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Common Wealth Games 2010: India's another step towards Develpement, Success, and Power

Commonwealth in India

So the Commonwealth Games-2010 is knocking at our doorstep, come 3rd October, 2010 and all the participating nations’ eyes will be glued at New Delhi, the capital of India. No, I have no intentions to discuss the cliché “Is India Ready?”, but I am certainly concerned about the economic factors involved in organizing such a huge event, only second to be held in India after Asian Games, 1982.

Commonwealth Games will be organized in India for the first time and second time in Asia (after 1998). It is a matter of pride for all of us that India is the third developing country to host the prestigious event after Malaysia (1998) and Jamaica (1966). The success of these games may also strengthen India's bid for 2016 Summer Olympics. India made a last-
minute offer of $7.2 million to the Games associations of the 72 commonwealth members to fetch the organizing rights after beating Canada and is all set to organize the hallmark event.



The estimated budget for 19th CWG is $1.6 billion (excluding non sports related infrastructure development like airports, roads and other structures), the most expensive ever, as compared to Manchester 2002 (US $ 420 million) and Melbourne 2006 (US $ 1.1 billion).


Financial Insight of the Event

Where there’s a huge sum of expenditure involved, there’s usually an economic study pondering how the money is going to be spent and what would be the revenue streams? The controversy surrounding these events is always centered on its economic sense. Do these games make money for the host city or not? All the recent Summer Games with the sole exception of the 1984 Los Angeles (Olympics) Games have lost money. The citizens of Munich continue to pay a special tax to this day, to pay off debt incurred in 1976 for their Olympics expenditure. This is very often not revealed to the public by using smart accounting techniques that do not include a lot of the costs incurred under direct games expenditure In its 2003 bid document, the Indian Olympic Association (IOA) predicted revenues of Rs. 840 Cr and an operating expenditure of Rs. 767 Cr. This August, however, came the news that the Games would be “revenueneutral”— that its expenditure would remain exactly equal to its revenue.

Now both expense and income estimates have ballooned to Rs 1, 620 Cr and Rs1, 708 Cr, respectively. (This holds, of course, only for the operating expenditure; it doesn’t factor in the hefty expenses on infrastructure or security, which go into the government’s books). The main reasons cited for the cost escalation were accommodation, catering, protocol and CGF relations, Queen's Baton Relay, rent for office of Organizing Committee, communication, image and look technology, risk management, insurance and technical conduct of sports.

 Besides, the number of volunteers too has gone up to nearly 30,000 and the cost of accreditation, catering, uniform etc on this account has also increased. Out of Rs 1620 Cr, the government has already released Rs 591.50 Cr to the Organizing Committee. It is forecasted that revenue of Rs 1,708 Cr will be generated from international/domestic broadcasting, sponsorship, ticketing, licensed merchandise, donations etc. Although the news of hosting such events are supposed to bring in cheer among the nation’s citizens but Indian stock market behaved the other way. The 2010 Commonwealth Games were awarded to Delhi on 13 November 2003, after markets had closed in India. The next day, Nifty closed 1.5% lower.

The biggest losers were the construction related stocks which pulled down the 50 stocks sensitive index at 1,580. It’s worth mentioning here that the Athens Stock market reacted very positively to the city’s win of the 2004 Olympics, pushing Athens Stock Exchange up by 8%, led by construction and industrial stocks. The cost incurring plans on infrastructure are enormous; 25 new flyovers, bypasses, broader roads, a larger metro system, an integrated Rail Bus Transport system, a High Capacity Bus system, an electric trolley bus system and a Light Rail Transit system are all in the pipeline. The transport sector has already been assigned the Lion’s share of the Tenth Plan outlay, at 23.68% of Rs. 23000 Cr i.e. Rs 5000 Cr.

