India news August 22, 2013

Sliding rupee hurting Indians at the IPL

The rapid depreciation of the Indian rupee over the past couple of months has led to disruptions in the accounts of IPL franchises, and exposed the flaw in the tournament's dual-payment structure. The rupee's fall, from 54 against the US dollar on May 3 to 65 on August 23, will most severely affect Indian players, whose wages are linked to a three-year locked-in rate of 46 to the dollar; overseas players are paid according to the floating rate and will not be affected.

The net effect on the highest-paid Indians in the IPL - like Gautam Gambhir and MS Dhoni - could, given the 40% difference between the actual dollar rate and the "IPL rate", run into tens of millions of rupees worth of losses.

As for the franchises, what they save on payments to Indian players they lose on the wages to their overseas staff.

The problem stems from the amendment to the regulations before the 2011 IPL auction, by which Indian players who were auctioned were required to sign a three-way agreement with the franchise and the BCCI-IPL. The exchange rate for all these contracts was fixed at Rs 46 per USD from IPL 2011 to IPL 2013, and is due to be revised before next year's auction. However, it was decided that overseas cricketers would be paid according to the prevailing exchange rate of the day.

The IPL's payment schedule requires that players are paid their salary in four installments: 15% before the beginning of the season, 50% before May 1, 15% before the beginning of the Champions League Twenty20 and 20% before November 1. By that calculation, Indian players could receive up to 35% of their salary at the lower rupee rate.

For instance, Gambhir was bought for $2.4 million by Kolkata Knight Riders in 2011 - a salary of Rs 11.04 crore based on the fixed exchange rate. Had his player agreement been based on a floating exchange rate, he would have taken home at least Rs 13 crore (on the 54-rupees-per-dollar rate), and possibly closer to Rs 17 crore (on the 65-rupees-per-dollar rate).

One IPL cricketer, when asked about this on Thursday, admitted that the Indian players were indeed losing out on a lot of money. "But I am happy with what I am getting," he added. A player agent who manages some of the most sought-after rising stars in Indian cricket said he will make his "best effort to address the issue before the next year's auction".

The franchises too are taking a hit. One franchise official estimated that each rupee fall against the dollar would result in an additional expenditure of at least Rs 15 lakh (approx USD 23,200) for every franchise.

"The falling rupee is going to impact our payout to the international players since 35% of the salary is still to be paid. I am sure franchisees are seeking to take forward covers in this volatile market," Raghu Iyer, Rajasthan Royals' chief exectuvie, told ESPNcricinfo. He did not comment on the impact on Indian players.

In the wake of rising costs, it didn't come as a surprise that IPL chief operating officer Sundar Raman emphasised the need to conduct the next IPL auction with the rupee as the base, rather than the USD, in a tweet on Thursday, something that Kolkata Knight Riders managing director Venky Mysore had strongly recommended in ESPNcricinfo's video show, The Huddle, during IPL 2013.

Explaining the rationale behind adopting a different policy for paying Indian and overseas cricketers, an IPL insider said it was done to suit practical purposes. "At the end of the day, even though all the players were being sold in USDs, the Indians were going to be paid in rupees, so it was easier to calculate their values with a fixed tag," he said. "It is similar to the IPL team valuation, which was rounded off at Rs 40 per USD when the first eight teams were sold in 2008. Hopefully, next year onwards, all the transactions will be made with the rupee as the base so that neither franchisees nor Indian cricketers will suffer."

Amol Karhadkar is a correspondent at ESPNcricinfo