"They steal entertainment tax. They claim 80 percent of the releases are flops. In that case why are they going back repeatedly to book films? Everyone here wants to make a profit. Everyone is into a con game."
That's why Khanna - a lyricist, filmmaker, cinema scholar and industry spokesperson - is all for the corporatisation of Bollywood.
"Look at a company like UTV. On 'Swades', which is supposed to be a flop, they've already recovered Rs.270 million on an investment of Rs.210 million! You must understand that today you get only 50 percent of your revenue from the box-office. The balance comes from non-theatrical revenue. In actuality, only 20 percent of the releases per year lose money."
When Khanna started his corporate film production house Plus Channel it was too early to even talk about the corporatisation of Bollywood.
"Then came Amitabh Bachchan's ABCL... Unfortunately both of our companies ran aground. Today ADLABS, Mukta Arts, Cinevasta, UTV are doing the same thing. Look at the Birlas' Applause Films. I may have creative quarrels with Sanjay Leela Bhansali's 'Black'. But the film will make money for them. Cinema is growing. This is a sunrise industry."
And what about the charge from within the film industry that corporate houses don't understand the film business? "They don't have to understand it!" Khanna shoots back.
"Even in Hollywood or Europe, cinema or any mature film market, the creative and corporate people are totally exclusive. Each has a specific role. It's rare for the creative and corporate aspects to coalesce. Yash Chopra may be a non-corporate guy. But at the end of the day he's proving himself the most progressive guy in Bollywood."
Speaking of "Black", Khanna elaborates: "In the early 1980s, the late actor Marc Zuber wanted to direct a film based on 'The Miracle Worker'. I wanted to produce it for him. Today I see Sanjay Bhansali go into the same area in 'Black'. It's a visually stunning film. But there's a tendency to type the entire paragraph in bold letters. Bhansali understands the whole language of Eastern European cinema. There are maybe a dozen directors in Mumbai who know Tarkovski. To say that it takes Indian cinema to a new benchmark is according to me, not right.
"People like Mani Kaul have done the same thing 40 years ago. They couldn't get an audience because they didn't have an Amitabh Bachchan and Rani Mukherjee in their film. I'm not putting down 'Black'. It's great stuff. But very derivative.
"When Yash Chopra paints his chiffon landscape he doesn't do it out of design. He just does what comes naturally to him. You look at Chetan Anand's 'Heer Ranjha'. I remember he got a mustard field sowed a season earlier so that he could shoot his schedule. Even Karan Johar's ornate cinema isn't just about lavish sets and clothes. It has a language of its own. These are filmmakers who have the courage and vision to evolve. 'Black' is going to happen more frequently in our cinema. Technology is a great 'ennabler'.
According to Khanna, the next big bang in cinema is digital technology.
"Imagine the ability to communicate across geographical boundaries. One conversation with (Reliance chief) Mukesh Ambani changed the course of my career. His vision of a digital world made me give up my writing lyrics and scripting. It's so exciting to be rewriting the ground rules of movie entertainment. See how the I-Pod changed the way music is accessed. Or look at the way our music is composed today!
"Some of our best musicians are engaged in an utterly trivial debate on re-mix albums. The fact is we don't have a concept of music publishers in India. And if we go back to the classical heritage every maestro sings music he has inherited. Whether Bade Ghulam Ali Khan or Kishori Amonkar they are singing derivative music.
"We're ready to roll out our digital services in six months. Phase 1 would be interactive television. Video on-demand, screening of digital content. We'll be in a hundred towns in the first phase. In the next 18 months, all over the country.
"It's a very exciting time for movies. I don't believe all those doomsday prophecies that we've been hearing from time immemorial.
"We've approximately 50,000 screenings per day across the country. And if the average number of seats per theatre is 500, that comes to 250,000 seats available per day. If you say the attendance is 40 percent, 100,000 people are still going to films per day. That means the Indian box-office is collecting over Rs.30 billion even at the flop-level attendance of 40 percent!
"To this figure, if we add the earnings from movie exports which is Rs.10 billion, plus the TV satellite and music rights...we've more than a billion dollars at the box-office. This is the money that's actually flowing into the movie industry. Where is it going? Would someone like to answer that?"
And he has a word for those who object to the term Bollywood. "People still have a problem with the word 'Bollywood'. But the whole notion of what's pejorative has changed. We've to see the Indian film industry as a brand. To say 'Bollywood' is demeaning is to question a brand name like Coke or MacDonald's."