Holiday and heartburn

Holiday and heartburn

Tax holiday, that is. The Karnataka film industry finds itself yet again in the middle of a controversy, this time over the Government's decision to give entertainment tax holiday to multiplexes. BAGESHREE S. discovers that some like it and others don't

The Hindu

LOOKS LIKE there is no respite from controversies for the Karnataka film industry. Even as the issue of moratorium on the release of non-Kannada films seems to have died a quiet death, yet another controversy has raised its head. This time over the Government's decision to give a three-year holiday from entertainment tax exclusively to multiplexes. With multiple interests pulling in multiple directions, the industry, which was divided over the moratorium issue, stands divided yet again.

Predictably, the owners of the two multiplexes in Bangalore are hugging themselves in glee. "Many other States offer such tax holidays," says Prasad of Innovative Multiplex. "As I know at least 10 other multiplex projects are in the offing in Karnataka and this is a great boost to the industry," he says. Multiplexes, he argues, deserve special benefits because of the huge investment they make and the nature of service and screening quality they provide.

Maharashtra example

Sunil Patil, COO, South Operations, PVR Multiplex, says that Maharashtra is an example of how such an incentive can help the industry grow. "No new theatres had been built in the State for 10 years until the tax holiday was announced. Now, 240 projects are going on in various parts of the state. Projects of this kind are just not viable without some support," says Sunil. "Multiplexes have ensured that Bangaloreans watch films the way the rest of the world does."

A significant number of people within the Kannada film industry are pleased with the decision because of the small rider that comes with the holiday offer: that two screens should be dedicated to Kannada films. Issues beyond this don't seem to concern them.

Welcome sop

"It is good for the industry. Others are anyway not building any new theatres," says Ashok, actor and former President of the Film Workers' Federation. Director Nagathihalli Chandrashekhar says multiplexes deserve sops because of the quality of screening and other services they provide. He asks how many single-screen theatres provide even comfortable seating, decent toilets and good sound quality. "We are an IT hub. Quality is more important than money for us," he says. This is the only way "class audience" can be lured into watching Kannada films, he argues.

Producers' Association President Basant Kumar Patil has no major differences with this line of argument. He would like to warn though that there should be strict monitoring to ensure that two screens (and large ones) are indeed reserved for Kannada. Director Nagabharana's apprehensions are also on similar lines. "Reservation of screens should not end up being just an eyewash. It's an incentive that helps all language. I don't know to what extent the regional market stands to benefit particularly," he says. One section of people you would expect to stand united in protest against this decision is the single-screen theatre owners. But quite a surprise awaits you there. Anil Kapoor of Rex and Symphony, for instance, offers a Darwinian argument: "It's a good thing. Change is the certainty and the stronger will survive." He was contemplating building a multiplex himself and the Government order has made his decision easy. "I am not a backward-thinking person and won't remain a single-screen owner forever."

M. Bhaktavatsala, theatre owner and former president of Karnataka Film Chamber of Commerce, says the entertainment tax holiday is only part of a nationwide trend. He views multiplexes as entertainment centres and not cinema halls per se. "Once a new multiplex comes up, the audience is diverted there," he says, adding that multiplexes are vulnerable to trends. Moreover, they entail heavy investments and their target is the high-end audience. "It's not going to make much difference to the Kannada industry. Multiplex screens are small, somewhat like preview theatres." World over, the trend is towards multiplexes, he points out, though single-screen cinemas will exist here and there.

According to Bhaktavatsala, a film like Swades will work in multiplexes, but not one like Veer Zaara. The latter entailed 700 prints and recouped its money in two weeks in what is called saturation release in industry parlance.

