How India’s demonetization is impacting Indian sport

Published 01 December 2016 By: Aahna Mehrotra, Anurag Tandon

How India’s demonetization is impacting Indian sport

On November 8th, 2016, Prime Minister Narendra Modi delivered a surprise address to the country at large. In his address, he announced demonetization as a measure to curb the plague of black money.1 As a corollary to his actions to bring more accountability, he announced that currency of the denominations of Rupee (R.) 500 (approx. USD $7.5) and R. 1000 (approx. $14.5) would cease to be legal tender from midnight of 8th November 2016. This resulted in a whopping 86.4 percent of the currency notes in circulation in India being declared as defunct.2

What ensued was nothing less than pandemonium. Chaos reigned supreme as banks and Automated Teller Machines (ATMs) saw long snaking queues of citizens, anxious to exchange the now-defunct notes.3 The Government put a number of provisions and restrictions in place to ease the transition the process of exchange of old and defunct currency to the newly announced denominations,4 but these offered little respite.

As per estimates available online, currency amounting to Rs.14 trillion was pulled out of circulation. If the Government plans to replace this deficit with the new notes in an equal ratio (half the amount in Rs.2000 notes, and the other half in the new Rs.500 notes), it has been calculated that it will take 175 days to print the number of notes required and then transfer and distribute them.

While the intention behind this drastic measure may be laudable, the implementation has left a lot to be desired. Acute shortage of the new denomination notes, coupled with ATMs that required recalibration, brought a significant portion of cash transactions to a standstill. People were left in the lurch, with no option but to either deposit their money in banks, or get the money exchanged from banks.

Though a section of people welcomed the move and undertook to brave the inconvenience caused, a section of the populace was up in arms against the decision of the Government. Deaths of patrons, caused while waiting at queues in banks was used as ammunition to assail the viability of this decision. The Government, however, ruled out withdrawal or roll-back of this move.5

Considering the gravity of the decision, the repercussions of it were felt far and wide throughout the country. In addition to people being affected, various other bodies, including National Sports Federations (NSFs) and other sports bodies were also affected by the immediate demonetization.

East Bengal, which had signed the acclaimed Haitian footballer Wedson Anselme hours before the Prime Minister’s address,6 hit a minor roadblock, as the striker had to leave India without being paid an advance. Anselme is tentatively scheduled to return to India in December to join practice sessions of the team once the present edition of the Indian Super League draws to a close.7 It remains to be seen how the Club will now transfer Anselme’s fee to him.

Similarly, the International Premier Tennis League (IPTL), presently in its third edition, saw World Tennis stalwarts Roger Federer and Serena Williams back out. Mr. Mahesh Bhupathi, Managing Director of the IPTL, attributed this to demonetization. He stated that he personally explained to both Roger Federer and Serena Williams the prevailing fiscal situation in India and they were both very understanding and he is hopeful hopeful of their participation in future iterations of the IPTL.[This paragraph was added on 7 December 2016]

Similarly, it has been speculated that members of the England cricket team, presently in India for the Test Series, are yet to receive a daily allowance of Rs.4200 due to them under an as yet unsigned Memorandum of Understanding between the BCCI and the ECB because of the unavailability of the cash. In the meantime, players are having to make do with whatever cash they have, or use their cards for any expenses incurred.9 Though card payments are a viable and convenient option for the players at present, the lack of legal currency may be pose a slight inconvenience for smaller transactions carried out at outlets, which may not have point-of-sale facilities for cashless transactions.

Interestingly, it has recently been reported that the BCCI has considered providing prepaid cash cards to its players (although it insists that this move is not linked to the demonetization drive). At a recent seminar held for the Treasurers of the various State Cricket Associations, it was proposed that prepaid cash cards (which are presently issued to select individuals) be issued to players.10 While the BCCI may not attribute this move to demonetization, the timing of this proposal seems to suggest otherwise.

Even the casinos operating in Goa have taken a hit, and are now accepting payments via debit and credit cards. Payouts and cash-outs to be paid to players are currently being paid by way of wire transfers and TDS (Tax Deducted at Source) Certificates will also be handed over pursuant to such payments.11 Citing the shortage of valid tender and low turnout of customers, a few casinos have reportedly shut shop, whilst others are struggling to provide change to customers. A number of other casinos have also reportedly been considering reducing their staff hours to counteract the acute shortage of currency.12

Other Sports Federations have also been affected in their day-to-day transactions. However, many transactions take place through cheques or Real Time Gross Settlement (RTGS), so the inconvenience has not brought the functioning of the Federations to a complete stop.13

Similarly, sporting events organized by Schools and Colleges have taken a hit. A majority of events require a small registration fee to be paid by all students, which is mostly paid in cash to the school authorities. Parents are hard-pressed to make all such payments in legal tender, considering there are limits imposed by the Government on the amount of withdrawals, where the customers can withdraw only Rs.2500 (approximately USD 36.4) per day.14 All arrangements made by schools are also in limbo, as coaches, umpires and other staff are often paid on a daily basis. With the phasing out of old currency, it has become increasingly difficult for schools to pay such persons on time, and in valid currency.

One matter that the authors acted on exemplifies the difficulties facing event organizers. The matter in question concerned an organization hosting multisport competitions exclusively for school students saw its title sponsor back out mere weeks before the commencement of the games.15 At the same event, a large number of coaches and umpires were retained on a model where they would be remunerated daily. However, since the demonetization has been brought into effect, it is near impossible for the event organizer to ensure the additional staff and officials retained by him are paid on a daily basis. Since all such wages are usually disbursed on a daily basis to a large number of staff members, the money is mostly withdrawn at once and paid to recipients, as and when it becomes due. In the event of payments being made to the recipient’s bank account, the process would become extremely cumbersome and time consuming. Another factor which renders this exercise futile is the fact that not every staff member or person engaged would have a bank account, making this simple process complicated and tedious for the organizer to follow

Not just school sporting events, but events being organized on a professional scale are suffering too. In matches of the Ranji Trophy series, players are facing extreme difficulties as there are teams from various states participating. Players from different states have had to make do with whatever limited currency they have as the alternative is to spend their practice time standing in a queue at a bank to get their money changed for valid tender.16

The demonetization has, however, not just been the harbinger of bad news for sport. In a heartening instance, not one to let demonetization cow the spirit of the game, the Andhra Cricket Association allowed people to watch the first day of the India-England Test series at the Stadium for free, owing to the shortage of legal tender, and the difficulties occasioned by people who went to buy tickets after the demonetization was announced.17 There are also reports emerging that instances of betting have decreased.18

It now remains to be seen how the various National Sports Federations and bodies adjust and adapt to these changes. The Government is resolute in its commitment that these changes are here to stay, and that the inconvenience caused will be worth the outcome. Till the time there is sufficient currency in circulation, payments need to be made either by wire transfers or cheque. With a marked drop in the instances of betting and other illegal corollaries of sports, perhaps this could clean up sport to a considerable extent. Time will tell of the true impact of this move on the world of sport. For now, the most one can do is wait.

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Aahna Mehrotra

Aahna Mehrotra

Founder, AM Sports Law & Management Co

Ms. Aahna Mehrotra is the principal lawyer at AM Sports Law and Management Co. She was called to the Bar in May 2011 and has gained considerable exposure through her experiences at different institutions worldwide.

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Anurag Tandon

Anurag Tandon

Anurag is an Associate in the Sports Law department at DPSA-TMT. DPSA-TMT is a merged entity of DPSA Legal and TMT Law Practice, founded in October, 2016. 

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