Tag: taxation

How Moto GP is trying to avoid the pitfalls that scuppered F1’s foray into India

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Ten years ago, India made its mark on the world motorsport map with the inaugural Indian Grand Prix Formula One race in 2011, which ran for three years at the Buddh International Circuit.

The Indian GP was an audacious effort from a private enterprise with little government support. The Jaypee group, which built the circuit, promoted the race before it hit financial troubles, leading to Formula One dropping the country with two years left in the contract.

Also read: Inaugural Grand Prix — a dream come true for India

During its run, the Grand Prix also got mired in various issues, from customs clearance for bringing the cars and parts to taxation when motorsports was not even considered a sport and was instead classified as entertainment.

The bureaucracy did not help matters with the red tape frustrating everyone as there was very little State support for the event.

Earlier this year, a big-ticket motorsport event returned when Hyderabad hosted a round of the FIA Formula E championship around the city’s streets, with the local government being heavily involved in bringing the race. While Formula E is a world championship event, it started only in 2014, and there are already doubts if it will happen next year.

Also read: Hyderabad loses spot in E-Prix, but all is not lost yet

But next week, India has another chance to host a high-profile motorsport event when Moto GP, the premier two-wheeler racing series, makes its entrance with the inaugural Grand Prix of Bharat at the BIC in Greater Noida.

Like F1 was, this event is also being promoted by a private enterprise — Fairstreet Sports. But unlike the Formula One experience, the race has the blessings of both the Uttar Pradesh and the Union governments, which should help in areas like logistics and visas, for example.

But how did the whole thing come to be about? The Hindu recently caught up with Pushkar Nath Srivastava, the chief operating officer of Fairstreet Sports. The promoters have signed a seven-year deal to host a round of the prestigious championship that started in 1949, one year before Formula One.

“Our team has been part of the World SuperBike championship in 2013 and 14. We went racing for two years, and MotoGP acquired the series. My partner Amit Sandill stayed with the racing arena and moved to Europe, where we saw MotoGP from close quarters,” said Srivastava

“So in 2019, when the government classified motorsport as a sport, it was a major step. We started studying what F1 did and didn’t and what we should and shouldn’t do as well. We started reading the judgments and did our homework for two years, and then we realised this is probably the best thing to do,” said Srivastava.

Also read: Did Indian customs cost Alonso the title?

The next step was to convince Dorna, the commercial rights holder for Moto GP. While Dorna was confident with the organisers’ ability, it wanted to know how much the government would support the efforts, having seen what F1 went through.

“They came to meet the UP CM Yogi Adityanath and the Union Sports Minister Anurag Thakuar and quickly realised they were passionate about Moto GP. With that, the approval and compliance process got very smooth, with the Sports Ministry becoming our single-touch point alongside the UP Govt. We got all our NOCs on time and didn’t have to keep running from one office to another.”

Though India is the biggest two-wheeler market, with more than 15 million bikes sold yearly, Moto GP has taken time to come to the country.

“No one was able to convince them before this. We did our study and convinced them how it can be done. We told them you should look at the Indian market to increase your numbers. After the race announcement, Moto GP has more followers on Facebook in India than F1 has. At the end of the day, every house has a bike and a bat,” Srivastava explained.

It is here that the government’s decision to classify motorsport as a sport did wonders. “Now that the federation (FMSCI) is recognised as well, the global federation (Federation Internationale de Motocyclisme) talks to our federation, which then talks to the Sports Ministry. Things like processing visas have become easy because the ministry recognises the federation.”

The core issue during F1’s three-year visit was with taxation, as teams had to pay a portion of their revenue earned since India was one of the 19 or 20 events on the calendar.

Also see: Grand Prix of Bharat

When asked how the organisers are dealing with it, Srivastava said, “They (F1) didn’t know how Indian taxation worked, and it was a mindset problem because they sold the broadcasting rights and other things.

“So, for MotoGP, we are taking care of selling broadcasting rights to Jio Cinema, and similarly, we are also handling some sponsorships. So, we generate revenue, and we pay the taxes in the right way. It was also a mindset change for Dorna to let go of certain things, and we convinced them that we can handle some things better.”

The GIST
The Formula One Indian GP was an audacious effort from a private enterprise with little government support
The Jaypee Group, which built the circuit and promoted the race, hit financial troubles, leading to Formula One dropping the country from the calendar
The government’s decision to classify motorsport as a sport, from the earlier classification of entertainment, in 2019 has worked wonders in bringing Moto GP to the country
After having lost F1 and uncertainties around Formula E, a lot rides on MotoGP

While some logistical stuff has been smoothed out, there were issues regarding the track itself. The Yamuna Expressway Industrial Development Authority (YEIDA) took over the land on which the circuit was built after the Jaypee Group failed to pay its dues, though it maintains the facility. The problem meant there were some issues in doing the essential repairs to the track to make it suitable for bike racing and needing clarification over which party would do it.

Things were eventually sorted out, with organisers footing the bill to repair the track. “The track had some challenges, and we met the CM and told him we wanted to bring MotoGP, and they helped us immediately. So we partnered with Jaypee and the government, and both gave us the required NOC to do the work on the track. Jaypee was open-minded and keen to bring a big event and is partnering with us. It is a shame to see such a great property not being used,” said Srivastava.

Also read: Rural sports academy dearer to me than F1, says Maken

Across the world, countries provide state funding to bring motorsport events to promote local tourism. While it is a tough sell to use public funds in a low-income country like India with more pressing needs, there seems to be a change in mindset at the government level to at least make it easier to hold such events without direct state funding.

