Posted by: John Elliott | April 24, 2010

India’s scam-ridden IPL cricket is a national celebration

Never before has a scam been enjoyed and celebrated by such a massive proportion of Indian people. Apart from the very poor in remote rural areas who have no access to television, everyone seems to have relished the fast-pace Twenty-20 cricket matches of the India Premier League (IPL), which finishes its third season with a final tomorrow (Sunday) blighted by massive allegations of corruption. 

India is of course a country of scams. To many abroad it is seen sentimentally as Mahatma Gandhi’s country of khadi cloth, good ethics, and care for the poor. To some it is an economic miracle and a future super power, while to others it is an unkind cruel place of caste, ethnic and rich-poor divisions and violence. Above all however, and not far below the surface, India is a maze of unethical, unlawful and illegal swindles that link most politicians, many bureaucrats, and a large number of businessmen and others. 

It is scarcely surprising therefore that there is a scam surrounding the IPL, which has grown in just three years to a massive $4bn wealth-creating package of sponsorships, broadcasting and other franchises, fees and other takings. 

Cricket is not just a national sport in India but also a passion, and people have watched in awe as the rupee and dollar figures have grown to such an extent that over $300m has recently been bid for new franchises, raising the total from eight to ten teams. 

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 A lot of the IPL activity has been alleged in the past week or so to be unethical, unlawful and sometimes illegal. Politicians and others are said to be laundering black money via Mauritius and other tax havens which, though officially recognised, hide investors’ identities through shell companies and benami (false) names. There are suggestions that matches and bids for team franchises have been fixed, and that there have been bribes, tax evasion, illegal betting, and breaches of foreign investment rules. 

At the centre of the growth, and the controversy, is Lalit Modi (left), creator and chairman of the IPL and vice president of the highly politicised Board of Control for Cricket in India (BCCI), who is facing calls for his resignation [and was suspended on April 24] .

 “Overlord of a national passion” was the headline on a Financial Times profile of Modi two years ago. More details of his business career appeared in the India’s Mail Today newspaper a few days ago headlined “Modi and controversy go a long way back”

The national celebration of the lucky few getting rich in a poor country is one of India’s many curious contradictions. The poor have (up to a point) always admired the massive illicit personal wealth of some politicians, such as chief ministers Mayawati and Jayalalitha in Uttar Pradesh and Tamil Nadu, because it shows what can be achieved from a deprived background. Similarly, the successes of the IPL organisers, cricketers, and the business and film star cricket team owners, have been enjoyed as a symbol of hope for what might be, as well as a spectator sport (now switched to tracking the leaks and scandals). 

Earlier scams and political corruption have also been celebrated to a lesser extent, and some have even done the country good for a time. While stock market fraud primarily makes the price-fixers rich, it also benefits private investors and boosts company capitalisations, and the country has revelled when the Bombay Sensex has soared in past scams. Also, as an ex-army friend has reminded me, the Bofors gun at the centre of 1980s corruption allegations won India a border war with Pakistan at Kargil in 1999 – though it has also stymied defence purchases for 20 years. 

This celebratory reaction probably partly explains why the workings of the IPL were not looked at earlier by the government’s financial and criminal investigations agencies, nor the media, even though rumours of illicit deals and links between politicians and investors have been around for some time. It was just too big a tamasha (party), with too powerful hosts, to be interrupted. 

Club of friends 

As one of those involved said to Tehelka weekly news magazine last week, “It’s common knowledge that ….politicians running across aviation, agriculture, road transport and the Opposition, are minting money and have undeclared stakes in every cricket pie”. Last September, Outlook weekly news magazine noted that “the IPL is largely a club of friends with mutual interests, and often conflicts of interest”. 

The main reason for the lack of investigations is of course that, as in virtually all scams (not just in India), politicians are so deeply involved that few officials would dare start inquiries. And most of the Indian media does not begin to investigate until it is fed information. 

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 This suddenly came unstuck earlier this month because of the involvement of Sashi Tharoor (left), an ambitious former top United Nations official who last year became an MP and a gaffe-prone external affairs minister. Tharoor helped a consortium based in his home state of Kerala to bid for one of two new IPL franchises on offer this year, and a woman friend, Sunanda Pushkar, was promised a $15m sweat equity stake on account of future consultancy work. 

Known as Kochi, the consortium put in the highest bid of $333m, which apparently upset Lalit Modi’s plans for who should win. The consequential row went public on Twitter and exploded in the past two weeks into a scandal that has led to a stream of media leaks, presumably from the government and political parties and mostly directed against Modi. There have been rows in parliament, tax and other raids, and calls for an official inquiry. Tharoor has been forced to resign from his minister’s post, and Pushkar has given up her $15m. 

