Where The Rubber Meets The Road

How the Grand Prix came to India

A car from Team Red Bull performs during the media preview of the Buddh International Circuit in Greater Noida on 18 October DANIEL BEREHULAK / GETTY IMAGES
01 November, 2011

THE JOURNEY FROM THE CENTRE of Delhi to the new home of India’s Formula 1 racetrack takes you to the periphery of the perpetually expanding urban agglomeration that surrounds the capital. When I travelled, by cab, to visit the track one morning in early October—in what may or may not have been unusually heavy traffic—the journey lasted a brief three and a half hours.

The first faint signs of Formula 1—or rather, of the company behind the race—appear as soon as you cross the Yamuna river and enter Uttar Pradesh: among the myriad hoardings and billboards in Noida, most of them selling real estate in some form or another, the footprint of the Jaypee Group is light but visible, crowded by competition from the dozens of other developers doing business at Delhi’s frontiers. But as you head south through Noida, towards the area known as Greater Noida, and the area beyond that, now known as the Yamuna Expressway Industrial Development Authority—which we will perhaps soon call simply Yeida—the Jaypee Group logo seems to be represented on the majority of available flat surfaces. The hoardings advertise the company’s residential projects (Jaypee Wish Town, Jaypee Greens Sports City), its subsidiary businesses (Jaypee Cement, Jaypee Infratech), its luxury hotel (Jaypee Greens Golf and Spa Resort) and, of course, its upcoming Formula 1 Grand Prix, a project of Jaypee Sports International.

In fact, the last road on the journey to the Buddh International Circuit at Jaypee Greens Sports City is another Jaypee undertaking, the Yamuna Expressway—a `15 billion megaproject that will eventually stretch 163 km from Noida to Agra. Past the built-up areas of Greater Noida, the highway cuts through the jagged border where city and village overlap. Along the roadside, scattered construction projects kick up clouds of dust around unfinished concrete towers with steel rebar still sprouting from their uppermost floors. Here and there, narrow dirt roads branch off the highway into nearby villages, while a few villagers can be seen selling fruit and vegetables from wooden carts under an interchange.

A Formula 1 car racing along a stretch of the Bangalore - Mysore highway during a promotional event on 27 September, ahead of India’s first Formula 1 Grand Prix. AIJAZ RAHI / AP PHOTO

The gate to Jaypee Sports City sits right at the highway’s edge, marked by a temporary sign and manned by a pair of guards. Inside, parts of the development are still under construction, ringed by boundaries of barbed wire. Next to a dirt lot filled with about 100 parked cars, a series of low-slung pale yellow brick buildings that look like hurriedly-constructed military barracks house the offices of Jaypee Sports International (JPSI). Workers with walkie-talkies clipped to their belts hurry back and forth between the buildings, from the sales barrack to the marketing barrack to the canteen. Most of the activity buzzes around the administrative building, where employees rapidly stride past carrying files with labels like “Driver Lodging” and “Inauguration of Buddh International Circuit”.

The company’s senior managers work in a line of small offices along a dimly-lit corridor, where the engraved nameplates outside each door include a surprisingly high proportion of retired Army majors and generals. (When I asked a JPSI executive about this, he simply said: “They get the work done quickly.”) At the end of the hallway, a clean-shaven man in his early 30s named MY Khan receives visitors who’ve come to see Sameer Gaur, the CEO of JPSI and the son of Jaiprakash Gaur, the founding chairman of the Jaypee Group—the country’s 48th-richest man, he has a fortune estimated at $1.5 billion. Sameer keeps a lower profile than the offspring of some other Indian billionaires, though he makes the occasional appearance in the society pages while launching a luxury watch or inaugurating a project in the company of Bollywood stars.

Outside Gaur’s office, a few men waited patiently for their appointments with Gaur. Khan, who had a plug of tobacco in his lower lip, politely and calmly deflected my request to see the boss. “Sir is not ready to meet journalists until the race ends successfully,” Khan told me, in a genuinely convincing tone. “He is even saying no to the big TV channels.”

Gaur has been waiting for the success of this race for a long time. Serious talk of bringing a Formula 1 race to India began in 2005, when the Indian Olympic Association (IOA) president Suresh Kalmadi—not yet disgraced by his role in the Commonwealth Games scandals—proclaimed that he was “trying to get a track ready in Mumbai, Delhi or Bangalore”, not long after Formula One boss Bernie Ecclestone, who controls and administers the sport, said he would like to see an Indian Grand Prix “within three years”. By 2007, Kalmadi was in serious talks with Ecclestone, who had given “provisional agreement” for a race in 2009, and newspapers breathlessly reported on several scouting visits by Hermann Tilke, the preeminent racetrack designer and architect, who was reported to be inspecting possible locations around Gurgaon and Greater Noida.

