Sahara India, owners of the Pune Warriors franchise, have pulled out of the IPL over financial differences with the BCCI stemming from the valuation of the annual franchise fee it has to pay. The decision, the latest crisis to hit the IPL, comes three years after it bought the Pune franchise for $370 million - the highest price paid for any of the IPL franchises.
It seems the immediate cause was the BCCI's decision to cash the bank guarantee from Sahara that that it was obliged, under its contract, to furnish at the start of each season. The guarantee is equivalent to the amount to be paid annually to the BCCI and can be cashed in case a franchise fails to honour its commitments.
In this case, Sahara had furnished a bank guarantee worth Rs 170.2 crore (approximately $30 million). Since the deadline for paying the franchise fees was May 2, the BCCI waited till Sahara's IPL 6 commitments were over and cashed the guarantee on May 20.
Reacting to the development, IPL chairman Rajiv Shukla said the board cashed the bank guarantee according to the rules. "Yes, it (Pune Warriors) has pulled out. As per the rules and procedure of the BCCI if a franchise fails to pay the fee then we cash the franchise's bank guarantee. We are extremely sad by their decision to pull out. This should not have happened," Shukla said.
Pune Warriors finished eighth in the current IPL season, winning four out of their 16 matches.
This is the second time Sahara have pulled out of the IPL; they quit on the day of the 2012 auction and withdrew from sponsorship of the Indian team.
This time, though, Sahara will continue its sponsorship of the Indian team until the end of December 2013, when their present contract expires. "We share an excellent relationship with the players and will not want such dedicated and good human beings who serve the country so committed to get harmed financially due to unsporting attitude of BCCI. So we have given time to BCCI to get the new sponsorship in place from January 2014."
Sahara's actual franchise fee has been a contentious issue ever since they bought the Pune franchise for Rs 1702 crore ($370 million) in March 2010. Sahara had been demanding that the franchise fee from their original agreement should be recalculated since the minimum matches per year have been reduced to 14 from the 18 promised to them.
In a lengthy statement, Sahara detailed its dispute with the BCCI over franchise fees. It said it was "disgusted" by the BCCI's attitude towards it and would not rejoin the league even if the entire franchise fee was waived.
"In 2010, Sahara had bid Rs 1700 crore for the IPL franchise on the basis of revenue calculation on 94 matches. But we got 64 matches only," it added.
"We and the Kochi team [also bought at the 2010 auction] immediately protested and requested the BCCI to reduce the bid price proportionately for viable IPL proposition. Nothing was heard. We waited with confidence that such a sports body should have sportsmanship spirit," it said.