Companies involved 

Anyone looking at some of the leading businessmen and companies involved in the IPL would surely have noted long ago that virtually all of them are at the wrong end of India’s corporate respectability spectrum. There is Vijay Mallya of United Spirits and the Kingfisher beer and airline businesses, infrastructure operator GMR that has grown miraculously fast in recent years and grabbed massive land holdings along with airport franchises in Delhi and Hyderabad, and the secretive Subrata Roy of the Sahara group that is famous for its chit (small savings) fund and real estate activities. 

Also owning a team is Mukesh Ambani of Reliance Industries (RIL) who has been a strong Modi supporter from the beginning of the league. Those trying to win teams this year include commodity trader Adani, which has been in legal trouble over non-payment of customs dues and monopolising coal imports, and the Videocon electrical white goods and oil exploration company run by Venugopal Dhoot. 

Lalit Modi comes from the Delhi-based Modi family business group headed by his father, K.K.Modi. Lalit Modi was not regarded as a success until he started the IPL, and his earlier business ventures include a controversial lottery franchise in the north-eastern state of Manipur. 

Modi’s friends and relatives 

His relatives crop up as both IPL stakeholders and franchisees. His brother-in-law is a part-owner of the Rajasthan Royals team, which has several shell company investors plus Lachlan Murdoch, son of Rupert Murdoch, the international media tycoon. His step son-in-law, Gaurav Burman, runs Elephant Capital, a private equity company, along with brother Mohit Burman who is also an investor in the King’s XI Punjab team. Elephant has a stake in IPL’s on line and broadcast licensee Global Cricket Ventures. (The Burman family control the Delhi-based Dabur health care and food company). 

Bharatiya Janata Party (BJP) politicians are deeply involved. Lalit Modi has close links with Vasundhara Raje, the BJP’s former Rajasthan chief minister, which are now being challenged on the fringe of the IPL story by Congress politicians. Modi faced tax and other charges after Raje lost power last year. He has sought help from Narendra Modi (no relation), the BJP chief minister of Gujarat. Adani is based in Gujarat and Lalit Modi reportedly wanted it to win the Kochi bid that was secured by Tharoor’s Kochi team. Kochi was allegedly offered a $50m bribe to back off by Lalit Modi (who has denied the charge), so that Adani could take over. 

Patel and Pawar 

Praful Patel, India’s urbane but under-performing aviation minister, who I described as the government’s “Teflon man” in an earlier blog, has also been a target of leaks to the media. He frequently issues smooth denials of any problems, and of his own lack of responsibility for the worsening state of Air India and India’s over-crowded and potentially dangerous skies and airports. 

This week he was rebutting leaks by denying any involvement in the IPL, even though his 24-year old daughter works for the league and, with him, reportedly sent an e-mail to Tharoor about cricket teams’ potential profitability. “Children should not be targeted,” said Patel a few days ago. He is closely involved with India’s cricket in other ways because he is a senior member of the Nationalist Congress Party, which is led by Sharad Pawar, once one of India’s most powerful politicians but now a not very effective agriculture minister. Pawar is former president of the BCCI and is at the centre of a row over what should happen to Modi. He is in line to become president of the International Cricket Council. 

It is not clear whether Pawar and Patel are being targeted by the Congress Party as a warning not to upset the stability of the governing coalition, or by the opposition BJP to embarrass the government. 

A writer in the Indian Express the other day said that “in many ways, the IPL is a confirmation of what India really is – an emerging economy”. He is correct. The scandal shows how far the country has to go before it can claim to have moved on from being under-developed in terms of market regulation and ethics. 

As the economy has been liberalised over the past 20 years, brilliant entrepreneurship has been generated, but unparalleled greed has grown at all levels of society. People from the top of the government down to a village headman use cronyism, patronage, bribery, coercion and generally low ethics to build status and wealth. That looks like continuing for generations because there are still some 700m or more people clambering to enter the economy and reap the benefits of new riches.
 
On the IPL, the current furore will no doubt lead to one or two resignations, but inquiries will be controlled to protect many of those involved. Some new regulations might be introduced to control the league. The flow of news leaks that is fuelling blanket media coverage will slow down soon and the fuss will almost certainly die away, maybe in a week of two, when it will be neatly swept from headlines by other news.

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Responses

  1. This article, two years since it was written, seems a prophecy! The IPL truly is the great Indian spectacle – a combination of a successful wealth creating formula – legitimize wealth creation by investing in religion – faith or otherwise :) and the Opening ceremony of IPL 5 was a sign of how far we have come.

