The Hindu Business Line : Karnataka bans online lottery

THE first State to start online lotteries in the country has gone and done what it has been saying these months: Ban it. Karnataka stands to lose around Rs 300 crore by its move, as the Chief Minister, Mr Dharam Singh, has admitted.

The intent to "immediately ban online, single-digit and other lotteries that have turned detrimental for the poor" was announced on Saturday as part of the coalition Government's Common Minimum Programme.

Saturday's announcement also said "Lottery schemes of other States will be effectively regulated''. A formal notification is due even as the State Government begins its Budget session on Monday.

As Business Line reliably learns, the State Government has terminated with effect from July 15 its five-year contract with the Essel group-promoted siblings, operator Playwin Infravest and licensee Ultra Entertainment Solutions.

Playwin, India's first corporate-run online lottery brand, was Karnataka's online lottery operator since August 2002. The operator, as per the deal, would pay Rs 1,096 crore for five years (until 2006) as a percentage of its revenues from three or more games.

As per the bid finalised two years ago by the then S.M. Krishna Government, Karnataka was bagging 21-25 per cent of the earnings (that also split into prize money, sales tax and charity such as midday meals.) It has already received Rs 100 crore and 140 crore as the minimum assured revenue (MAR). In addition, the operator also pays sales tax, just as operators for other State online lotteries do.

What is not clear right now is the fate of the online lotteries of other States that are being sold in Karnataka. At least three States - Arunachal Pradesh, Sikkim and Meghalaya, are selling theirs here. The State Lotteries Directorate would not comment.

Playwin, which also bagged Maharashtra, Sikkim and Meghalaya bids, had invested Rs 450-500 crore in the venture, including licences, the central computer system and marketing across the country. Within Karnataka, it had set up a network of 800 dealers, 600 of them in Bangalore alone, who had invested refundable deposits of Rs 3 lakh each apart from other expenses. These would be refunded, sources in Playwin said. Now, Maharashtra, too, has ended its contract with Playwin.

For some months now, the online lottery system has come under attack verbally and physically and has even blamed by some for farmers running into debts — - a charge that agriculture experts and the lottery industry have dismissed.

Playwin was the first corporate-run online gaming that came on the promise of transparency. It targeted the middle and upper classes, which do not play the conventional paper lottery. A rash of other brands followed to tap the potential Rs 50,000-crore national lottery landscape. The State's MSIL-run paper lottery alone generates Rs 10-15 crore a year.