President and CEO of the Formula One Association, Bernie Ecclestone (centre), at the Toyota Formula 1 team launch in Cologne, Germany. BRYN LENNON / GETTY ALLSPORT

In September 2007, Kalmadi excitedly announced that he had met Ecclestone in London and agreed on a draft contract for 10 years of races beginning in 2010. The site was still undecided, but in October, Kalmadi told reporters, “We are in negotiation with the governments of both Haryana and Uttar Pradesh to acquire land.”

When the deal was finally signed in November 2007, the IOA was out of the picture; instead, JPSK Limited, a newly created subsidiary of the $1.5-billion Jaypee Group, reached an agreement to hold the Indian Grand Prix at a site in Greater Noida. The deal later came under scrutiny when it was revealed that Kalmadi’s son, Sumeer, was a minority partner in JPSK, which had been incorporated in the weeks before the contract between Jaypee and Formula One was signed. (Jaypee insists the partnership has been dissolved, and JPSK has since become Jaypee Sports International.)

According to a spokesman for JPSI, the contract stipulated payments of $200 million to Formula One for race sanction fees over five years. At the time of its signing in late 2007, Jaypee had not yet

acquired the land where the track now sits from the UP government, but the company had good reason to expect it would be able to do so.

For Jaypee, the road to Formula 1 began more than four years earlier, in January 2003, when the company was awarded a contract by the UP government to build what’s now known as the Yamuna Expressway. The terms of that agreement, signed during current UP Chief Minister Mayawati’s first stint in office, required Jaypee to underwrite the costs of constructing the 165-km highway; in exchange, the government would acquire the land required for the road, which would be sold to Jaypee at cost—along with 6,175 acres of additional land at locations along the expressway to be used for real estate development; Jaypee would derive further income from the concession to collect tolls on the highway for 36 years after its completion.

At the time of its signing, the agreement was regarded in some circles as an innovative—and highly unusual—new financial model for infrastructure development. Where previous public-private partnerships typically required the government to fund a share of the costs to provide an incentive to the private developer, the UP government offered lucrative rights to additional land for real estate development—in other words, it paid in real estate rather than cash, capitalising on the state’s power to acquire land at will from its owners. The social and political costs of such methods may not have been immediately apparent, but the wave of protests that has convulsed the region around Greater Noida in the last year, led by farmers angry at the terms of compensation and the government’s increasing appetite for land, has made the drawbacks all too clear.

IN AN ERA WHERE THE LINE between professional sport and big business has been almost entirely erased, few sports look more like companies than Formula 1. The financial structure of the sport’s promoters, the Formula One Group, is an impenetrable web of holding companies and subsidiary operations; its principal owner is a holding company that is itself mostly owned by a private equity fund.

Xander Heijnen, a motorsport expert and former adviser to Formula 1 teams who now publishes “Formula Money”, an authoritative guide to the sport’s finances, told me that Formula 1 was “a money-making machine”. Between team sponsorship, race sanction fees, television rights and trackside advertising—of which flow to Formula One rather than the hosts of each race—the Formula One Group had estimated revenue of $1.6 billion in 2010, according to the latest edition of “Formula Money”.

Caroline Reid, one of the guide’s authors, told me in an email interview that she estimated the Formula One Group would earn $58.8 million from the Indian Grand Prix: in addition to the sanction fees paid by JPSI, roughly $40 million each year, another $20 million will come from trackside advertising and luxury suite tickets, which cost upwards of `200,000 per person.

Paris Hilton poses with a Red Bull-sponsored Formula 1 car at one of the many parties held during the Monaco Grand Prix in 2010. IAN GAVAN / GETTY IMAGES

The leveraged buyout that saw majority ownership of Formula One pass from one holding company to another holding company in 2006 was funded by loans worth roughly $2.8 billion, a debt that has provided further incentive for the sport to add new races and expand into previously untapped markets like India, Singapore, Korea, the United Arab Emirates and Bahrain.

The financial picture for the hosts of each race, however, looks a little more cloudy, given the enormous cost of constructing the racetrack and the high sanction fees paid to the Formula One Group—which retains nearly all revenue apart from ticket sales. According to “Formula Money”, most circuits break even only with the help of government assistance; “only a few are believed to make a profit,” the guide says, “and hardly any more than $1 million”.