  2. [...] tweet, which was directed at Shashi Tharoor, a gaffe-prone minister of state for foreign affairs, not only led to Tharoor losing his job and Modi being suspended, but quickly escalated into revelations about government phone tapping of businessmen and [...]

  3. Gandhi’s version of capitalism, was one built on economic self reliance, Swadeshi, that ignores the law of comparative advantage, in which countries specialise in producing those goods they can make most efficiently, trading them for other types of goods produced by other countries who have also specialised.

    In Gandhi’s defence, Swadeshi was more a political policy than an economic one, one that could have been re-examined after independence was achieved.

    India’s real problem began with our Harrow, and Trinity boy Nehru

    Nehru, had these notions that the government should establish a safety net and protect the poor by providing basic services (notions that exist till this day), even at the time India had I don’t know 500 million people, and even then it was just not feasible.

    So the country plotted on a disastrous course, one which consisted of licenses, quota’s, nationalisations and civil servants making economic decisions that were not based on profit maximisation.

    If it was not completely corrupt before, then those policies certainly made it corrupt, and it certainly was the blue print for crony capitalism we know today in this country, where favoured insiders profited the most.

    You are very right, India has a strong tradition of capitalism, it dominated the spice trade, the equivalent of dominating today’s crude oil business, but the nehruvian years were like a purge. People forgot what survival of the fittest meant, in fact with the myriad of companies I deal with today, survival of the fittest is still not in their psyche.

    Gandhi and Nehru taught Indian politicians to be populist, even at the expense of the country. and the latter actually encouraged businesses to act as rent seekers.

    The fact Praful Patel and his compatriot Sharad Pawar remain nearly untouched despite being tainted last week, is testament to that.

    Its not surprising one would forget, India had a deeply capitalistic tradition, and was an economic superpower for thousands of years. That memory was purged by incompetent politicians, seeking to preserve their own power base or legacies, that are based on quack economic policy.

  4. Dear Mr. Elliott,

    I completely agree with whatever you have mentioned about lack of corporate governance and accountability with the entire IPL story. But I would like to comment on the reference of Gandhi on your blog. This is something I fail to understand is why there is still so much romanticism attached to Gandhi when we are talking about Capitalist India in the 21st century. Of course I don’t deny that the man was great, in fact to some extent saintly. What we fail to recognize that India has always been crudely capitalistic, and that too for millenniums.

    In India there are no social benefits so as to speak, where every man is for himself. Where only the best man survives and thousands perish in meeting just the basics – roti, kapda, makan (food, clothing and shelter). Isn’t that is what capitalism is all about? The survival of the fittest? We were a capitalistic society even when we were socialist!!

    We have banias (traders) as a cast in our infamous cast system for ever. Not that I want to glorify our inglorious caste system, but the point I am trying to make is that, we do have them.

    Therefore, that raises the question – WHY SO SURPRISED that we are capitalist?

    Humans generally have a very short memory, that I can understand. But if anyone has been to India they should know that we have been consumerist for centuries. Haven’t you heard about Taj Mahal, and other such famous relics of our glorious consumerist behavior as “must haves” rather than “need”. What just befalling to me is why media in the west still sees a truly capitalistic behavior of Indians as a unknown phenomena.

    I think its about time that people in the west wakes up and smells the coffee. India and Indians are back and they are here to stay for a very long time. Its about time that things are put back into perspective so that people are not misled into believing that they live in a capitalistic society while still en-cashing unemployment benefits and free food coupons. The irony is India today is more capitalistic than the capitalistic (read: tending towards socialistic) west. Peace!

    Best,
    SM

  5. Not sure what the poster Albert views as being 2010 lenses, but it does sound like either he is naive or just plain ultra nationailist.

    The kind of stuff you hear from Indians and Chinese all the time, when people from a different ethnicity offer an opinion, suddenly the opinion is either racist or colonial, or the opiner for no reason other than race is not allowed to comment.

    Frankly crony capitalism is alive and kicking in Asia today, as it was in the 80′s or before that.

    I suppose the Chinese went through some bizarre experiment with public ownership in the 50′s for a couple of decades, but we won’t talk about that

    Modernisation, and economic growth have not changed anything, Samsung in South Korea miraculously has its disgraced chairman back at the reigns, the Japanese have their Kiretsu’s, in China there is a word for crony capitalism, its called Guanxi and to have Guangxi is actually an admirable trait and is much sought after by western businesses. In India, politicians, have long used office for personal gain.

    It is not an 80′s view to suggest in Asia, that corruption and crony capitalism which favours insiders is not seen as a cancer. Its as true today as it was back then, and I’ve spent my entire 35 years all over this continent.