 Doordarshan has been allocated a sum of Rs 165 Cr for establishing an infrastructure to provide high definition TV (HDTV) telecast of the Games. India has reinforced its commitment to check doping in the event and has contributed $20,000 (Rs 9,40,00) to the International Fund for the Elimination of Doping in Sports. Rs 17.5 Cr has been sanctioned this year for refurbishing and providing tourist amenities at the 46 monuments in Delhi. Other than the clearly visible costs,GOI will also be spending on other areas which include:

Power

Currently, Delhi produces 4,500 MW of electricity, which is obviously very less for such a big event. Therefore, the Central Government is in a process to increase the power production to 7,000 MW. As per the scheme, direct additional energy will be provided to Delhi from the nearby regions as well as some new power plants will also be constructed. This way, the Government states that Delhi will have a surplus of power very shortly.

Spending on participants

The Government is making arrangements for providing free accommodation for athletes, a modern-comfortable Games Village, high-end health facilities, security, pollution-free environment, transportation etc. Moreover, all the athletes will be provided with a free trip to the wonder monument Taj Mahal. To improve the performance of the Indian contingent in the Commonwealth Games, 2010, a scheme with allocation of Rs.678.00 Cr is being implemented for providing training to the elite sportspersons in all the disciplines
onsidering the Indian contingent spent Rs. 40 Cr on the message, ‘See You in Delhi’, at the closing ceremony of the Melbourne games in an 11- minute show, it might end up being just that. The challenge is to ensure that the potential of the games as a catalyst for change is harnessed.

 The increase in budget allocation from Rs 767 Cr to Rs 1620 Cr was followed by OC’s assurance to GOI about revenue of Rs.1708 Cr from the games. Looking at the source of revenue generation for GOI to recover the tax payers’ money, the two main streams will be, spending of over two million foreign tourists and 3.5 million domestic tourists, likely to arrive in Delhi in 2010 before and during the Commonwealth Games. TV rights worth Rs 240 Cr have already been sold more than a year ahead of the event against an earlier estimate of Rs 160 Cr. As per an estimate, the amount may mop up to Rs 460 Cr. Cricket and big bucks may be synonymous, but the 2010 Commonwealth Games are estimated to be the most expensive Games to be held in India till date and is hoping to beat Cricket at its own game, setting a total ad revenue target of Rs 1,000 Cr The Commonwealth Games, though smaller than the Olympics, provides an attractive platform for sponsors eager to emerge from the global recession. According to the sponsorship plan, multiple partnership and sponsorship slots have been offered, which include Rs 100 Cr each for two lead sponsors (lead partners) and Rs 50 Cr each for 10 associate sponsors (partners).

Asking rates for the 12 sponsors have been pegged at Rs 25 Cr each. Besides, there will be sponsorship slots like suppliers, travel, hospitality, apparel, and more. Apart from the above mentioned revenue streams; there will be many other benefits that the government will be able to reap in a long term. Holding the games in a developing nation like India will also be beneficial due to factors like Low wages, improvement in employment rate, lower operational costs, general infrastructure improvements and a low opportunity cost of labor.

Limited available seats on airlines coming into India, for example, could push prices unnaturally high, leading to subsequent increase in the top line of these airline companies which will surely enhance the tax collection for the government for year 2010-11. All the transactions made by the tourists will add to the indirect tax collection of I-T department. Small entrepreneurs are likely to benefit from the various aspects of businesses arising due to such a mega event. New Delhi will definitely be recognized at world level as a ‘Heritage City’. Whether or not the 19th Commonwealth Games will prove to be economically fruitful for India?

Only time can tell that but in the age of public-private partnerships and when ‘Aam Admi’ is facing the brunt of inflation the big questions arising are: “Who bears the pain of negative outcomes, and who enjoys the gain of positive ones? “ “Who to blame, if the promised revenue by organizing committee does not materialize?” These questions acquire urgency because India is looking forward to host even bigger events like Olympics in future and well organized Commonwealth games will act as a benchmarking event for its future aspirations. Having said all that, the fact remains that organizing games at such a grand level with stupendous spending has become a tradition among nations,

 China show cased its power by spending $50 billion in Beijing Olympics. India too cannot afford to stay behind, where there’s a question of Motherland’s pride, We don’t mind the event’s expenditure as long as the event is organized successfully to leave a mark in the history. Let the event to be turned into a golden opportunity for us to show the world: our strength, our ever rising capabilities and our zeal to reach among the top gaming nations.