Unveiling Formula E race Scam: Economic boost or financial irregularity?

Hyderabad: The streets of Hyderabad once roared with electric racing cars and promises of economic prosperity. Now, those same streets echo with allegations of corruption and political warfare. What began as India’s first Formula E race in February 2023 – celebrated by organizers for its “positive impact” on the local economy – has transformed into a criminal investigation, with the Anti-Corruption Bureau (ACB) filing an FIR against former minister K.T. Rama Rao and two officials for alleged financial irregularities.
Genesis
During the BRS rule, the Telangana government signed a tripartite agreement on November 25, 2022, between Formula E Operations Limited (F.E.O.), MA&UD Department, and Ace Nxt Gen Private Limited for conducting Formula E races for Seasons 9-12 in Hyderabad. Under this agreement, the role of the Government was limited to the extent of building the track for the event and providing other civic amenities.
Initial event and sponsor withdrawal
On February 11, 2023, the first event costed HMDA Rs 12 crore. The sponsor paid fees and other payments. Later, differences emerged between FEO and the sponsor, leading to the latter’s withdrawal from Season 10. By May 2023, payment was overdue.
Financial Commitments
On 27 September 2023, the then Special Chief Secretary Arvind Kumar, holding full additional charge of Metropolitan Commissioner, HMDA, put up a HMDA file to the then Minister, MA&UD K Taraka Rama Rao(KTR) seeking approval for the LFA (Long Form Agreement) executed for Season 9. The draft mentions HMDA as the Promoter and Host instead of Ace Nxt Gen Private Limited and MA&UD department respectively. As such, due authorization in favour of MC, HMDA is required for undertaking the responsibility of Promoter and Host City.
The then Special Chief Secretary sought approval for payment of Rs 110 crore and Rs 50 crore for auxiliary works for the event including but not limited to civil works and municipal services, totaling to Rs 160 Crores. HMDA transferred two installments of Rs 22.69 crore and Rs 23.01 crore to F.E.O. UK through Indian Overseas Bank. Additional tax payments included Rs 8.06 crore to the Income Tax Department and Rs 1.10 crore to the Federation of Motor Sports Clubs.
Agreement Termination
FEO terminated the agreement, citing the Municipal Administration and Urban Development Department’s failure to fulfill the Host City Agreement signed on October 30, 2023. The event would have been India’s only FIA World Championship event in 2024.
On 27 November 2023, Formula E Operations (FEO) canceled the Hyderabad E-Prix citing the Municipal Administration and Urban Development Department’s failure to fulfill the Host City Agreement signed on 25 October 2022. In a statement, FEO said, “The cancellation follows a decision by the MAUD, under the Telangana Government, not to fulfill the Host City Agreement signed on 30 October 2023. FEO has no choice but to formally notify MAUD of the breach of contract. FEO is considering its position and possible steps under the Host City Agreement and applicable laws, reserving all rights. The Hyderabad E-Prix would have been the only official FIA World Championship event in India in 2024 and was part of a multi-year agreement between Formula E and the Telangana Government.”
Newly formed Congress Government findings
F.E.O. did not take the consent of the parties to the agreement before terminating the agreement. The payments were made without obligation under the existing agreement, apparently in anticipation of a future agreement. This is a grave irregularity.
The investigation revealed unauthorized payments totaling Rs 54.88 crore. Key irregularities included payments without Finance Department approval,HMDA payments despite not being party to the agreement, funds released before the October 30, 2023 agreement signing, payments during the Model Code of Conduct without Election Commission approval, and foreign currency payments violating exchange regulations.
Government reply to FEO
On December 26, 2023, the government responded to F.E.O.’s breach notice. The government stated the agreement lacked legal validity and caused state losses. The agreement involved Rs 600 crore commitment with recurring expenditure for three years. The government identified violations, No Council of Ministers approval, No Finance and Law Departments concurrence, Agreement signed during Model Code of Conduct without Election commission of India(ECI) approval, and Agreement deemed fraudulent against public policy.
Nielsen sports analysis report
The economic study conducted by Nielsen Sports Analysis estimated a Rs 690 crore boost to the Hyderabad economy from the ABB FIA Formula E World Championship’s debut race in India on 11 February,2023.
It stated that 31,000 people attended the event, 59% of attendees were from outside Hyderabad, Rs 39.6 crore was generated from events by teams, sponsors ABB, DHL, Greenko Group, Jio, and events associated with Hyderabad E-Mobility Week.
Controversy over Formula E race
In October 2024, Telangana Revenue Minister Poluleti Srinivas Reddy, on a South Korea tour, revealed two bombshell revelations about the BRS party leader’s scam within two days.
The case was sent to Governor Jishnu Dev Varma for approval. The requirement for the governor’s approval in cases involving public representatives is recent. Before 2018, the ACB didn’t need such a sanction to prosecute MLAs or MPs. In 2018, amendments to the Prevention of Corruption Act made this approval mandatory.
Subsequently, the Governor granted permission to the Anti-Corruption Bureau (ACB) to prosecute BRS working president and Sircilla MLA K.T. Rama Rao over alleged financial irregularities in the Hyderabad Formula E races.
KTR open challenge
“If you have the courage, initiate a discussion on the Formula-E race issue in the State Assembly” – KTR
Bharat Rashtra Samithi (BRS) Working President K.T. Rama Rao (KTR) has challenged the Congress government to discuss the Formula-E race controversy in the state assembly. He asserted that the previous government’s actions were transparent and beneficial to Telangana.
KTR accused the current government of spreading misinformation and making baseless allegations about the Formula Erace during the BRS regime. “Your government has been making baseless allegations against the previous BRS government, especially against me, for several months regarding the Formula E race issue. Reports suggest that in the cabinet meeting under your leadership this week, this topic was discussed for one and a half hours. Additionally, there are leaks from the Chief Minister’s Office to the media, hinting at filing cases and claiming that the Governor has granted approval,” read the open letter to Telangana Chief Minister Revanth Reddy.
Instead of closed-door discussions, the truth should come out before the four crore people of Telangana through a State Assembly debate, said KTR. The previous government entered into an agreement with the Formula-E race organizers to benefit Telangana and Hyderabad. The race was successfully conducted in 2023, earning praise from all quarters.
According to a Nielsen report, the event contributed around 700 crore to the state’s economy. In an open letter to Telangana Chief Minister A Revanth Reddy, KTR said another race was to be held in 2024, but it was unilaterally cancelled as soon as your government came to power. Since then, your Congress government has been trying to spread false narratives about this race through the media, alleged KTR.
ACB case
On 19, December,2024, the Anti-Corruption Bureau (ACB) registered a First Information Report (FIR) against K.T. Rama Rao (KTR), former Minister and working president of the Bharat Rashtra Samithi (BRS), for alleged financial irregularities during the Formula E race in Hyderabad in February 2023.
KTR is the prime accused in the FIR. The case also implicates former Municipal Administration Department Special Chief Secretary Arvind Kumar and HMDA Chief Engineer B.L.N. Reddy as other accused.
ACB booked a case under section 13 (1) (a) r/w 13 (2) of the Prevention of Corruption Act 1988 (as amended in 2018) and Sec.409 r/w 120-B IPC, and took up the investigation.