IMPROVED PRIVATE SECTOR PARTICIPATION IN INDIA’S COMMERCIAL SPACE SECTOR

Introduction

India’s space program is one of the most developed in the world and is controlled by a state agency — the Indian Space Research Organization (ISRO).

The current global space economy is estimated at $360 billion, with India accounting for about 2% ($7 billion). The Indian space sector is expected to grow at a CAGR of ~48% over the next five years to $50 billion.

In the global space market, rocket and satellite launch services, an area in which ISRO specializes, account for only 5%. This segment requires a solid infrastructure and heavy investments. Satellite services and terrestrial systems account for the remaining 95%.

Currently, the government is encouraging some degree of Indian private sector participation, mainly in the missile and satellite launch services segment. However, greater private sector involvement will be needed to penetrate the satellite services and ground systems segments.

Improved private player role

Indian players have generally not been able to compete in the satellite services and ground systems segments as they were mainly suppliers of components and subsystems. In addition, Indian companies do not have the resources and technology to run independent space projects or provide space-based services. Because ISRO works with the traditional provider-provider model, most of the intellectual property is owned by the organization; This has hindered the technological progress of Indian companies.

However, private actors can bring the necessary innovation to develop space-based applications and services. In addition, demand for these services is exploding around the world and in India, with satellite data, imagery and space technology being used in most sectors. In addition, ISRO would need to expand 10 times its current level to meet this growing demand. According to industry estimates, India currently has more than 40 startups working on space and satellite projects and this number is likely to grow.

Major companies such as Larsen & Toubro, Godrej and Tata have long been suppliers of ISRO and have capabilities such as infrastructure testing, manufacturing capabilities and assembly lines, but aerospace manufacturing is only a small part of their total industrial output. As the space sector is a capital-intensive business, these conglomerates need to take the first step to increase private sector participation.

Space reforms

In 2020, the cabinet of the Union passed the bill that would allow the private sector to participate in or conduct a variety of space activities, such as building/developing rockets and satellites, providing launch services and owning satellites . This new design allows private companies to conduct R&D activities, collaborate with ISRO on various scientific and interplanetary missions, and use ISRO facilities.

These reforms will be implemented by a new hub, India’s National Space Promotion and Authorization Center (IN-SPACe), and while ISRO’s business activities will be delegated to government-owned units: New Space India Ltd. (NSIL) and Antrix. the organization to focus on R&D, science missions and space exploration.

In addition, NSIL will refocus its space operations from a “supply-driven model” to a “demand-driven model” and ensure optimal use of space assets.

Role of government-owned business organizations

IN-SPACe: It will act as a single interface between ISRO and private companies wishing to engage in space-related activities or utilize India’s space resources. In-SPACe will be responsible for regulating and enabling private sector activities in the sector. It will designate its own addresses for security, legal, promotion (of activities) and monitoring purposes. The organization will also be responsible for promoting private industries by creating a friendly regulatory ecosystem and ensuring the smooth transfer of technological know-how from ISRO to private actors.

National Space Promotion Board of India: Established to strengthen the space department and promote private space entrepreneurs.

NSIL — It is the business arm of ISRO and primarily responsible for enabling Indian industries to undertake high-tech space-related activities. He is also responsible for the promotion and marketing of products and services in the aerospace industry. In addition, NSIL will soon assume a large part of ISRO’s responsibilities (operational launchers, satellites and commercial activities) in the form of industrial consortia.

Antrix Corporation Limited — Incorporated as a marketing division of ISRO; handles ISRO’s commercial agreements for satellites and launch vehicles with foreign customers.

Challenges

While the government has taken steps to boost private sector participation in India, companies are cautiously optimistic, often citing multiple approvals and unclear procedures as impediments. For example, in 2017, Hughes, a US-based company, announced a $500 million satellite communications system in India. To date, the company has not received any approval or an expected schedule.

A satellite company normally needs approval from the Department of Space (under the office of the Prime Minister), ISRO (under the DoS), Antrix (the commercial arm of ISRO), and the Committee on Establishment and Operation of Satellite Systems. India, and in the case of communications satellites, the Ministry of Telecommunications and the Wireless Planning and Coordination Wing (both under the Ministry of Communications and Information Technology).

Moreover, the lack of clear, specific and predictable regulation can also create barriers for companies to attract private capital. Given the long gestation period and capital-intensive nature of space technology, private players should have access to “patient” capital, which can be reached by government or global private equity markets, as only these can afford to invest in the long term. betting space initiatives. . This requires reforms of FDI and currently private actors (operational satellites) have a 100% limit on FDI that must be approved by the government. However, this approval can take years. To address this challenge, the government may consider implementing the FDI model for telecommunications, which allows investments (up to 49%) through the automatic route and investments (> 50%) through government approval.

Finally, since ISRO is both a regulator and an operator, this conflict of interest is likely to manifest itself during the resolution of disputes between private actors and ISRO entities. While IN-SPACe is intended to be an independent agency, it falls under the purview of ISRO and the resulting potential conflicts of interest can be a concern for private actors.

Conclusion:

Despite all the challenges, the recent government decisions are a step in the right direction. Within months of the government opening up the space sector, IN-SPACe received at least 26 proposals from Indian and foreign companies. These proposals ranged from the approval of ground stations, the creation of satellite constellations, the development and launch of satellites and launch vehicles, to the delivery of applications.

In addition, companies such as US-based Amazon Web Services, UK-based OneWeb (backed by Bharti Group), NELCO and Tata’s L&T have expressed interest in this sector. In December 2020, the Space Department signed an agreement with Agnikul Cosmos Pvt. Ltd., a small Chennai-based missile company, to access the facilities and provide technical expertise for Agnikul’s vehicle/rocket development program in ISRO.