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HORSE SENSE
By P G Belliappa
Tuesday 07 Mar 2017
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CHANGE comes in many forms, some incremental and some in bold strokes. A combination of circumstances early this winter season led to the Bangalore Turf Club (BTC) taking the latter route in opting for ‘tote only betting’ at Bengaluru.

The trigger was the demonetisation of high-value currency notes on November 8, 2016. Bookmakers, who were always an integral part of the racing scene in Bengaluru, kept away after the first two days of the season citing a shortage of cash. Even the club was forced to cancel a race day and two days of ‘off- course betting’ due to the same reason. However when the bookmakers wanted to return in December, the club imposed such onerous terms on them - to make up for the loss of revenue due to their non operation - that the bookmakers themselves opted out.

This revolutionary move has its share of critics and risks. Old timers particularly were upset with the bookmakers’ disappearance as they were a distinct and colourful part of the racing experience. Loss of revenue from stall fees, betting commission & mobile charges, not providing a guide to betting flows and odds, closing odds pay out at the tote vs fixed odds earlier and diversion of betting to other centres or driving it underground are cited as drawbacks.

However, the obvious advantages of a tote monopoly clinched the decision to go ahead. Today, as racing aficionados congregate for the Invitation Cup weekend in Bengaluru, they will be participating in a unique experience as the BTC is the only Turf Authority in India to conduct racing without bookmakers.

The growth of the totes since it was first computerised seems to have given the club the confidence to go ahead. From Rs. 10 crores in 1991-92, turnover at the tote has grown rapidly, especially after 1994-95 when the government compounded payment of totalisator tax and the club commission on win and place bets was reduced to 2.5%. In 2015-16 it reached close to Rs. 1,800 crores whereas field money with bookmakers during the same period showed no growth at all and remained at less than Rs 50 crores.

The state government collected Rs. 142 crores last year as totalisator tax as against Rs. 13 crores from betting tax on bookmakers. The club earned around Rs. 85 crores from the tote but it took in only Rs.13 crores from bookmakers - stall fees (Rs. 5 cr.), betting commission (Rs. 4 cr.) and mobile charges (Rs. 3 cr.). From an administrator’s point of view, therefore, a tote monopoly was a ‘no brainer’.

The success of racing bodies around the world with a tote monopoly as against those that depend on bookmakers or who run a system incorporating both testifies to the ‘tote only’ model’s supremacy.  This is mainly because the source of racing finance- betting revenue is in the hands of the racing authority which enables it to plough back enormous sums of money into the all-round development of the sport and the community that supports it.

 The figures are staggering! The annual betting turnover in Japan is around US$ 22.5 billion, equivalent to Rs. 150,000 crores and the Japan Racing Association returns 15% back to the racing industry. Their top international race, the Japan Cup has stake money of US$ 5.4 million (Rs. 36.2 cr) with the winner taking home US$ 2.5 million (Rs. 17 cr). In comparison, the “official” all India betting figure would be less than      Rs. 4, 000 crores while the Indian Derby, our richest race, offered Rs. 3.3 crores as total stakes this year.

The betting figures at Hong Kong are equally eye-popping. From a single city, the Hong Kong Jockey Club's tote monopoly garners about Rs. 94,000 crores on race betting alone and the club nets a margin of about Rs. 3,900 crores. For the 1,200 horses racing in Hong Kong, stake money on offer is around Rs. 900 crores. Facilities are among the finest in the world with 6 of the 25 top internationally rated races being run there.

Plugging wholesale leakage of revenue and evasion of taxes to the turf authority and the government are other spin offs of a ‘tote only’ betting system. Again, the figures are very revealing. At Bengaluru, bookmakers paid the government Rs. 13 crores and the club a similar figure on field money of only Rs. 48 crores.

Effectively, bookmakers have a pool of 60% of the collections available. On this they take the risk of payouts, offer credit, face losses on bad debts, disburse salaries and meet other expenses. Yet they match or offer better odds than the tote which has a payout pool of 87% on win and place without risk. This is not a viable business proposition. But bookmakers do exist & flourish, hinting at massive tax evasion and recording of bets between 10 x and 100 x. The stagnation of bookmakers’ field money and tote’s exceptional growth in the last 25 years further support this inference.

The third and probably the most important advantage a tote monopoly provides is that it improves the sport’s integrity. While not every bookmaker can be accused of trying to influence results, the temptation to do so is understandably overwhelming. 'Coups' which are the bane of racing, are possible only in a bookmaker-operated environment. They are much harder to pull off on the tote, thus safeguarding punters’ interests.

