The Indian exhibition industry is on the brink of a multiplex revolution following finance minister Yashwant Sinha's reduction of customs duty on cinematography equipment from 25 to 15 percent on 28 Febuary.
India's exorbitant entertainment tax structure has always been the major obstacle to Western exhibition companies investing in the territory. In addition, escalating real estate costs and innumerable building laws have seen most international cinema operators reluctant to develop long-term building plans.
However, one pioneering but beleagured, cinema operator, Village Roadshow opened India's first multi-screen cinema, a fourplex joint venture with India's Priya, in June 1997 in New Delhi.
The company has announced plans to invest $50 million into building multiplexes over the next five years in the cities of Bombay, Bangalore, Pune, Hyderabad, Ahmedabad and in the New Delhi suburb of Noida.
The new tax concessions will attract the interest of other international exhibition companies, eager to exploit new, underscreened territories.
A report on the Indian entertainment industry released by Arthur Anderson last year pointed out that India has a very low density of cinemas per capita and given fiscal incentives, large growth was expected over the next few years in multiplexes. While the US has about 31,000 screens for a population of 266 million people, India has just 12,900 screens for a population of some 1.5 billion This translates to a density of 8,580 people/screen in the US versus 77,520 people/screen in India.
But the tax incentives came with a warning on Wednesday morning. While announcing the 2001 Budget, the Indian Finance Minister warned the industry of the connections between a section of the film industry and the underworld.
Sinha called upon the industry to take advantage of government measures and bring about a greater degree of professionalism and transparency in its operations. He said the entertainment industry has emerged as an important segment of the economy holding great promise for the future.
The minister also announced a 30 per cent tax deducted at source on television game shows and also said foreign channels telecasting in India would have to pay income tax. In an effort to introduce competition in all service segments, the finance minister said the Convergence Bill will cover telecommunications, information technology and information and broadcasting sectors in an integrated manner.