The enduring charm of the Bangalore Derby

  

 

Kunigal is a solution, but it is not the finish line

 

By Sharan Kumar

 

The proposed compromise deed between the Karnataka Government and the Bangalore Turf Club should bring some relief to owners, trainers, jockeys, breeders, racing professionals and race-goers who have been anxiously watching the uncertainty surrounding Bangalore racing.

 

Yes, Kunigal is a solution, but it is not the finish line.

 

The settlement gives Bangalore racing a possible way forward, but important questions over finance, arrears, development and licensing still have to be answered.

 

The most important message is simple: Bangalore racing has a road ahead.

 

But there is a significant price for this settlement. BTC has to give up its claims over the present premises. Under the agreement, the Club unconditionally acknowledges the State Government's title and waives and abandons claims relating to ownership, adverse possession, permanent tenancy, occupancy rights, easement and other rights. It also gives up claims for compensation, damages, refund, set-off or restitution against the Government, except where expressly provided for in the agreement.

 

In effect, BTC is giving up the battle over its existing premises in return for a structured route to Kunigal. That makes the compromise significant, but it also underlines why the terms of the new arrangement need to be financially and operationally workable.

 

There is another uncomfortable reality that cannot be ignored. The compromise is heavily weighted in favour of the State Government. BTC is giving up its long-standing claims over the present premises, accepting the Government's title and agreeing that its future occupation will be entirely under lease. In return, it receives the Kunigal land and the limited retention of four acres at Race Course Road.

 

But did BTC really have much of a choice? The dispute has been running since the original lease expired long ago. The Karnataka High Court had directed BTC to vacate the racecourse premises and hand them over to the State, following which BTC approached the Supreme Court and obtained an interim order maintaining status quo. The appeals remain pending.

 

Against that backdrop, the compromise can perhaps be viewed less as a conventional negotiation between equals and more as an attempt by BTC to secure the best possible exit from a difficult position. The question now is whether what BTC has secured at Kunigal is sufficient to give the racing industry a viable future.

 

But the settlement is not the end of the problem. In many ways, it is the beginning of another challenge, with a far greater effort now required from the Government machinery to make the relocation a reality. The mandarins will have to move heaven and earth to make a new racecourse possible, while BTC itself faces the daunting task of raising the finances needed to build it.

 

Under the proposed agreement, BTC will get 110 acres and 20 guntas at Kunigal Stud Farm on a 29-year lease, with provision for a further 29 years subject to conditions. BTC will also retain four acres at Race Course Road, including the heritage building, club house, administrative block, paddock and betting area.

The existing racecourse can continue to be used for two years after possession of the Kunigal land is delivered, giving BTC a transition period to develop the new facility.

 

That should reassure the racing community that the settlement does not mean the gates at Bangalore will suddenly close.

 

The real challenge is building Kunigal Race Course

 

The agreement provides the land, but BTC has to develop the new racecourse at its own cost and obtain the necessary permissions, sanctions and clearances. The development period itself has yet to be specified in the draft.

 

 

This raises the biggest question of all:

 

Where will the money come from?

 

BTC's finances are already stretched. The compromise deed does not provide for any Government grant or assured tax holiday for the construction of the new racecourse.

 

And the financial burden does not end with construction.

 

BTC has an outstanding liability to the Government relating to its occupation of the present premises from January 1, 2010 until the date of handing over the surrendered land. The exact amount has not yet been incorporated in the draft. The rate, calculations and total in Clause 5 are still to be filled in.

 

That figure could be critical to determining how much money BTC will actually have available for Kunigal.

 

There is also the continuing cost of the four acres at Race Course Road. The Government decision referred to in the compromise provides for the retained land to be leased at 0.5 per cent of the prevailing guidance value, which is understood to work out to around ₹1 crore a year. However, the 0.5 per cent figure has not been inserted in the present draft itself; Clause 4.3 still leaves the percentage blank.

 

The Kunigal land, by comparison, carries an annual lease rent of 2.5 per cent of the prevailing guidance value, with the rent automatically revised whenever the guidance value changes.

 

So BTC is being asked to build a new racecourse, meet its historical liabilities, pay rent on both properties during the transition and continue financing its normal operations.

 

That is a formidable financial challenge.

 

The revenue question

 

The problem becomes even more serious when BTC's revenue model is considered.

 

The 40 per cent GST burden on turnover has severely affected the club-operated tote business. At the same time, bookmakers are among the major contributors to BTC's revenue through stall fees, entry fees and other charges.

 

This creates a potential vulnerability.

 

What happens if bookmakers decide to bargain hard?

 

If bookmakers push for lower fees or reduce their participation, BTC could face another substantial squeeze on revenue at precisely the time it needs large sums to develop Kunigal.

 

A new racecourse cannot be built on hope. It requires a credible financial plan, and that plan has to survive the realities of the present racing economy.

