Italy is close to signing a landmark co-production and co-distribution agreement with India, which is also expected to encourage Indian crews to shoot movies in Italy.

The deal is one of the latest initiatives spearheaded by new Italian state Film Department chief, Gianni Profita.

"We are collaborating with Indian Film Commissions to ensure that Indian productions can have easier access to Italian locations and technical facilities," Profita told "At the same time, Indian Film Commissions will also help Italian crews who travel to India to shoot movies."

Currently, Indian productions often shoot pictures in Switzerland, using the Alps as a stand-in for the war-torn mountainous region in northern India, close to the Pakistani border.

As part of the new joint-distribution deal, Profita said a joint Italian-Indian commission will also select a package of Indian films that will be distributed in Italy both theatrically and on TV, as well as Italian titles that will be released in India.

Other new initiatives include a film festival in India that will be dedicated to contemporary Italian movies, and a similar event in Italy that will promote Indian filmmaking.

The two countries also aim to open up a "permanent" channel of communication to discuss the problems their film and TV industries face in relation to the international bodies that establish media regulations.

"We believe that the US and Europe can no longer be the only active participants during GATS (General Agreement on Trade in Services) and UNESCO round tables," Profita said.

Meanwhile, Italy is also in talks with France and the UK to establish a reciprocal co-distribution accord. Italy recently renewed its co-production treaty with France and the two countries have set up a permanent work group to harness French-Italian initiatives.

"Italy also played a fundamental role within EFAD, the workgroup set up by 15 European countries which lead to the first-ever common declaration on public support for cinema," Profita said.

In the meantime, Profita is trying to speed up a reform of the Italian public funding system. "We want to establish a firmer connection with the market," he said.

The state funding body, the Fondo di Garanzia, has frequently come under fire for providing the majority (70%-90%) of the budget of individual pictures, meaning producers are not motivated to recoup production costs. It is also frequently criticised for funding films that flop at the box office.

Criticism will be further fuelled by a report which this week established that Italy spent Euros 340m over the past nine years in film subsidies used to produce 232 movies. However, these state-subsidised films grossed an appalling Euros 73m.

Between 1994 and 2002, the State's Fondo di Garanzia fund actually greenlit Euros 497m in funding for 362 titles. But some films which received subsidies were never released, while others never even went into production and didn't receive the money at all.

Last year, the Italian government presented a draft law to Parliament proposing a number of dramatic changes to the country's entertainment laws, including the introduction of a tax shelter.

The draft law proposes that public funding for Italian movies should be capped at 50% of the budget.

The law also proposes that ten debut features must be financed by the state every year. In addition, the state's fund for entertainment, which also covers dance, theatre and opera, will have to ensure that at least 25% of its total budget is used to fund the local cinema industry.