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India's Sports Industry and Industry Status under Industrial Dispute Act, 1947

Introduction

In the last few decades, Indian sports have evolved into one of the mega sources of entertainment and revenue generation for the country. The rules governing the sports might not have experienced any significant changes in these last few decades, but there has definitely been a full transformation in the country’s attitude toward sports. Sports are no longer a mere activity played only on the field; they now also include a major share of activities off the field. This evolution is mainly attributed to the investments made by big firms in a move to promote sports and make it available to the masses.


India’s Sporting History

History has been unkind to Indian sports. 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. Despite having a population of over a billion people, India has managed to win only 28 medals in the 25 Summer Olympics that the county has participated in. This performance of Indian sports has been constantly criticized on the international stage. Several reasons have been cited for this deplorable performance of Indian sports at the international level, including socio-political cultural issues, unhealthy competition, and unwanted meddle by various unwanted entities in the sports industry. India’s demographic and socio-political structure has also resulted in extreme inequality as these factors results in a scenario where Indian citizens do not get equal opportunity to participate in sports and make a career as a professional athlete. Moreover, supposed nepotism, corruption, scandal, poor leadership and mismanagement has an adverse effect on India’s sports governance. Poor governance leads to lofty policies and misleading priorities, thereby leading to inefficient allocation of resources.


Development in this Matter

The Ministry of Youth Affairs and Sports came up with the Khelo India Program in 2018 with the purpose to “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, in 2012 the Federation of Indian Chambers of Commerce & Industry (FICCI) made a proposal to the central government to include sport as an industry. It was proposed that this move would help in developing the sports infrastructure as a whole. Unfortunately, this proposal was shelved, as sports being a subject of the State List required India’s government to deal with matters of sports.

However, this initiative was not done away with completely. In 2020, the state of Mizoram classified sports as an industry in order to make available to the sports sector subsidies, loans, and assistance from private and government sources. Adding the status of ‘industrial’ to the sports sector, along with the Khelo India program, will help promote the sports sector in generating revenue, thereby facilitating a holistic development of the complete sports infrastructure.


The Meaning of Industry Status

Indian law has not defined the expression of “Industry Status”; however, “industry” has been defined in Section 2(j) of the Industrial Act of 1947 as “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. 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 more elaborate manner, where it was held that any activity will comprise an industry if it passes the ‘triple test’ which includes the following factors:

  • Activity carried out in organized and systematic manner;

  • All the operations are carried out with the cooperation of Employers and Employees;

  • All the operations carried out are for the production and then distribution of goods, irrespective of investment of capital or not.

As applied 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. The North American Association of Sports Economist[i]and International Association of Sports Economists has defined the sports industry as having three primary components:

o Activities involving participation in sport

o Activities involving attendance at spectator sporting events

o Activities involving following spectator sporting events through some media.


Potential Economic & Legal Incentives of the Sports Sector attaining Industry Status


1. Financial Development

The “Sports Industry” would benefit 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 continued to invest in sports as 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 industry status would provide and ensure special incentives to investors in the sports industry which 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. This single clearance mechanism would help in creating new sports-focused entities which then leads to the promotion major investments.

Sports Projects and Infrastructure requires huge inflow of capital in order to cover both recurring and nonrecurring expenses. Taking this into consideration, attaining industry status would help simplify raising capital as well as produce the opportunity for receiving various subsidies. This mode of raising capital and interest subsidies would help provide access to the latest technologies as well, including more technological embedded sports facilities, enhancement of sports through artificial intelligence, and sports performance trackers.


2. Employment Generator

The sporting sector is often regarded as one of the largest industries worldwide, both in terms of generating employment and revenue. The 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 level 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 encourage young athletes in rural or under-developed regions to take up sports as a career. Sports does not create jobs only for the athletes, officials, coaches, scouts, umpires, and referees, but also for those working in sports equipment stores, sporting and recreational facilities, retail, dining, and many other industries. The attainment of an industry status will lead to massive market opportunities which will open up within this industry. New sports initiatives require professional human capital, which will ultimately promote employment generation.


3. Infrastructural Development

Organized sports requires the proper infrastructure. This need has been recognized by the Government, under its sports-centric program Khelo India which created the ‘Playfield Development’ project. The project was created 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 to both government funded institutions and for private use which would raise funds by renting these infrastructure to private professional leagues and private enterprises. Industry status would also make it possible to form Public Private Partnerships in the case of ownership and maintenance of professional and amateur sports stadiums and complexes. This is similar to the model used 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 while also maintaining quality.


4. Operations Subsidies

Industry Status would ensure availability of operational subsidies like deduction in tax charged on the sports facilities, operation rebates, and exemption from public utilities access. In the Sports Manufacturing sector, an industry status would mean subsidies in the form of reduced Goods and Services Tax and a deduction of freight and octroi charges. India’s sporting goods 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. International brands such as Mitre, Lotto, Umbro and Wilson use India as their primary manufacturing source. However, there exists a severe competition from cheaper Chinese products. This highlights the need for a special focus to be given in providing incentive and exemption of taxes to promote export of Indian goods. Schemes like CENVAT, which avoids double taxation to exporters, can be applied to sports-related products as well. Products that have distinct features owing to their place of origin, like the special wood of Kashmir for wooden Willow Cricket bats can be given protection under the ‘Geographical Indication of Goods’. These items would receive additional tax rebates that could help in ensuring that the goods and funds are flowing smoothly between manufacturers and sports-focused institutes.


Conclusion

Recognizing sports as an industry will not only promote revenue generation but also help in generating revenue for many at the individual level. It will also help in improving the performance of Indian athletes, thereby improving quality of Indian Sports. There are enormous opportunities for further industry participation, but there are a lot of hurdles that can obstruct attracting investments for the developing sports sector. The 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 sports. It is time for Indian sports to be recognized as an industry in order to ensure intra- and inter-industry provision of support for private industries and government bodies. Although this is an ambitious push in the direction towards the development of Indian sports, this positive step of industrialization will lay the foundation for a much larger ground for development of India’s international sporting performance. Mizoram’s step toward industrializing the sports sector is the first step towards this mega-goal which would lead the way for an all-around positive development of the Indian sports sector.


Written by: Ishaan Michael



References:

[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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