 

Land is only one part of the solution

 

There is another important issue for owners and professionals to understand.

 

The compromise deed does not guarantee BTC a racing licence at Kunigal. It expressly states that the agreement gives no assurance regarding the grant, continuation or renewal of any licence or permission, which will remain governed by law.

 

So three things have to come together:

 

Land. Finance. Licence.

 

The proposed compromise provides a framework for the first. The other two still require considerable work.

 

And this is why the issue matters beyond Bangalore.

Indian racing is an interconnected sport. Owners move horses between centres, trainers and jockeys follow the racing calendar, breeders depend on racing opportunities and thousands of professionals depend on the sport being conducted regularly.

 

Each club benefits, directly or indirectly, from the racing conducted by the others.

 

If Bangalore racing is weakened, Indian racing as a whole will feel the consequences.

 

The compromise therefore deserves to be welcomed as a possible solution to a long-running dispute. But it should not be mistaken for the completion of the journey.

 

The Government has to make the relocation possible. BTC has to find the money to build it. The financial terms have to be sustainable. The licensing position has to be clear.

 

For owners, professionals and race-goers, the message should be one of cautious confidence rather than anxiety.

 

The settlement may have found a new piece of land for Bangalore racing. The real challenge now is finding the money and the regulatory certainty to put a racecourse on it. The settlement is only the beginning of a new struggle.

 

At the same time, BTC will have substantial existing liabilities.

 

The Government is claiming arrears for BTC's occupation of the present premises from January 1, 2010 until the date the surrendered land is handed over. The actual amount, however, has not yet been incorporated in the draft. The relevant rates, calculations and total are still marked as to be determined.

 

That is a liability which the racing fraternity cannot ignore.

 

What about the four acres?

 

The four acres retained at Race Course Road are an important part of the settlement.

 

The Government's unstated stand is to provide for a lease rent of 0.5 per cent of the prevailing guidance value, which would reportedly work out to around ₹1 crore a year. But it is important to point out that the 0.5 per cent figure has not actually been filled into the present settlement draft. Clause 4.3 still leaves the percentage blank.

 

The Kunigal land, meanwhile, carries a lease rent of 2.5 per cent of the prevailing guidance value, with the rent automatically increasing when the guidance value is revised.

 

So BTC will have to finance a new racecourse while meeting its historical arrears, continuing operating expenses and taking on substantial future lease obligations.

 

The revenue equation is the real worry

 

There is another issue which deserves serious attention.

 

The 40 per cent GST burden on turnover has already severely affected the club-operated tote business. A substantial part of BTC's revenue is also generated through bookmakers, including stall fees and other charges.

This makes the financial position particularly vulnerable.

 

If bookmakers decide to bargain hard over fees or reduce their participation, BTC could find its revenue under further pressure precisely when it needs large amounts of money to develop Kunigal.

 

A club with stretched finances cannot build a new racecourse simply on optimism.

 

There has to be a credible financial plan.

 

And there is one more uncertainty

 

The settlement does not itself guarantee BTC a racing licence at Kunigal.

 

Clause 8.2 specifically says that the agreement does not provide any assurance regarding the grant, continuation or renewal of a licence. Those matters remain subject to the law and the State's regulatory powers.

 

Therefore, three things have to come together for this settlement to succeed:

 

Land. Finance. Licence.

 

The proposed agreement provides a framework for the first. The other two require considerably more work.

 

Why everyone in Indian racing should care

 

This is not merely a Bangalore issue.

 

Indian racing is an interconnected sport. Owners move horses between centres. Trainers and jockeys follow the racing calendar. Breeders depend on a healthy racing industry. Thousands of professionals and employees depend upon racing being conducted regularly.

 

Each racing club benefits, directly or indirectly, from the existence of the others.

 

If Bangalore racing is weakened for a prolonged period, the repercussions will not stop at the Bangalore racecourse. They will be felt across Indian racing.

 

That is why the proposed settlement should be welcomed, but not celebrated as though every problem has been solved.

 

A road ahead, but a difficult one

 

After years of litigation and uncertainty, BTC finally appears to have a possible route to a new home at Kunigal while retaining a foothold at Race Course Road.

 

That is significant.

 

But the settlement must now be made financially and operationally workable. The Government's arrears claim has to be quantified. The exact lease terms for the four acres have to be incorporated. The cost of developing Kunigal has to be assessed realistically. A sustainable revenue model has to be found. And the licensing position has to be made clear.

 

Owners need to know where their horses will race.

 

Professionals need to know where their livelihoods will come from.

 

Race-goers need to know that Bangalore racing has a future.

 

And the rest of Indian racing needs Bangalore to remain a strong racing centre.

 

The settlement may have found a new piece of land for Bangalore racing. The real challenge now is finding the money and the regulatory certainty to put a racecourse on it. The settlement is only the beginning of a new struggle.