If the tickets for the inaugural Indian Grand Prix sell out at something close to full price, Jaypee will make $30 million in ticket revenue, and end up with a loss of roughly $35 million on the race itself after sanction fees and other operational costs are paid—without taking into account the $200 million price tag for the track itself. In a series of interviews in the run-up to the race, Sameer Gaur has predicted that Jaypee can break even in “the next three to four years”. Some of that revenue may come from the racetrack, which can be rented to other events throughout the year, but as the analysis in “Formula Money” demonstrates, even long-established circuits in countries with a larger racing fan base have had great difficulty meeting their costs.

For Jaypee, the real business opportunity will come from property development rather than racing—or the other sports facilities, like a cricket stadium, that will accompany the track at Jaypee Greens Sports City. Under the terms of its arrangement to build the Yamuna Expressway, Jaypee was able to purchase the land for the project—approximately 2,500 acres—from the UP government at essentially the same price the state paid to landowners; a spokesman told me the cost was around `800 per square metre, or roughly `3.2 million per acre. “We do have around 1,500 acres of real estate,” Gaur told the Times of India in September. “And there would be some advantages from the real estate as well.” Formula 1, one might say, represents a very high-profile advertisement for the sale of the Jaypee properties surrounding it—and the company’s considerable investments and landholdings throughout the rapidly urbanising Yamuna corridor.

The question of whether all of this indeed represents the “public good”, cited by Mayawati to compel farmers to sell their land, is not an easy one to resolve. The Supreme Court has already issued at least two conflicting decisions on separate cases of forcible acquisition in Greater Noida, which suggest that little consensus will be reached over how the terms “public” and “good” should be

interpreted.

AT PRESENT, the struggle over land acquisition has mostly pitted farmers against the UP government and its development bodies. Politicians from parties eager to unseat Mayawati in next year’s UP assembly elections have rallied to the side of the protestors, none more than Rahul Gandhi, who attacked Mayawati at a July rally in Aligarh for “taking over farmers’ lands and turning them into racing tracks and golf courses”.

The intensifying protests in western UP represent a complicated brew of grievances, raised to a boil by the rapid transformation of a region that was, until recently, a patchwork of small villages. Before the pace of development intensified all around them, many of the farmers used their compensation money to build new houses or purchase new cars and trucks; the influx of new money, several of them told me, had led to increased alcohol consumption and inflated dowry demands. As their bank accounts ran low and their aspirations to live comfortably increased—while new construction for high-end apartments rose all around them—the farmers soured on the government’s terms as they realised their own livelihoods weren’t coming back and the buyout money wouldn’t last forever.

Chaudry Mahinder Singh, vice-president of the farmers’ rights group Bharatiya Kisan Sangathan, outside the office of the superintendent of police in Greater Noida. ZUBAIR DARZI FOR THE CARAVAN

Outside the office of the superintendent of police in Greater Noida, I met Chaudry Mahinder Singh, the vice-president of a farmers’ rights group, Bharatiya Kisan Sangathan. Having realised that they parted with their land for a fraction of their current market value, the farmers were demanding additional compensation from the government for the land they had already sold—and threatening to launch an agitation to shut down the Formula 1 race if the government continued to refuse those demands.

Singh had come to the superintendent of police to announce the planned agitation. “The government laid a trap,” he told me. “There is no possibility of survival now.” A tall, broad-shouldered man in his 50s, Singh wore aviator glasses, had a bushy moustache and sported golden rings on two of his stubby fingers. Singh told me that he had sold six acres of land to the government, which paid him `770 per square metre, which would add up to roughly `18 million—a healthy sum at first sight, but a fraction of the government’s own allotment rate for land in the area, which is above `15,000 per square metre. Singh, who was driving an SUV crammed with six or seven of his fellow farmers, dismissed any notion that the ongoing development would provide income or benefits for him and his neighbours. “The money will circulate among the rich,” he said, grimacing. “We will just stand and watch their business deals from outside.”

The master plan for the Yamuna Expressway Industrial Development Authority (YEIDA) envisioned an urbanised corridor stretching outward from Greater Noida, with industrial, commercial and residential development to lure people and businesses out from Delhi and its inner ring of satellites. That vision has become reality at breakneck speed; according to census data released this month, the “urban agglomeration” encompassing Delhi has pushed past that of Mumbai for the first time ever.