  6. If you look at news coming out in last two days, there is no doubt that this entire IPL issue will be perfectly covered up and forgotten by this weekend. A new IPL chief has been picked from the old lot, parliamentary JPC has been denied, ‘leaks’ have all but stopped etc. As citizens we still have Supreme Court, do you have any news of any good men moving the court on this?
    We all thought we ‘liberalised’ in 91, but if fact the old monopoly was just passed on to a new group of 4-5 monopolies in every sector of the economy. Everywhere it’s the same story the only difference is, in countries like India and China people are far too excited (almost child-like) with the idea of new money that many times they forget ( or don’t care ) to clean their fingerprints after the loot, whereas in the West over last 30-odd years they have nearly excelled in the art of running this so called “free market economy”.

  7. Indian premier League is a SCAM driven one. No doubt on it. IPL has to be suspended until the transparancy matter comes out regarding the shareholders and their sources stated. Otherwise this state of IPL will spoil indian Cricketers Image worldwide.

  8. Actually its surprising that this story made such big news….considering Indian politicians and pretty much anyone else who has the ability to get money through corrupt activities from peddling fake pills, expired pills to the unsuspecting public, from false advertising everywhere (like Tata Indicom and Reliance advertising 3.1mbps speed with their data cards when you can barely get 256K out of them).

    As an Indian visiting India, my hopes keep getting dashed as corruption just seems to be getting worse.

    All the power is in the hands of a handful of large corporations and the politicians.

    When I was in Chennai, if you went to any bar or liquor store, the only beer they had or served was UB brands, turns out this “beer baron” has the market locked up making low quality liquor. His Kingfisher Airlines recently had a bomb scare, yet they waived security check for him at Delhi since he had to be somewhere to receive an award.

    As much as I am not in favor of multi nationals, I prefer them to these thugs.

  9. I can well understand the reason for this blogger becoming “Former” correspondent for FT and not present. He is like the millions of others in his age group in the west, who still sees Asia, and India through 1980′s lenses.
    Most posts on this blog also appear on the FT website – see http://www.ft.com/cms/s/0/48f5cc8c-51bd-11df-a2a2-00144feab49a,dwp_uuid=a6dfcf08-9c79-11da-8762-0000779e2340.html for this one.
    Also I live in India, not “in the west”. j

  10. Surprising there is not much written about what Lalit Modi & BCCI did which didnt raise many eyebrows. He monoplised IPL by banning cricketers who joned the competitor ICL and effectively managed to throttle it by even getting ICC approval .

    The actual reason for Modi to tweet against Tharoor still remains an enigma. I dont think he was stupid to not know the consequences. Or was he acting on orders and then sacrificed by someone behind the scene.

  11. The IPL sparked debate when it began commercializing the brand value of individual players across the globe so that their value multiplied many times over through auctions.Who would have believed that this phenomenon called the IPL would shake the Congress Party’s political credibility to the extent that one of its most famous Ministers had to exit? The chargesheet against Modi is the latest scandal to hit the IPL.http://www.lawisgreek.com/chargesheet-against-modi-here-begins-the-probe-on-ipl-scams-and-money-laundering/

  12. Well done John as usual for speaking out. I wonder at times, does it matter? We are a nation of corrupt to the core politicians with conniving bureaucracy in tow.

    Other nations being corrupt does not give us a license to be more corrupt to be ahead in the race of corruption.

    How do you expect Air India to improve when a 24 year old daughter of minister Patel can divert planes and flights. To my mind the very urbane and corrupt Patel and Pawar (the two Ps) are to be sacked. Enough of them. Fortunately, P has many more connotations describing these two guys.

  13. India is a country of scams? What kind of sweeping statement is that? Where I sit, Britain is a country of scams, MPs fiddling their expenses, major corruption involving BAe swept under the carpet etc etc. China could also be described as a country of scams. Russia, Nigeria…where does one stop. And when does a country become labelled a ‘country of scams’? Yes IPL is a major scam but that does not mean there are not hardworking honest people around.
    India is not a country of scams, but there are festering scams which need to be brought out into the open and dealt with.

  14. Really good piece, John but what a sad commentary on the lack of ethics and morality. Unlike Cricket, it sounds like greed and corruption in India knows no boundaries.

  15. Excellent piece John. The IPL and Mr Modi have been a scandal waiting to explode – as you say, the Kochi incident was probably the unintended starting whistle for the dogs to be let out. Note that the “weapon of choice”, as the HT called them, were the Income Tax Department, keeping up another great Indian tradition.
    But what a shame: the IPL is a glorious spectacle and the ultimate Indian event.


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