Hitting The Jackpot: Gambling
The most popular vice, however, is gambling, which is also illegal. Still, unlawful betting in the IPL cricket season is averaging $100 million per match. On match days, youngsters, pot-bellied traders and Page-3 regulars can be spotted in coffee shops, restaurants and even the stadiums, glued to cellphones, haggling hard with bookies. Betting on horse races and lotteries is subject to state laws. Indians are buying over 30 million lotteries a day. The market is valued at Rs 50,000 crore. “The market can grow manifold, provided the government rationalises its lottery policy, legalises gambling and betting, and opens the market to foreign investors,” says Kamlesh Vijay, CEO of Sugal & Damani (S&D) Lotteries. The Rs 6,000-crore, travel-to-jewellery company has been selling lotteries for the past three decades. Earlier this year, it bid for UK’s national lottery, proposing ticket sales of £63.9 billion over 10 years. The evaluators declared it the reserved bidder. That has brought returns-hungry investors to its doors and its competitors’. “Some of the largest US private equity funds have approached us, however, the laws disallow FDI in lotteries,” says Vijay. S&D’s profits grew 60 per cent last year.
Another success story is Zee-promoter Subash Chandra’s lottery venture — the media moghul’s biggest business now. Last year, his lottery brand Playwin turned in Rs 2,400 crore, towering over his media (Rs 1,500 crore), packaging (Rs 1,000 crore), and the entertainment and real estate businesses.
The company is generating online lottery winners every 5 seconds. Its website is getting more hits than that of the Indian Railways’ ticket bookings. Online gambling is a Rs 5,000-crore market now and, according to Playwin Chairman and CEO Amar Sinha, 40 per cent of online wagers are from Tier-II and III towns. Sinha is lining up impressive expansion plans for the group’s lottery and wagering businesses. Playwin has tied up with the Royal Western Turf Club (RWTC) to participate in the booming horse-race betting market. Indians are betting Rs 1,500 crore on about 200-odd horse races a year at nine racecourses. The RWTC took in over 300 members last year, though the life membership fee is a whopping Rs 5 lakh.
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| IT’S BIG, YOU BET! Gambling happens to be the most popular of all ‘sinful’ pursuits. The country’s sole casino in Goa has no dearth of patrons (Dreamtimes) |
Still, members account for only 20 per cent of the average Rs 1 crore wagered per race at the club. The bulk comes from non-members. To expand the market, Playwin is setting up about 100 off-racecourse betting centres across Maharashtra. The Bangalore Turf Club is the most lucrative due to the state’s wager-friendly tax regime. Well-heeled race-goers, spirits giant UB Group’s promoter Mallya amongst them, flock the English racecourses in Epsom and Ascot.
Corporate India’s gambling ambitions include India’s answer to Vegas. Hotel Leelaventure and Playwin have bagged licences to own and run live casinos in Goa, home to the country’s sole casino, with live roulette. Owned by Advani Hotels, Goa Casino attracts 17,500 dedicated casino-goers a year. Big corporate groups including real estate giant DLF are also awaiting Sikkim’s decision on bids for five-star casinos.
The Devil’s Advocate
The West has formalised sin industries outlawed here. Sports wagering is legal in the UK. Prostitution is not unlawful in Holland. And the US is readying to permit hash consumption. There are listed porn companies in the US, Playboy Inc for instance. India is yet to accept that curbs on an industry, whether on grounds of morality or by law, force it underground.
The formal and informal segments of the Indian sin economy co-exist because the government speaks in two voices. On the one hand, from atop a moralistic plank, controversial politicians such as the Union Health Minister Anbumani Ramadoss advocate purging Indian cinema of smoking and drinking. On the other hand, though the Parliament outlawed smoking in public in 2004, the ban is far from effected on the ground. Isn’t Ramdoss’s quarrel then, with the message rather than the subject? “It’s difficult to police smoking with the limited resources at hand, as murders and other heinous crimes get priority,” confesses Delhi Police’s DCP Crime Anil Shukla.
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PORN IN THE USA: US-based sleaze
entrepreneur Richard Menon has fans
aplenty in his country of origin, India, from
where he claims to get around 10 emails
every week |
The doublespeak, perhaps, arises from two compelling moral hazards for policy makers. One, the overdependence of the exchequer on the tax revenue from the sin sectors. The tobacco industry, including the highly taxed gutka makers, pays Rs 25,000 crore a year in taxes. Finance Minister P. Chidambaram raised the excise duty on non-filter cigarettes in Budget 2008 to bring the rate on a par with the less-toxic filter cigarettes. He, however, refrained from taxing bidis, which are more injurious, saying the industry gives jobs to the poor. And two, the burden of the politician-sin business-owner nexus. Several politicians own sin factories and shops, especially in the informal sector. Amongst India’s largest bidi makers is Union Civil Aviation Minister Praful Patel. UB Group’s Mallya, too, is a well-connected Member of Parliament. The high taxation and price controls on the formal alcohol industry can be traced to the political clout of the country-liquor lobby. Hooch distillers have secured their market by exhorting policies that have put less-injurious, formal-sector alcohol beyond the reach of the poor. In 12 states that account for two-thirds of India’s beer consumption, the gross margins for beer average 5-6 per cent on curbed pricing freedom, reveals Carlsberg’s Gidwani. The global benchmark is 25-30 per cent.
Easing the laws or opening minds on a closed industry do fester tension between its existing illegal and the upcoming above-board segments, triggering a battle for survival. Then Indian policy makers, driven by vote-bank politics, make the cardinal mistake of not discouraging the informal segments enough. And the government’s antidote to the proliferation of sin becomes curbs on consumption without workable checks on supply. The temptation to resist the inevitability of indulgence and regulate sins in India is indeed high. Like the consumers, the government isn’t abstaining.
With inputs from Vishal Krishna, Feroz Ahmed, Abhishek Chowdhury and Uttara Choudhury in New York
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(Businessworld Issue 3-9 June 2008)
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