K.V. Dhananjay of Veeresh theatre, who has also been active in the exhibitors' association, has no plans of building a multiplex. Yet, he too sees this trend as inevitable. "We have no choice but to accept this. I saw it coming." He points out that single-screen cinema owners in Bombay and Delhi, who were initially unhappy with the Government's policy towards multiplexes, have since then updated their own property and compete alongside them. But not all share this equanimity. Venkatesh Reddy, who owns Naga, Urvashi and Mukunda, for instance, is a very angry man today. "We have served people here for the last 30 to 40 years and never got any tax benefits. And someone lands here from outside and garners all benefits. Is it a crime that we have paid taxes all these years?" he asks. He continues in the same indignant tone: "Tell me, who deserves tax benefits? Someone who sells tickets at Rs. 500 or someone who sells it at Rs. 10 and Rs. 20?"

K.C.N. Mohan of Navrang says it will make little difference to those like him, who run Kannada films exclusively. At the same time, he believes that the rider on reserving screens for Kannada is not any special benefit to the Kannada industry. "When you have some 11 screens, you would in any case run a couple of Kannada films," he says. "Anyway, those who run non-Kannada films in single-screen halls will be severely hit."

Huge taxes

H.D. Gangaraju, President of the Karnataka Film Chamber of Commerce, agrees. "Some of these single-theatre owners have paid up to 110 per cent tax at one point. Isn't it unfair to them?" he asks. The small players who can't afford to make huge investments in Bangalore and in other district and taluk centres might be ruined by this decision, he argues. He is as unhappy about the Government not even consulting the Chamber before arriving at the decision and plans to pursue the issue.

Sunil Patil offers two counter-arguments. He says that tax holiday is only for a limited period, and therefore, the tax loss is "only notional". In fact, the Government is ensuring that it gets a fat revenue in future by providing this sop now. "Secondly, our ticket prices range between Rs. 50 and Rs. 500. It's not for any one class," he says.

Even as arguments continue, any possibility of a reversal of decision on tax holiday seems unlikely, considering the overall policy of the Government favouring and encouraging big investors in all sectors. But there is some chance of single-screen owners getting their own share of sops if they can build enough pressure, as the Maharashtra example illustrates.

Decision challenged

Single-screen owners in Maharashtra went to court challenging a similar decision of the Government, which moved quickly and offered a different set of sops to them. It reduced the entertainment tax and hiked the service charge ratio from Rs. 2 to Rs. 4. (Service charge is the non-taxable part of the ticket price.)

Will the Karnataka exhibitors be able to pull off something similar? There is some apprehension within the industry. "Exhibitors are a divided lot. There are too many conflicting interests," says Dhananjay. But other exhibitors hope that the two registered exhibitors' associations and the chamber will be able to salvage something. To resort to the good old cliché yet again, one can wait and watch the drama unfold in the days to come.

Tickets may cost the same

CONTRARY TO popular belief and what was reported in some newspapers, the holiday on entertainment tax is most unlikely to bring down the ticket prices in multiplexes.

Even as Prasad of Innovative Multiplex talks tentatively of how they might consider passing on "some benefit" to the film-goer, Sunil Patil of PVR is certain they won't be able to slash ticket prices any further. "We have made an investment of over Rs. 25 crore and priced tickets anticipating a tax holiday. Without it, the lowest denomination cannot be below Rs. 90, taking into account the costs involved in the services we provide," he says. He adds that they would have been, in fact, forced to hike ticket prices if the holiday offer had not come in time. "We won't be doing that now," he says.

Venkatesh Reddy of Urvashi, Naga and Mukunda also points out that there has been no precedent of any multiplex reducing prices following a tax holiday.

The minister says...

ASK THE Minister for Information and Publicity, B. Shivram, if the tax holiday offer won't mean a big revenue loss to the Government, and he simply says: "Our Deputy Chief Minister, who is also our Finance Minister, would have thought of all that before bringing it before the Cabinet." He points out that tax holidays are nothing new and various sectors have been given such sops every now and then.

Reacting to the decision irking single-screen cinema owners, he says: "Let them tell us what they want. We will consider that also. The Government is open (to suggestions)."

H.D. Gangaraju of the Karnataka Film Chamber of Commerce is expecting the Chief Minister to invite them for a meeting later in the week to discuss the issue.