After having lost F1 and uncertainties around Formula E, a lot rides on MotoGP. A third strike could be a massive dent to the country’s image and make other series wary of coming here yet again.

But with just ten days to go, Srivastava is confident of pulling off a great event that can stay on the calendar. “This a great chance to showcase what UP and India offer. More than 200 countries watch MotoGP. Recently, the Prime Minister Narendra Modi spoke about following the Qatar model of using sport to promote tourism, and it warmed our hearts to hear that at a time when we are doing that.”

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White House budget assumes student-debt forgiveness will move forward

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Borrowers across the country are in financial limbo as they wait for the Supreme Court to decide whether the White House’s student-debt cancellation plan is legal. But the Biden administration’s own financial planning presumes the initiative will survive the courts. 

As part of the Department of Education’s funding request to Congress for $2.7 billion for the Office of Federal Student Aid, officials took the costs and savings into account of President Joe Biden’s plan to cancel up to $20,000 in student debt for a wide swath of borrowers, Undersecretary of Education James Kvaal said on a conference call with reporters Thursday.  

The “budget assumes that we will move forward,” with the plan, Kvaal said. 

The fiscal-year 2024 funding request unveiled Thursday marks the latest salvo in a battle over the money Congress will give FSA. If the courts allow the Biden administration’s debt-relief plan to move forward, FSA would be charged with implementing it. That’s made FSA funding a flashpoint for congressional Republicans in recent months. But FSA is also responsible for almost every aspect of the financial-aid and student-loan system, something that could be put at risk if the office doesn’t get enough money from Congress. 

Biden administration officials didn’t provide much detail on the call with reporters about how debt cancellation impacted the Department of Education’s request for funding for FSA. Implementing the debt-relief plan would likely be a cost, but wiping borrowers off the books could also save the agency money because there would be fewer accounts to deal with. 

“My assumption is that if you take cancellation into account, the budget request would be smaller than it would be if you assume cancellation is not happening,” said Sarah Sattelmeyer, the project director for education, opportunity and mobility in the Higher Education Initiative at New America, a think tank.  

That could create challenges if the court strikes down debt cancellation, she said. “The bottom line is, really we need to make sure there are sufficient resources for any situation that might happen with FSA,” she said. “That’s the most important because when there aren’t sufficient funds, students and borrowers bear the brunt of that.” 

Like the IRS, FSA may not ‘seem sexy,’ but it’s important

Though FSA is not a household name, the office is in charge of all sorts of seemingly wonky tasks that touch almost every student and borrower. FSA oversees the Free Application for Federal Student Aid, which college students use to apply for loans and grants; it disperses student loans to borrowers; manages the companies collecting student-loan payments; monitors colleges for wrongdoing and more. 

That’s why many researchers and student-loan borrower advocates were concerned when Congress level-funded FSA last year, despite a request from the Department of Education for an uptick of $800 million. Congressional Republicans touted the decision as providing “no new funding for the implementation of the Biden administration’s student-loan forgiveness plan.” 

Dominique Baker, an associate professor of education policy at Southern Methodist University, compared FSA to the Internal Revenue Service. “It doesn’t always seem sexy,” to lawmakers to increase funding for these types of bodies, she said, but a lack of funds can have a real impact. 

She cited delays in borrowers qualifying for relief under already existing programs as one impact of an underfunded FSA. Last year, the Department of Education said that student-loan servicers weren’t properly tracking the number of payments borrowers made toward qualifying for forgiveness under certain student-loan repayment plans.   

“It is important to ensure that college is affordable,” Baker said. “It is sometimes easier to talk about funding pieces that make college more affordable than it is to talk about compliance and regulatory bodies that are ensuring that this one piece of paper that gets shuffled over to this other desk happens in a timely manner.” If it doesn’t, she added, “you will accidentally pay five months of extra loan payments past when your debt should have been canceled.”  

Over the past few years, FSA has been asked to do even more than what’s typically required. Many of the Biden administration’s initiatives to improve the student-loan experience, including making it easier for borrowers to access Public Service Loan Forgiveness and proposing sweeping changes to the way borrowers repay their student loans, fall under FSA’s purview. 

In addition, FSA is in the middle of overhauling its student-loan servicing contracts in an aim to provide a better experience for borrowers. Things like giving more direction to student-loan servicers about how they communicate with borrowers about their loans, and ensuring student-loan companies are more responsive to issues borrowers and regulators have raised in litigation, are part of that effort and will require resources, said Clare McCann, a higher-education fellow at Arnold Ventures.

“All of that is incredibly important to making sure borrowers are going to have a smooth transition back into repayment, when that does happen,” she said. 

It’s too early to say which of these priorities could be at risk because of Congress’ decision to level-fund FSA last year, Sattelmeyer said. “We don’t have a great idea yet of the tradeoffs FSA is going to make, but they’re going to have to make tradeoffs,” she said. 

For fiscal-year 2024, the Biden administration has asked for a $620 million increase over the amount that Congress enacted for fiscal-year 2023. And if FSA doesn’t get that funding increase, researchers and advocates worry the office will continue to have to make tradeoffs that could hurt students and borrowers.

“D.C. is and remains a political town,” Sattelmeyer said of the possibility that the department’s funding increase for FSA could fall victim to the same forces that scuttled it last year. “I can’t predict the future, but I can say that it is really important to message,” through the budget, “that FSA needs additional resources,” she said. “It’s also important for practitioners and advocates and others in this space to be pushing for additional resources.” 

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