Foreign films, made in India

It's a Rs 3,000 crore industry and is expected to grow at a CAGR of 50 per cent.

It comprises around 300 studios, employs 12,000 professionals and has been involved in Hollywood blockbusters such as Star Wars, The Mummy and Stuart Little.

In fact, Brazilian striker Ronaldo's life is being recreated in a studio in Thiuruvanana-thapuram. Titled Goal, it's going to be the first Hollywood film to be made entirely in India.

In the next three years, the industry is expected to receive more than $3 billion worth of business from abroad, as a foreign production house can save as much as 60 per cent of its budget if the film is made in India. The industry, in fact, has been in existence since 1934 when Kolkata-based New Theatres produced The Pea Brothers.

Yet, it was only early this year that India produced its first full-length indigenous animation film — Hanuman. The film was a moderate hit, and will be followed by a spate of similar ventures with even celebrated producer Karan Johar and big production houses (Virgin-TV 18, Walt-Disney-Yash Raj Films) jumping on to the bandwagon.

But why did it take the animation industry over 70 years to produce its first full-length Indian film? And why is the share of the domestic demand for TV/broadcast animated content just 10 per cent of the total market? The reasons are many and a lopsided taxation policy is just one of them.

The animation industry is covered under the Software Technology Parks of India (STPI) scheme which is aimed at boosting software exports. However, STPI predominantly holds good for work which is in the nature of outsourcing and most animation studios have to ensure an export commitment of at least 85 per cent if they are to receive the benefits under the STPI scheme.

As a result, many Indian animation studios wanting to produce original content-based intellectual property do not get any such benefits. In effect, says a PricewaterhouseCoopers study, done for Ficci, the Indian government is subsidising the production cost of foreign film producers instead of encouraging content creation for Indian companies.

The study recommends a 10-year tax holiday for the production houses doing original animation work for Indian audience. Service tax is another issue. Surprisingly, studios making any original Indian content in India have to pay 12.2 per cent service tax, while those that are outsourcing their work enjoy service tax exemption. It's a Catch-22 situation now.

Not enough local animation content is created because of taxation and the TV networks choose the short cut by sourcing animated content from abroad or from the existing library at a discounted price. The second hurdle -- and potentially a much bigger problem -- is availability of skillset.

At present, only a handful of first-rate institutes such as the Film and Television Institute in Pune and the Zee Institute of Creative Arts are providing exclusive courses in animation. Considering that India needs around 36,000 animators (more than treble the current number) in the next two years, the situation calls for urgent measures in setting up proper training facilities.

Otherwise, one has to see the sad spectacle of Indian animation studios doing only outsourcing work for foreign classics while the animated version of India's very own Ramayana is made by filmmakers in Japan.