Under any system of betting worldwide, the average of winning favourites is between 30 to 35 percent. But the perception that racing is fairer without the influence of bookmakers is pervasive. Earlier, riots occurred in Bengaluru when heavily fancied favourites failed, particularly in jackpot races. With the shift in betting to the totalisators over the last two decades, they have rarely occurred since.

Again, clubs running tote monopolies offer the world’s highest stakes per race due to the large sums available with them. In Hong Kong it is more than Rs. 1 crore per race for 800 races which explains why as many as 23 horses rated at 115+ and listed in the Longines World’s Best Race Horse Rankings run there. In Singapore it is around Rs. 41 lakhs and in Japan around Rs. 32 lakhs. In contrast, in England, the home of thoroughbred racing where bookmakers rule, it is Rs.15.6 lakhs while in Bengaluru stakes, incentives and subsidies added up to Rs.11 lakhs per race last year which was among the highest in the country.

This kind of stake money offered as an incentive by the club attracts quality horses, intensifies competition and normalises ‘triers.’ A neck separates the winner from the runner up in 75% of the races at Hong Kong and the distance between the 1st and last runner averages about 3 ½ lengths. While it is early days yet in Bengaluru and these results are hard to match, there is anecdotal evidence from both racing officials and professionals that racing has improved considerably with the exit of bookmakers.

Merely removing bookmakers, however, will not catapult Bengaluru into the stratospheric realms that Hong Kong and Japan now occupy. It will be a long and hard climb, one which can only be successful if all the other steps taken in those jurisdictions to popularise the sport, follow a customer-centric approach and a clamp down on illegal bookmakers are pursued relentlessly.

Usage of technology leveraged the success of Hong Kong and Japan. Smart cards, self -vending terminals, tele- betting and hand-held devices set the standard. Super large screens display racing and forecast the probable combination odds so vital for pool bets, a major revenue earner.  Digital products are also being constantly developed to meet customer demands for speed, convenience and connectivity.

Hong Kong also uses its infrastructure of betting shops all over the city to run lottery and football pools. If these are also considered, then the combined betting turnover figure almost doubles to Rs. 1,76000 crores.  There is a proposal to legalise cricket betting in India. If this comes through and the totalisator facilities are similarly utilised, it could be a game changer for race clubs!

 As these ideas tie in with the government’s recent push for digital transactions, less cash and better tax compliance, the move can be successful. The public and government may also change their attitudes. Even today horse racing, which the Supreme Court had declared ”a game of skill” carries the stigma of gambling, rigging and tax evasion. So much so that Race Course Road in New Delhi, which houses both the Delhi Race Club and the prime minister's residence, was recently renamed as “Lok Kalyan Marg.”.

To change mindsets, the path set by the Hong Kong Jockey Club (HKJC) is worth treading upon. The HKJC devotes its surplus each year to charities and community projects. It contributes so much to the city’s economic and social development that it is seen as Hong Kong’s largest community benefactor and not merely as a race club. Overall, its contribution to government revenue – including betting duty, and tax on profits is an astounding Rs. 18,200 crores! In comparison, last year, the Bangalore Turf Club paid the state and central governments about Rs 175 crores in taxes and all the Turf clubs in India put together, not more than Rs. 400 crores.

On the CSR front, Bangalore Turf club contributes about Rs. 1.7 crores to charities; Mysore Race Club runs a charitable eye Hospital; Royal Western India Turf Club runs a highly visible program with contributions exceeding Rs. 1 crore and the other turf clubs chip in as well. But all these are dwarfed by the strikingly impressive contribution made by HKJC which supports more than 200 charities and community projects with contributions in excess of Rs. 3,400 crores last year.

It is no wonder then that punters in Hong Kong happily declaim that they are not betting but actually donating to charity.

The elephant in the room is of course the Goods & Services Tax (GST), which is due to be implemented in the coming financial year. If pegged at a reasonable rate and charged on the commission earned from the totalisators, it has the potential to make for an all-India tote monopoly and spell good times for racing. If levied on the turnover, it could sound the death knell of the tote and the sport as we know it.

I hope that it will be the former for I would like to continue contributing to charity!

Article reproduced from the Souvenir published by Bangalore Turf Club Ltd on the occasion of the Indian Turf Invitation Cup weekend 2017 kind courtesy of the writer.