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 rupees per person.
Indian Grand Prix circuit