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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
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© ESPN Sports Media Ltd.
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