Not everyone is pleased with the rapid transformation of villages into cities, and the contested zones where urban and rural collide harbour their share of social and economic problems, rooted in drastic income inequality and clashing cultural mores. Promilla Shankar, one of the seniormost Indian Administrative Service (IAS) officers in UP, formerly headed the state planning cell responsible for the National Capital Region. But after she wrote a letter to the Prime Minister’s Office in early September that criticised the ongoing urbanisation of the Yamuna Expressway corridor, she was suspended by Mayawati’s government on the grounds that she had taken a personal trip to Sri Lanka without securing prior permission.

A portion of the land allotted for the Yamuna Expressway. ZUBAIR DARZI FOR THE CARAVAN

Mayawati’s office has denied the charges, but when I met Shankar in Delhi in mid-October, she said she had come under considerable pressure to approve the revised Yamuna Expressway development master plan. She had refused to do so, she explained, because the plan allowed large-scale transformation of fertile agricultural land into housing and commercial use for the population of 3.5 million people, a fivefold increase from the present population. Shankar argued that such a move “would displace the farmers and create social unrest”—and that it conflicted with the terms of the existing Regional Plan for Delhi and its outlying areas. “No one is going to speak,” Shankar told me, sipping cappuccino at an American restaurant in Delhi. “Mayawati has terrified all the officers. My suspension was part of her pressure tactic.”

“You can’t ignore the violations of government plans,” she said, looking through her spectacles with a hint of frustration. “It’ll only cause chaos and confusion.”

A FEW DAYS AFTER MY FIRST VISIT to the racetrack, I returned to Greater Noida to see Askari Zaidi, a senior vice-president of JPSI whose responsibilities include answering questions from reporters.

Zaidi, a burly man in his early 50s with a salt and pepper beard, spent 20 years as a print journalist. He is soft-spoken and polite, and his professional etiquette is impeccable: he’s quick to answer emails and respond to calls, and he effortlessly parries tough questions, sometimes with a smirk and a playful response: “Is this relevant to your story?”

The story, according to Zaidi, is growth. “It’s a very big growth story,” he said as he surveyed the scope of development in the area. “Now we hope we can do good business from the race track,

hotels, catering services.”

As we sat in his sparse office at the Jaypee Integrated Sports Complex, which offers multi-disciplinary sports activities like swimming, table tennis, squash, snooker, chess and carom, Zaidi brushed aside my concern about the profitability of the Grand Prix. He proudly reminded me of the Jaypee Group motto—“No Dream Too Big”—which adorns the company’s many advertisements, and said the race was a “long-term investment” whose dividends would arrive in due time.

“Jaiprakash ji always loves to engage with megaprojects,” Zaidi said, “That’s his ambition.”

Zaidi cooled off slightly when I asked him about the protesting farmers. “They are not farmers,” he said. “They are farmer agents.”

“The government is dealing with that case,” he continued. “We have nothing to do with farmers.”

At about that moment, Zaidi pushed a button to summon an office boy, who entered with two glasses of water covered by silver lids. Zaidi kindly offered me both glasses, and moved on to the entertainment planned for the race weekend. The Bollywood actor Arjun Rampal, he said, was going to transform two lounges at the Jaypee Greens Golf and Spa Resort into a big discotheque where Lady Gaga would perform; tickets will start at `40,000. “Once foreigners will get convinced that we can hold an event like this,” Zaidi said, “then they will come in the future and buy our packages.”

“This all sounds so easy,” Zaidi said as I prepared to leave his office. “But a lot of work and money has gone into these arrangements.”

I believed him. But it was hard not to wonder about the dazzling Grand Prix spectacle he had described once I walked out from his office onto the road. Life in Greater Noida seemed to exist at two extremes, each incomprehensible to the other. Either you ride the bus or you drive a luxury car; there’s no cab service here, though people squeeze five or six into an auto rickshaw or 10 or more on an ox cart. High-end hotels, which will be fully booked for Formula 1, are plentiful, but cheap lodging is almost nonexistent. Most of the new jobs available to those who sold land are in low-wage construction labour, though there’s considerable competition from a wave of migrant workers who’ve swarmed the job sites.

A group of villagers voicing their complaints about the government’s land acquisition policy in Dankaur. ZUBAIR DARZI FOR THE CARAVAN

“No one is happy here,” said Teg Chand Sharma, a villager from Dankaur, who now works as an unskilled labourer hauling bricks along the highway for JPSI. He told me that he had owned one acre of land near Sports City; in late 2008, he said, Jaypee employees started to visit the villagers to persuade them to accept the government’s offers for their land.

