Sathyu said he received Film Finance Corporation - now National Film Development Corporation (NFDC)- funding for his debut film Garam Hawa (1973), which is showing in the IFFK's Indian Classics segment.
It is unfortunate that the Corporation now does not fund films, unless it has a good chance of making a profit, Satyu said speaking at 'Meet the Director' programme here.
"This is a wrong policy, because the idea is to develop an industry," said the 85-year-old director.
Director Sanalkumar Sasidharan said he "does not believe in government subsidies or the market".
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"I don't know what is the crisis in Malayalam filmmaking that everybody is talking about. In the new age of digital film making, you can make films with the smallest budget" said Sanalkumar, whose "Ozhuvidivasathe Kali" is showing at the festival.
His debut film "Oraalpokkam" was the first crowd-funded Malayalam film made with Rs 25 lakh.
"Ozhuvidivasathe Kali" was shot on a budget of Rs 10 lakh. He then got a cab and a projector and screened the film at 100 different locations in Kerala.
"There is the space and audience for small, meaningful films. Mainstream films should not be imposed on everybody," he said.