Külföldi torrent oldalak How India's Government Surprisingly Cripples Its Own Film Industry

India’s film industry, one of the world’s biggest, most diverse, and most vibrant, manages to flourish despite a troubling degree of indifference and even interference from the Indian government. Indian films are a crucial window through which the rest of world sees and gains insight into India’s culture, and the government ought to be standing behind the country’s filmmakers, not in their way.

Despite heavy government taxation, apathy about film piracy, and second-class treatment as an industry, Bollywood and its regional sister film clusters are projected to generate theatrical revenues of 150 billion rupees (US$2.3 billion) in 2016. The industry employs 1.83 million people, and is the largest cinema industry in the world in terms of number of movies released per year. But it has only a 6% share of global box office, and generally low profitability that makes movie financing and production truly perilous.

But the federal government of India and various state governments see this as ripe fruit for picking, taxing movies with a debilitating combination of Entertainment Taxes, Service Taxes, and of course the Income Taxes that production companies and individuals pay when they accrue incomes as professionals and service providers. All business must pay taxes of course, but there is a paradox in the way movies are treated. Unlike any other business in India, movies must pay both an Entertainment Tax, which would seem to classify them as a frivolous activity, outside the ambit of a necessary service, and they must also pay Service Tax, which implies they are necessary. Businesses in India are normally either one or the other, entertainment or service. But according to the tax collectors, Cinema is somehow, inexplicably, both.

The new proposed Global Sales Tax (GST) Bill subsumes the taxes in most other industries, but the cinema industry of India is singled out for additional Entertainment tax. In fact, cinema has been put on par with alcohol and tobacco, as if to say it has a harmful impact on society. Other than service and entertainment tax, movies directly or indirectly pay water, hoarding, advertisement and other value added taxes that can add up to 55%-60% of a movie’s budget.

There is also little uniformity of service taxes across India’s many regional film industries; they range from as little as 2% in West Bengal, to 45% in Maharashtra. Some states waive taxes for films as incentive for providing linguistic purity in titles, production in certain languages etc. With more variety and more confusing regulations, come more loopholes.

In most sectors, taxes paid are deployed toward causes to support those who pay them, for example, putting road taxes back into funding for roads and bridges and infrastructure for transportation, and taxes on cigarettes into public health services.

The cinema industry in India receives almost nothing back from the government and its taxation, and is in fact penalized in many ways. Public locations cost money to be locked off for shooting movies, and access to locations is controlled by local state governments in most places. Bureaucracy from various state and municipal bodies ensures various parties have to be ‘taken care of’ before clearances can be obtained for shooting movies. All the taxes the industry pays don’t afford them even a single window of clearance.

Piracy is rampant and is in fact encouraged in trains and marketplaces. Every single day train in India has hawkers selling illegal DVDs. In exchange for the mere payment of two DVDs, the Railway Police, who are supposed to nab these sellers, will happily ignore them. There are around 5,000 passenger trains in India, and at the conservative estimate of just 20 DVDs per train sold, that’s 100,000 DVDs from which no producer ever sees a paisa (1/100th of a rupee). At a mere 30 rupees on average per such DVD, that’s 3,000,000 rupees a day going to the black market on the trains of India alone.

According to a 2013 article in WIPO Magazine (the journal of the World Intellectual Property Organization) the Indian film industry loses around INR 18,000 crores (US$3.34 billion) and some 60,000 jobs every year because of piracy. As Bollywood director Anurag Basu (Barfi!) lamented, “It’s a huge thing. We remain a flourishing industry, but imagine the business movies would do without piracy.”

The government owned internet service provider, Bharat Sanchar Nigam Limited (BSNL), which controls and sells all the bandwidth that even private providers consume, receives sizable data revenues from illegal movie downloads. In fact, the BSNL website advertises how one can get movies on the internet. When queried recently one BSNL official, on condition of anonymity said, “If we control piracy, who will buy internet service from us? We also need revenues, no?”. The Government of India actually benefits from this illegality, and chooses to largely ignore it. There is a private internet service provider that currently carries an advertisement featuring two girls competing for a faster movie download on their phones – illegality on steroids!

Even after being accorded official status as a private industry in 2001, moviemakers have tremendous difficulty in obtaining institutionalized funding, except for those already established companies that don’t need the capital, who can capitalize on lower bank interest rates compared to private financiers. Private financiers typically provide capital at the usurious rate of 36% per annum interest, while banks charge anywhere between 16% to 18%. The producers who need this capital the most are bluntly refused funding, even when they provide collateral. So much for an ‘industry’ status.

Faced with these many challenges, and up against a nearly 90% loss making ratio, it’s a wonder the industry is even afloat. Thanks only to a steady supply of people with means who are lured by the possibility of overnight riches, are most of the 1,500 to 2,000 Indian movie projects funded each year.

The Prime Minister of India, Mr. Modi, has unveiled an ambitious Digital India program that aims to provide leapfrogging information access and classrooms to remote communities, and is set to take advantage of technologies in many sectors, like agriculture and medical care, etc.

But driven by the very real danger of piracy and distribution of illegal copies of movies all over India, no enterprise would dare invest in distribution. The movie business remains crippled by the absence of legal protection. The government of India, at the moment, seems to be oblivious to the amount of tax it could potentially collect if it ever took this task seriously.

As a mostly independent, fragmented and cash-driven industry, India’s cinema provides an ideal home for creating and laundering black money, as there are few real checks or reliable records on budgets and expenses, cash flow, payments, or collections in theatres, apart from the modern multiplexes in the largest cities.

This black money laundering game has even attracted political parties to become cinema producers, and they have every incentive to keep the industry backward, operating in the shady underbelly of India’s unofficial economy. No current regulatory authority has any idea as to how to prevent the cinema industry from being a rampant user of black money and conduit for money laundering, both in India and abroad as well.

It would appear indeed, that the government of India needs specific, actionable advice that can awaken it from the slumber of its policies vis a vis the cinema industry of India.

Unless and until India’s government reforms its policies, an industry that offers the opportunity to propel India’s soft power to untold dimensions around the world will have to remain in relative obscurity, crushing its smaller players, performing well below its potential, and struggling to have an impact worthy of the enormous creative talent it attracts.