Why India's Formula 1 Grand Prix is under threat
- 25 October 2013
- From the section Business
Only three years old and with two years to run on its contract, India's Grand Prix is already facing an uncertain future.
Bringing Formula 1 to India has cost more than $400m (£246m) and while it attracts some of the world's fastest cars and best drivers, many are questioning if the economic spin-offs are attractive enough for companies to put their money behind the event.
The race itself has attracted huge audiences, with tens of thousands at the venue and millions around the world watching it on TV.
But is it making enough money? That's the big concern that is dominating the race this year.
Though that does not seem to have dampened sponsorship events.
Drivers and divas from Bollywood dominate the glamorous events around race day at the Buddh International Race Circuit in Noida on the outskirts of Delhi.
McLaren Mercedes F1 driver Sergio Perez accepts that motorsport is yet to capture the imagination of the Indian public.
He says it is a shame that the Grand Prix is not happening in India next year.
"I think Formula 1 is not very popular here. But the interest is growing among the media and the fans.
"India is a very big market for Formula 1 and we should definitely be aiming to come back."
Reasons for cancellation
F1 boss Bernie Ecclestone announced earlier this year that the 2014 Indian Grand Prix would have to be dropped to tweak the racing calendar.
Reportedly, he could not agree on dates with the Indian organisers.
F1 management "wanted us to hold the race in March", says Sameer Gaur, chief executive of Jaypee Sports International, which owns and operates the race circuit.
"It was not practical to host one now and another in six months.
"But there should be no doubt that we will be back in 2015," he says.
However, India's motorsports industry has been speculating on a variety of reasons for the cancellation next year.
The chief reason is what are seen as unfriendly government policies.
The state government of Uttar Pradesh has refused to accept F1 as a sport and instead classifies it as entertainment.
This means that organisers need to pay tax and duties on everything connected with the race.
Fans too will have to pay entertainment tax on each ticket.
So for the Indian infrastructure firm, Jaypee Group - of which Jaypee Sports International is a part - the F1 investment has not come cheap, and the organisers have already been struggling with rising costs and poor revenues.
Fewer race fans
India's rupee has depreciated by over 40% in the past two years, and in August hit an all-time low against the dollar.
The Buddh International Circuit is one of the few Formula 1 racetracks in the world that is not backed by government money.
Other than the initial investment and operation costs, the venue needs to pay the F1 management an estimated licence fee of $40m annually.
The revenues from TV rights and track sponsorships go to the F1 management directly.
So the organisers mainly depend on revenues from ticket sales and while the inaugural race in 2011 drew in 95,000 fans, last year it was under 65,000.
This year, the figures are estimated to be even lower.
Taking on cricket
Indian Formula 1 driver Karun Chandhok says that while he can understand the government not being involved, "It'll be good if they didn't hinder the process.
"Just this week, I have had at least 50 different media people from around the world, and people from teams, engineers who have called me to say, 'Hey, we are stuck in London without a visa, we can't come to the race.'
"When you have 700 world media coming to talk about your country and about your race - the only thing they are going to go back with is what a pain it was to get into your country.
"We need to iron out these things."
In India, it is cricket that dominates the advertisers' wallets.
But with number of sponsors growing every year, companies are finding it difficult to make their brand stand out.
Last year, India's biggest telecom operator, Bharti Airtel, decided to drop its sponsorship for a cricket series in favour of the Grand Prix.
So why is there a question mark hanging over the viability of motorsports here?
Image consultant Dilip Cherian, who advises a number of firms on their investment in sports, says it would be judicious for F1 to keep its foot in India.
But he too agrees that costs have gone up and large global markets are going through recession.
"So while profits may be high, I don't think Indian corporates are paying enough to justify that kind of spend in India in the short run."
There are already 22 possible races on the F1 calendar next year - making it one of the longest seasons ever.
With Sochi in Russia and New Jersey in the US competing, many feel that once India loses its spot on the racing calendar, it will be tough to get it back.
Driver Karun Chandhok points out that F1 is more than just a sport.
It is a global calling card, he says, one that can open doors for Indian companies looking to gain an international foothold or for global companies entering the Indian market.
"If we really want to help brand India, we need events like F1."
So many are hoping that in spite of the break next year, Formula 1 will prove popular enough to get back on track in India soon.