Every rupee in the film industry ultimately comes from one source and one source only: The consumer.

Whether it's a street urchin spending his entire day's income on a lower stall seat at a Grant Road theatre or an MP catching the late show at PVR Anupam.

An NRI picking up a music CD of the latest hit in Soho or a DVD in New York.

Finally, it's all cash over the counter.

PART I: Why stars dodge taxes PART III: The snake eats his own tail PART IV: Howdunnit

The movie biz is cash biz. Hundreds, even thousands, of crores annually flow through the hands of people like you and me into the hands of ticket-sellers and counter salesmen. Those rivers of cash find their way into two groups of people's hands. Exhibitors and store owners. That's where the hera pheri begins.

Here's a true example:

A multiplex in Bombay is notorious for one thing. No, not its Dolby sound system or its popcorn. It's famous for the fact that, within an hour of the advance booking counter opening, all shows of a film are declared houseful. For instance, the advance booking opens on Monday at 10 am and there are a total of 1,000 seats. Multiply that by four shows a day, multiplied by seven days. That would account for 28,000 tickets available.

Yet, within an hour of the counter opening, all those 28,000 seats are apparently sold out. Physically impossible, you say? You would be right. But the laws of physics don't apply here. The laws of phillums applies.

According to an inside source, the multiplex resorts to this 'sell-out' tactic in two cases: One, when a distributor buys out the entire hall capacity to pretend to the world that the film is a houseful hit. And two, when the theatre owner himself deals in black marketing of his own tickets.

So, for instance, outside this multiplex, you'll find tickets freely available in black, usually at twice or even thrice the actual ticket price. And invariably, you'll find rows of empty seats inside the theatre, despite those houseful signs outside.

According to the source, the theatre owner in this particular case takes the ticket price as well as a 50% premium from his black market 'franchisees'. The rest of the profit is their's to keep.

Now, how in the world do you expect this theatre owner to declare that extra income? As 'extra profits'? Even the IT officer of his ward will think he's insane.

So what this particular exhbitor does is declare the actual number of tickets sold, and the income received for those tickets. The unsold tickets are handed back by the black market chaps and are declared unsold.

So, quite often, you'll find this theatre displaying houseful signs for a film like Refugee for a week -- which would mean a 100% earning -- but when you check the box office receipts declared to the trade press, you'll find that the actual earning was only, say, 45%.

Even when a film becomes a hit, it's no different. All theatre owners may not indulge in black marketing as blatantly as that particular fellow, but most of them do have their devious ways of concealing income. For instance, there's usually a certain quota of seats reserved for VIPs who may drop in unexpectedly. When a film is a hit, this quota is invariably sold at black market rates (the VIPs are happy to get the seats at all, never mind the rates!) and that extra income goes into the exhibitor's pocket.

In short, there's a lot of cash unnaccounted for at the theatres itself. Eventually, much of this extra cash finds its way into the tills of the distributors who have to work closely with exhibitors.

Again, at this point, the distributor has to choose whether or not to declare the extra cash income. And, quite naturally, they choose not to. Not all do so because they are fond of flaunting the law.

Much of the time, distributors borrow huge sums of money at exorbitant rates of interest from financiers. These extraordinary rates of interest are all payable in cash of course, otherwise the tax on the interest would be more than what the financier receives himself!

So the distributor uses this spare cash to make such under-the-table payments. Over the years, these sums have grown into huge fortunes. The years when film distributors of Amitabh movies were rumoured to bury iron safes in their backyard to conceal their cash may be over today, but almost all such clever chaps find ways and means to stash that cash.

And finally, distributors are the ones who really control the cash flow in the industry. After all, a producer these days rarely needs to spend a rupee to make a film. For instance, after the phenomenal success of Kaho Naa... Pyaar Hai and the record initial of Fiza, Hrithik Roshan's bankability is sky high.

Any producer who declares a film starring the muscular hero has distributors queueing up to buy the film. One such producer raised Rs 22 crores for his film, which is due to be released in end-2002!

It's the same with all bankable stars.

So, when a producer starts a film and the money begins to roll in from financiers, investors and distributors, a lot of that money comes in cash. Is the producer going to say, 'Please take this back and give me a cheque instead'? Only if he's just gotten off a plane from Los Angeles.

While it's true that a few select film makers like Subhash Ghai are operating entirely in cheque payments and Hollywood-style international accounting practises (which involves having a team of auditors scrutinising every payment and receipt during the making of a film as well as issuing completion bonds to penalise or reward the late or early completion of a film), the vast majority are still stuck in the feudal ages.

They have their own considerable borrowings to think off, all payable at usurers' rates of interest. And the cash is very useful to pay off those borrowings. As well as to maintain that hi-fi lifestyle they're so accustomed to living.

And finally, the dirty cash comes into the hands of the very people who control the industry today. The stars.

It's almost traditional for a star to receive a signing amount in the form of cash and/or gold. All undeclared and non-taxable, of course.

And even after that, a considerable part of the balance payments are certain to come in cash. A new star who's just had his first hit and is flooded with 75 offers the way Govinda was a decade or so ago, is hardly likely to refuse all those suitcases of currency piling up in his living room!

And once the chakkar starts, the star is like Abhimanyu caught in the chakravyuh. He may fight it forever, as some stars like Aamir Khan are said to do, but he'll still be stuck in the middle.