NEW DELHI: In a bid to give further fillip to the entertainment sector in India, the government recently set up a high-powered committee to suggest ways to attract venture capital (VC) in the sector.
According to an Arthur Andersen Ficci (AA Ficci) study, at present, the entertainment industry can be conservatively estimated at about Rs 96 billion, which is expected to grow to about Rs 286 billion by the financial year 2005.
The terms of reference of the new committee on VC funding are two-fold:
* To suggest a roadmap outlining a strategy to attract venture capital companies/funds to invest in the entertainment sector
* To study the existing investment regime in India in order to identify areas for policy changes to facilitate such investment.
The committee, which has been given six weeks' time to submit recommendations, is headed by planning commission member NK Singh. The other members of the panel include ICICI CMD KV Kamath, additional secretary in the department of banking in the finance ministry Vinod Rai, I&B ministry secretary Pawan Chopra and directorate general of foreign trade L Mansingh.
Though the VC funding panel has been set up for the entertainment sector, which also includes TV and radio broadcasting, apart from films, the industry representation is dominated by those active in the film sector.
Asked why the television segment of the entertainment sector has not found some representation in the new panel, information and broadcasting minister Ravi Shankar Prasad said the committee is free to get in touch with people from other sectors and would also do so.
Until now, according to Prasad, approximately Rs 7,000 million financial assistance has been sanctioned by financial institutions and banks after the film industry was granted an industry status. Out of this Rs 2,000 million has been sanctioned by Industrial Development Bank of India, while the rest has been by various banks like the State Bank of India.
"Part of our efforts have been focussed on making the regimes covering the flow of finances such as the FDI and the lending regimes of commercial banks and the IDBI more encouraging," Prasad said, indicating that the bid to involve VC funding is another step in this direction.
The bid to attract VC funding has been necessitated more so as despite previous liberalisation in the entertainment sector and sops, the unorganised sector and underworld's hold over the film industry continues. A background paper on this prepared by the ministry states that the nature of the entertainment business is such that there is high risk attached to the creation of the entertainment software.
Since VC companies are by definition interested in high profits in high-risk ventures, it would be potentially profitable to bring together VC and the entertainment sector, the ministry paper pointed out. It added, "If we are seriously interested in chasing venture capital funding for the entertainment sector, it would be appropriate to look at the global practices and systems related to venture capital and assess the situation within India so as to bring about a respective investment regime."
In the global economy, a country's total advertising expenditure and its gross domestic product (GDP) have a strong positive correlation. In India, the ratio of advertising expenditure to GDP is about 0.4 per cent. This is quite low in comparison to the developed economies - USA (1.3 per cent), UK (1.1 per cent), Germany (0.9 per cent) - as well as several developing economies like Brazil (1.6 per cent), Thailand (0.9 per cent) and Indonesia (0.7 per cent), the AA Ficci study has said.
But considering there are some other high-powered committees also looking into such financial issues for the entertainment sector, would it turn out to be a case of too many cooks spoiling the broth? Time will tell.