“In the beginning we didn’t agree,” Sharma said. But as pieces of the land began to sell—Sharma claimed that a few large landholders were paid exorbitant sums to handover crucial parcels, though this is impossible to verify—the other owners gave in when they realised farming would be tough in the midst of development. “They sold the land at the backside”—Sharma motioned toward a mud-scrapped expanse of land—“and Jaypee unloaded trucks of sand and bricks.”

“See how it has turned into grassland,” Sharma continued. “Now cows and buffaloes run through the fertile parts to eat the grass. This is how the farming was made difficult.”

A few days later, I visited Phandari Yadav, the CEO of YEIDA, whose spacious office is located inside a shopping mall close to Pari Chowk.

Phandari Yadav, the CEO of YEIDA, at his office located in a shopping mall close to Pari Chowk. ZUBAIR DARZI FOR THE CARAVAN

Yadav, an IAS officer, told me that he hadn’t met any farmers who were unhappy with the land acquisition. “I deal with them every day,” he said. “They never complain.”

I mentioned to Yadav that I had managed to encounter some farmers who did in fact seem unhappy, particularly about the development authority’s model to compel the sale of land and then resell it to private builders. “I see this situation differently,” Yadav said, with a slight smirk. “It’s like I am taking a salary and I am not happy. I want a salary hike every now and then.”

“See, they are building this whole infrastructure for people, so government has to cooperate with them. They developed Noida for people, what did government get?” he said.

A broad-faced man with close-cropped hair, Yadav took charge as CEO 10 months ago. He told me that after studying the land acquisition process, he believes that the 2031 Master Plan for Noida is flawless.

“This is an infrastructure project,” he said. “There is no way to develop the area other than this.” The measure of its success, he suggested, was population growth. “If people won’t come here,” Yadav said, “we don’t need this project.”

ON THE AFTERNOON OF 18 OCTOBER, JPSI “unveiled” the Formula 1 track. About 300 journalists were transported from New Delhi and led into the racing arena though the VIP gate. The remaining three gates were cordoned by highly beefed up security. Food and beer was served first. On the circuit, a convoy of 50 Mercedes cars stood in two lanes—like the grid at the start of each race—to give journalists a ride around the track. The drivers, who wore white shirts with Mercedes logos, had been given strict instructions not to overtake each other, and photographers stuck their heads through the open sunroofs to capture a few shots.

After we’d taken a spin around the circuit, Jaiprakash’s two sons, Sameer Gaur and Manoj Gaur, addressed the media in a vast conference room. After the features of the track had been presented, one journalist asked Manoj about the project’s finances, and when JPSI expects to break even.

“I think it’s a very pertinent question,” Manoj replied. “Reminded me of a famous incident that many forget. John F Kennedy, the famous American president, was elected in 1961. He had given a 10-year timeline that the US will be the first one to send a man to the moon. He was assassinated in 1963. Neil Armstrong, the first man on the moon, landed in 1969.”

“It is not a question of money,” Manoj concluded. “We have invested in the future. We have invested in the youth of this country.”

Before Neel Jani, a Swiss racing driver of Indian origin, demonstrated a few tricks in a Red Bull-sponsored car, Jaiprakash Gaur—the source of inspiration for the Jaypee Group, the achiever of dreams—appeared on the stage. Looking dapper at 80, with a cream waistcoat and a brown scarf slung over his shoulders, Jaiprakash shared a few anecdotes from his childhood; how he used to play gilli danda in his village, how he was first introduced to hockey.

JPSI Chairman Manoj Gaur (left) and Sameer Gaur (right) at the media unveiling of the Buddh International Circuit logo. MANISH SWARUP / AP PHOTO

A lean, dark-skinned man with all-white hair, Gaur sounded like a debater who’d deploy all his skills—flattery, optimism, appreciation, intelligence and humour—to win any argument. “I am the son of a farmer,” he said, looking at the audience intensely. “I know what poverty means.”

Referring to Bhatta-Parsaul, where protests had erupted into violence, he explained that his company had no connection to those villages. “We don’t have any land there.”

The situation was very different here, Gaur continued—the farmers whose plots had been purchased for the Sports City, he said, had no complaints with Jaypee. “I was born in a village,” he said. “I know the feeling when you lose your land.”