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CORRECTED: Report - corruption threatening India GP UPDATE (GMM)  It seems not everything is running smoothly as India prepares to host its inaugural grand prix in October.

Last week, it emerged that Mark Hughes - the F1 boss of the race promoter Jaypee - had quit for "personal reasons" and switched to the Abu Dhabi project.

Now, it has emerged that Suresh Kalmadi, the official who initiated India's F1 project, has been stepped down on suspicion of corruption.

He was in charge of original F1 promoter the Indian Olympic Association, and is accused of hindering an inquiry of India's Central Bureau of Investigation.

Autoweek said part of the investigation into malpractice surrounding the recent Commonwealth Games in Delhi could involve the alleged channeling of illegal profits through the current F1 promoter JPSK.

'JPSK' is reportedly an acronym combining Jaypee with the initials of Kalmadi's son Sumeer, who part-owns the company.

02/01/11 Allegations of corruption are threatening to spoil the party ahead of the inaugural Formula One Indian Grand Prix in October. Suresh Kalmadi, the politician and sports administrator who initiated the nation's F1 project, has been dismissed after 16 years as the president of the Indian Olympic Association (IOA) for allegedly trying to hinder a major fraud inquiry by the nation's Central Bureau of Investigation (CBI) that potentially could involve the Grand Prix promoter.

In 2004, the IOA appointed Kalmadi chairman of the organizing committee of the Commonwealth Games in Delhi. The CBI is investigating alleged financial malpractice in connection with contracts awarded ahead of the event last October. According to Indian media, the CBI will also investigate unsubstantiated rumors that illegal profits from the games are being laundered through the company set up as the promoter of the upcoming F1 race, which is part-owned by Kalmadi's son.

Kalmadi was a prime mover of the F1 project two years ago when he secured a preliminary agreement between the IOA and Bernie Ecclestone to bring Grand Prix racing to the nation. When the IOA failed to get government funding for the venture, a new company, JPSK Sports, was incorporated in November 2007 to serve as the race promoter and subsequently signed a 10-year contract with Ecclestone's Formula One group.

JPSK was created by three entities. The majority shareholder, with 74 percent of the stock, was Jaiprakash Associates, a company set up by the Jaypee Group. This massive construction and engineering conglomerate, founded in 1979 by Jaiprakash Gaur, is building the new F1 circuit and infrastructure in Delhi. There also were two minority shareholders, each holding 13 percent. They were Trackwork International, a Delhi company whose principal, Sunder Mulchandani, originally came up with the idea for the F1 project; and Sulba Realty, a company in Pune that is directed by Kalmadi's son, Sumeer Kalmadi, whose initials are in the name of the event promoter. In 2008, JPSK appointed Sumeer Kalmadi's sister and her husband, Payal, as well as Aditya Bhartia, to its board of directors.

Last year, the Ministry of Youth Affairs & Sport refused JPSK's request for $36.5 million to be paid to F1, on the basis that Grand Prix racing was not a sport.

The present CBI inquiry follows allegations by India's national anticorruption body, the Central Vigilance Commission (CVC), to the effect that the costs of the state-funded Commonwealth Games project may have been overreported to the relevant government agencies. The sums involved are said to be huge. The CVC reported that as much as $1.8 billion may have been swindled from the $6 billion Commonwealth Games budget. In tracing the missing money, the CBI is expected to study the funding of Sulba Realty and to establish whether there is any relationship between Suresh Kalmadi and JPSK, apart from the family connection. More at AutoWeek

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