Saturday, April 27, 2013

Will Casino business in Goa dwindle, if the BJP retuns to power at the Center: A discussion 
~~~Suman Mukhopadhyay
There are still lot of apprehensions floating around, regarding the gaming industry in Goa, after right-wing alliance led by Bharatiya Janata Party (BJP) returned to power by defeating Digambar Kamat led Indian National Congress (INC).

The BJP has been always been very vocal on its ‘anti-casino’ sentiment with Manohar Parrikar (Goa CM and who is also the minister of finance ) declaring that casinos are a nuisance and promised that offshore casinos would be relocated in the Arabian Sea, five nautical miles away from the shore during his last election campaign, which led the officials of Casino Association of Goa (CAG), looking for cover. There were also media reports though the BJP in Goa, is not entirely keen to remove casinos largely due to the legal complications like violation of license agreements with previous governments and the revenue potential from Casino`s as a major attraction for tourists, stringent regulations like banning entry to Goan residents and those below 21 years of age are likely to be enforced along with a stop on the issuance of new Casino licenses. Now if this is the attitude of the BJP towards Gaming business of India to resist Goa becoming Las Vegas of India, we can understand what will happen to this sector if they double up at the center!!

Recently, Manohar Parrikar, the CM of Goa, said, "The cabinet cleared the proposal of an entertainment tax and establishments falling under the category will have to take pre stamped tickets from the government for tickets such as casino entry tickets etc".

So, now the question arises: what is the future of Gaming Business in India or is it loosing sheen due to high handedness of the local government in Goa?

If we look at the balance sheet of the company called Delta Corp Ltd (CMP: Rs.63.70), a Bombay Stock Exchange listed entity and which through its subsidiaries, owns and operates two offshore casinos and two hotels in Goa, the gaming sector in Goa, does not look too encouraging. The company holds three of the six gaming licenses in Goa. There were some recent media reports that, it would launch 1,500-seat gaming Casino in Goa next month. Voila!!

Delta Corp Ltd's consolidated Q4FY13, results showed a net loss of Rs.10.37 crore, as against net profit of Rs.11.55 crore in Q4 March 2012. Moreover, the company's revenue from the core gaming business grew by meager 14% to Rs.162.70 crore in FY 2013. This raises lot of eye-brows regarding the future of the sector.

Though, commenting on the company's performance, Jaydev Mody, Chairman, Delta Corp said, "FY 2014 will see the fruits of our investments with the launch of ambitious new gaming and hospitality properties that will put us well ahead of the competition. We are confident that we will continue to enhance shareholder value through our core gaming segment with these new products, which are scheduled for launch in the first half of the current financial year", it could give little solace to the shareholders of the company, in the increased air of uncertainty surrounding the gaming sector--it gives an impression that the gaming industry is perhaps going nowhere in Goa.

Now the points which need to get highlighted are:

(i) The casino operators in Goa last year said the state government's proposal to bar the locals from entering on-shore and off-shore gaming zones was "unwanted" and would serve no purpose.

According to the Casino Association of Goa (CAG), barely 5% of those who visit casinos are from Goa. CAG executive member, Shrinivas Nayak, said the proposed ban had no meaning, "Less than five percent of the customers who arrive at casinos are from Goa," Nayak said. Nayak said that a law would only fuel illegalities and bribery.

(ii) Business houses which had cumulatively invested Rs.1,500 crore in Casino industry in Goa, are on the brink of collapse due to hostile policies of the state. Goa has six off-shore casinos and more than a dozen on- shore ones, based in five-star resorts.

(iii) In the last year's budget speech, Chief Minister Manohar Parrikar reduced the entry fee of visting offshore casinos from Rs.2,000 to Rs.500, clearly paving the way for increased footfalls to the gambling hubs, but in the same breadth, increased the annual offshore casino license fee from Rs.5 crore to Rs.6.5 crore bringing in additional revenue of Rs.9 crore to the state exchequer. So, it is ultimately it is a negative trigger for the sector, unless there is a substantial increase in the footfalls, in the offshore casinos parked in the Mandovi river, which flows along the capital. The land casinos licence fee had also been increased from Rs.15 lakh to Rs. 2.5 crore in the last year's budget.

(iii) In FY14 budget, the CM of Goa, proposed to increase the penalty provision for non-issue of entry tickets for casino by by ten times of the entry fees so charged. So also, as measure of enforcement, the FM also proposed to penalize non-possession of entry ticket by any individual who entered the casino, by imposing a penalty often times of the entry fees so charged. This penalty shall be independently enforced on the spot The amendment to this effect will be carried out shortly.

This is expected to have an adverse effect on the number of persons visiting the Casinos.

(iv) The BJP women's wing earlier accused the Congress government of floating these casinos, but now it seems they do not have much problem in youngsters frequenting the offshore casinos (In last year's budget the BJP government, reduced the license fee for offshore to Rs.500), too often.

Conclusion: It would be interesting to see how the BJP government vacillates between its "ideological moorings" (opposition to casinos) and the necessity to have casinos, to further the twin benefits of boosting the tourism sector of Goa and step-up revenues for the exchequer. However, one thing is certain- the casino industry shall have to brace for stricter regulations in the near future.

And if the BJP government by any means gets elected at the center, the whole gaming sector could hit an air--pocket due to the over-indulgence of the "Far-right-wing-purists" in the party.
~~~With inputs from Internet.