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Reverse bidding: How 2 new IPL franchises will be picked today

They will replace Chennai Super Kings and Rajasthan Royals, who were suspended by the RM Lodha Committee, appointed by the Supreme Court to investigate the 2013 IPL corruption scandal.

Written by Shamik Chakrabarty | Kolkata |
Updated: December 8, 2015 12:43:41 am
ipl, bcci, ipl match fixing, ipl betting, match fixing, cricket match fixing, cricket betting, sports betting, lalit modi, israel, bjp, indian express columns The two new franchise owners will be picked through a reverse-bidding process — the base price for the reverse bid from the central revenue pool is Rs 40 crore.

The Board of Control of Cricket in India (BCCI) will open in Delhi on Tuesday tenders for two new IPL teams. They will replace Chennai Super Kings and Rajasthan Royals, who were suspended by the RM Lodha Committee, appointed by the Supreme Court to investigate the 2013 IPL corruption scandal. The two new franchise owners will be picked through a reverse-bidding process — the base price for the reverse bid from the central revenue pool is Rs 40 crore, and the party that bids for the lowest share from the central revenue pool will be the winner of the new team.

Why is BCCI conducting this unscheduled franchise auction?

After the Lodha committee suspended Super Kings and Royals for two years, and barred CSK official Gurunath Meiyappan and RR co-owner Raj Kundra from involvement in cricket for life, the BCCI had to take a call on whether to go ahead with a six-team tournament for the next two seasons or invite two new franchises. A four-member working group comprising IPL chairman Rajeev Shukla, BCCI secretary Anurag Thakur, treasurer Anirudh Chaudhary and IPL governing council member Sourav Ganguly was formed. The committee met the IPL stakeholders and decided to invite tenders for two new franchises for two seasons to stick to the eight-team format. The Board decided against having a 10-team IPL from 2018 — when the two banned teams will return — onwards because most of the existing franchises were not warm to the idea; they felt it would negatively affect their valuation. Also, the BCCI’s contract with the sponsors and official broadcasters for the IPL ends in 2017, and the Board wants to start with a clean slate from 2018.

How is the bidding process going to be different this time?

BCCI has a central revenue pool made up of the hefty television rights income and other sponsorship earnings connected to the tournament. From this central kitty, BCCI passes on roughly Rs 40 crore to each IPL franchise. This is known as the annual management fee. The bidder that settles for the least management fee gets the team. Besides, there is also an option of ‘negative bid’, whereby a bidder not just forgoes the entire management fee but also pays an additional amount to the BCCI. Example: Team A agrees to a reduced management fee, say Rs 10 crore. Team B takes nothing from the BCCI but pays it Rs 10 crore. Team B wins the bid. In the past, new franchises like Kochi Tuskers or Sunrisers had to pay a franchise fee to be part of IPL; this time it is different.

What are the obligations of the bidders?

No bidder can have an interest in another franchise, existing or suspended. Each bidder has to pay Rs 1 crore to be part of the auction. The two winning bidders have to furnish a bank guarantee of Rs 66 crore. To avoid a conflict of interest, no BCCI official can have any connection with bidders. The new entrants can’t use names like ‘Rajasthan’, ‘Royals’, ‘Chennai’, or ‘Super Kings’. Their names can’t even resemble names of any existing or suspended team.

What happens to the players of the two banned franchises, CSK and RR?

These players, said to be around 50, will be divided into two groups: Capped and Uncapped. ‘Capped’ will be those who have been in the playing XI of a senior national team in the last five years. The rest are domestic players who are yet to make the international cut. The top 10 players will be up for sale through a draft system, while the rest will go to the auction pool.

How will the draft system work?

Big names from CSK and RR like M S Dhoni, R Ashwin, Ravindra Jadeja, Ajinkya Rahane, Brendon McCullum and Shane Watson are expected to figure in the draft. Each team will have a salary cap of about Rs 66 crore. The team that submits the lowest bid at the auction will have the right to choose the first player in the draft. In case of tied equal lowest bids, the names of the two teams will be placed in sealed envelopes. The envelope picked first will get the first right to select a player. Irrespective of the league fee specified in respect of each player, the first capped players picked will mean the salary cap diminishing by Rs 12.5 crore.

How will the teams decide the city they represent and the stadiums they play?

Bidders can choose from Chennai, Cuttack, Dharamsala, Indore, Kanpur, Nagpur, Pune, Rajkot, Ranchi and Visakhapatnam. Each bidder must specify one or more stadiums in the bid document, but will eventually get a venue to call their own. Chennai, which has an established fan base, is expected to be a favourite. Jaipur has not been included in this list because of BCCI’s problems with the Rajasthan Cricket Association. Kochi isn’t in contention since that franchise too is involved in litigation.

Will a consortium be allowed to own a team? (Lalit Modi had tweeted the shareholding patterns of the Kochi franchise, which led to a big controversy.)

Consortia, joint ventures, partnerships (including limited liability partnerships) or joint bidders may submit a “Consortium Bid”. They must describe all relevant arrangements, including the intended final shareholding structure, and all identities. Each member of the consortium must attend the bid opening. If the consortium is a partnership, the partners must sign two identical original franchise agreements, and any one partner must sign documents under a general power of attorney. An individual or company may only be a member of one consortium, and can’t submit a separate bid on its own behalf.

Will the BCCI retain complete control over the process?

Unsurprisingly, yes. BCCI reserves the “unfettered right” and “absolute discretion” and without any liability whatsoever to any bidder the right to cancel the entire tendering process at any stage prior to the execution by BCCI. They can also amend, vary, waive and/or modify any or all of the terms of a binding franchise agreement with a potential franchisee without giving any reasons.

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