote export of Indian goods. Schemes like CENVAT, which avoids double taxation to exporters, can be allowed to sports related products as well as partial waiver of duty can also be given to various products. Products that have distinct features owing to their place of origin like the Special wood of Kashmir wood Willow Cricket bat can be given protection under the ‘Geographical Indication of Goods’. These items would receive additional tax rebates that could help in ensuring that goods and funds are flowing smoothly between manufacturers and Sports-focused institutes, with fixed equipment being provided to them at cheaper or almost free rates, in exchange for grants and tax reliefs.
Recognizing sports as an industry will not only promote revenue generation but also help in generating revenue not only for the skilled but also for the unskilled. It will also help in improving the Sportspersons performance, thereby improving quality of Indian Sports. There are enormous opportunities for further industry participation, but there are a lot of hurdles in this road of attracting investments for developing sports sector. Indian Sports sector needs to see beyond the Corporate Social Responsibility investments, as they are just a drop to quench the financial thirst of Indian Sport. It is time for Indian Sports to be recognized as an Industry in order ensure intra and inter industry provision of support for private industries and government bodies.
Although this is a systematic yet a far-fetched ambitious push in the direction towards the development of Indian Sports, this positive step of Industrializing Indian Sports will lay the foundation for a much larger ground for development of India’s international sporting performance. Mizoram’s step toward industrializing sports sector is the first step towards this mega-goal which would lead the way for an all-round development of the Indian Sports Sector.
-Ishaan Micahel
KIIT School of Law
[i]The Size and Scope of the Sports Industry in the United States, IASE/NAASE Working Paper Series, No. 08-11
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