Should PSUs bail out CWG 2010?

The state-owned firms may have partly bailed out the Delhi Commonwealth Games (CWG) organisers offering sizeable sponsorship but questions are now being raised whether it has been fair on the government’s part to ask PSUs to dole out money for the event from their corporate social responsibility (CSR) reserves.

CSR experts fear the ‘good cause’ deed rather than help PSUs build trust with various stakeholder groups may well cause severe damage to their brand’s reputation, which may take years to rebuild.

“As soon as a brand owner starts to put out messages about its corporate responsibility credentials, it becomes open to inspection. The words must be matched by deeds, otherwise it will be seen as a cynical PR exercise,” Suren Sista, pavate fellow at Cambridge University’s Judge Business School said.

As it stands, the private sector has largely stayed away from the event and the state-run entities like NTPC (Rs 50 crore), Air India (Rs 50 crore), Central Bank of India (Rs 51 crore) and Indian Railways (Rs 100 crore) have done the rescue act. Contrast this.

The only two major private sponsorships have come from the two-wheeler maker, Hero Honda (Rs 38 crore) and the global beverage major, Coca Cola (Rs 15.71 crore). Here comes the question. Why PSUs which are largely built on tax payers’ money should be asked to fund the controversy-ridden event whereas India Inc has not come forward to be associated with it?

And this has been despite the growing corporate trend of deploying CSR funds into sports, which not only meets their brand marketing objectives but also offers community returns at large. “A few years ago several sponsors of sports may have shied from openly declaring the linkage of CSR with return on investment, however, the scenario has changed over the years,” Monish Chatrath, executive director at accountancy firm Mazars said.

Globally, private brands like Barclays Bank have been one of the largest supporters of grassroots football. Similarly, credit card giant Visa has played a key role in the development of Paralympics for over a decade. Back home, electronics major Panasonic has now been supporting the Indian football team as part of a CSR initiative.

Even the Tata group has played sponsor to many international sporting events. A relatively new entrant in the telecom space, Aircel too today is a title sponsor to India’s biggest tennis event—Chennai Open. CSR experts say what these firms realised has been the advantage of the combination of the financial leverage and the emblematic power inherent in sport.

Yet when it has come to India’s biggest sporting extravaganza since Asiad in 1982, there has been reluctance from the private players to open their wallets.

The corporate interest lies in maximising profits while maintaining sustainable growth. It’s not simply about the delivery part but also the process—how it would enhance return on social investments. This is where the organisers have failed to offer the clarity,” Mritunjay Kapur, managing director at business consulting firm, Protiviti India said.

As the countdown has drawn closer to the games, each passing day has opened up a new controversy: leaky stadium roofs, delay in construction, overpriced equipment and shabby contract deals are some that has recently hit the headlines.

According to Parul Soni, executive director, development advisory services at Ernst & Young, since CSR investments has a huge impact on brand value in the modern business arena and has imbibed within the corporate commercial thinking, no entity will like to take a chance with its value creation strategy.

“Nobody wants their money to go into a pool of funds. Overall, it lacks strategic appeal for private players,” he said.