Opinion: Why India missed an opportunity with F1

The Indian government not embracing Formula 1 has left the country without a global sporting event and the economic benefits that come with it, Rachit Thukral says.

Hosting an F1 race is a matter of prestige and the sport brings immense economic benefits to the tourism industry and the local businesses.

It doesn’t come as a surprise that more and more countries are jumping on the opportunity join the F1 calendar, which features a record 21 races this year - with the inclusion of Baku as the European GP.

Majority of the races are directly financed by the government, while a few are held in conjunction with a private promoter.

For instance, the Bahrain GP, which has become a regular fixture on the calendar since 2004, is entirely sponsored by the government, with the country keen on boosting its image.

More recently, Russia has put itself on the F1 map in another government-financed venture, with President Vladimir Putin personally attending his country’s first two grands prix.

And the wide market F1 reaches makes it one of the world’s most popular sporting categories, it having recorded 425 million viewers for the 2014 season.

India a anomaly

Considering the worldwide acknowledgement of the benefits of hosting an F1 race, India is a major anomaly.

The country hosted three grands prix between 2011 and 2013 backed entirely by conglomerate Jaypee Group with the government providing no financial support to the race.

Instead, it levied heavy taxes on the teams and organisers while bureaucratic hurdles only added to the problems with several cases running until the day of the grand prix, creating an undesired mess.

As a result, when the financial situations of the organisers deteriorated, the country was ‘temporarily’ dropped from the F1 calendar and is yet to make a return on the original five-year contract.

What is India missing now?

As seen in all other countries that host F1 races, hotel prices surge during the grand prix weekend. In India, a prime example of that was Delhi’s Hilton Hhonors doubling its rates.

Likewise, the Radisson Hotel in Noida, which housed a number of teams, reported a threefold increase in revenue during the three years.

The local businesses, among them various cab providers and tour operators, flourished, with the government also taking an indirect benefit in the form of increased tax revenue.

The race also provided increased employment opportunities to the local people, including farmers who sold their land to pave way for the Yamuna Expressway.

Leading trade association Associated Chambers of Commerce and Industry of India in 2011 estimated that F1 could bring in revenue to the extent of Rs 90,000 crore [USD 13.5 billion] in 10 years, with the inaugural race capable of generating Rs 10,000 crore [USD 1.5 billion] alone.

Considering that the organisers had shelled out only Rs 273 crore [USD 40.94 million] plus taxes by the final race, the rate of return appears to be humongous. 

But it isn’t just the economic benefit that India is missing - with F1 being a truly international championship, the country will misses itself on the global sporting map.

In 2010, India hosted the Commonwealth Games (CWG), spending Rs. 60,000 crore [USD 9 billion] on the games. However, using the event to grow India's image in turn generated mass criticism and lead to widespread 'negative' reporting from the international media.

But with the Indian Grand Prix and also the FIA Annual Prize-Giving gala held in 2011, the country revived with a positive reaction from all over the world, glorifying its image after the poor reception of the CWG.  

Moreover, the race was widely hailed by drivers and teams alike, with Jaypee grabbing FIA’s Best Promoter for two consecutive years in 2011 and 2012.

Government's support?

In an ideal situation, the state or the central government would help to cover the losses of the organisers, which stood at Rs 160 crore [USD 24 million] in 2013. And that would maybe have saved the grand prix.

This model is followed in Australia, where the Victorian State Government fills the deficit between revenue and expenditure, ensuring the organisers can break even.

Another way is the government smoothing the process of hosting a race, by removing bureaucratic hurdles and easing up the visa process and taxes during the grand prix weekend.

The government did take steps in this direction, but well after the last race in 2013. Hopes were pinned on the new regime which arrived in 2014 - but little movement has been made yet.

Recently, the new government did place The Federation of Motor Sports Clubs of India (FMSCI) under the National Sports Federation's 'Others' category - a category which comes with 'no financial assistance' as a clause.

That does mean the FMSCI events will not gain any financial help from the state - but it also could mean an alleviation of the hefty entertainment tax that the grand prix would normally have to pay.

After all, there have already been some tax breaks - custom duties for racing cars and bikes have now been removed, provided the vehicles leave the country within a month of their arrival.

Return possible

This is the third year in a row that India will miss the grand prix and, as Turkey and Korea can attest, it is difficult to regain a place on the F1 calendar.

However, one example of a country returning to the scene is Mexico, where the ageing Autodromo Hermanos Rodriguez circuit was revamped jointly by Mexican government and private company CIE.

The Mexican GP made its return in 2015, after decades of absence, and immediately received an overwhelming response with packed grandstands making the race a successful event.

Alejandro Soberon, Executive Chairman and CEO of CIE, told Motorsport.com that the expectations "were exceeded’’ after revealing  that the race generated an economic impact of USD 510 million.

While Mexico shows that a return to F1 fold is possible even despite the crowded calendar, it also displays the need for a proper channel and a joint push between the government and the race promoters, especially in a developing country.

Having staged the CWG in 2010 and winning the bid to host the 2017 Under-17 FIFA World Cup, the Indian government is clearly willing to spend on sports.

And Formula 1, despite its trials and tribulations, is a sport well worth spending on.

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Article type Commentary