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

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.

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.