For decades, ISRO has done something extraordinary. It has not merely run India’s space programme; it has built much of the ecosystem required to make one possible. Where an industrial base did not exist, ISRO developed technologies, created supply chains, trained engineers, built launch vehicles and satellites, operated launch infrastructure, and took missions from the drawing board all the way to orbit.

That model was indispensable when India was building its space capabilities.

The question today is whether it should remain the model when those capabilities mature.

That question has become contentious after employee associations within ISRO sought clarity over proposals to transfer manufacturing and operational functions to industry. The immediate triggers include the transfer or proposed transfer of the SSLV, PSLV and LVM3 programmes to industry, as well as plans for private operation of the new small-satellite launch complex at Kulasekarapattinam. Employee representatives have warned against reducing ISRO to what has been described as a residual “R&D boutique” while launch vehicles and launch infrastructure move outside the organisation.

Those concerns deserve to be taken seriously. But they should not obscure what the government is actually trying to do. This is not the privatisation of ISRO, but an attempt to create an Indian space industry alongside ISRO.

The Indian Space Policy 2023 is unusually explicit about the intended division of labour. ISRO is to concentrate on advanced technologies, new systems, national missions, scientific exploration and other areas in which the State needs to lead. Once systems become mature and operational, the policy says they should increasingly be transferred to industry for commercial exploitation. In fact, it expressly requires ISRO to “transition out” of the routine manufacture of operational space systems. It is a change in ISRO’s job description.

The employees’ concern is understandable

Consider first the anxiety within ISRO.

Space capabilities are not ordinary manufacturing capabilities. A rocket is not simply a collection of drawings that can be handed to a manufacturer. Much of the knowledge that makes an extraordinarily complex system reliable is tacit: accumulated through testing, failures, launch campaigns and thousands of engineering judgments.

If ISRO entirely stops building launch vehicles, will that knowledge gradually disappear from the institution? If a private manufacturer encounters a serious problem ten years from now, will ISRO retain sufficient practical competence to intervene? Could India become dependent upon one or two private suppliers for strategically important capabilities? What happens to existing employees and to future recruitment if substantial operational work migrates elsewhere?

These are legitimate questions.

So too is the argument that technologies created over decades using public money are national assets. Their transfer cannot amount to simply socialising the cost of developing technology and privatising the eventual profits. The process must be transparent, competitive and designed to maximise the value returned to India.

There is also a national-security dimension. Access to space is strategically important. India cannot find itself in a situation where the government has ceded so much capability that it cannot independently undertake an urgent mission.

But none of these concerns leads to the conclusion that ISRO must itself indefinitely manufacture every mature rocket or operate every civilian launch facility.

They lead instead to a different conclusion: the transition must be designed carefully.

A space agency should not have to become a factory forever

There is an important distinction between developing a technology and manufacturing it repeatedly.

The first PSLV required the concentrated scientific and engineering capacity of the Indian State. The hundredth PSLV should not necessarily require the same institutional model.

Once a launch vehicle has been designed, tested and repeatedly flown, continuing to devote scarce government scientists and engineers to its routine production creates an opportunity cost. Every engineer occupied with reproducing a mature system is an engineer who cannot work on the next generation of propulsion, reusable launch systems, human spaceflight, planetary exploration or technologies that do not yet have an obvious commercial market.

ISRO already has an enormous agenda. India is pursuing Gaganyaan, a sustained human presence in low-Earth orbit, the Bharatiya Antariksh Station, further lunar missions including sample return, and future missions to Venus and Mars.

These are precisely the areas where the case for public investment is strongest. Their scientific or strategic value may be immense even where the immediate commercial return is uncertain.

There is little public-policy virtue in asking the same institution to pioneer Chandrayaan-5 and simultaneously remain India’s dominant production manager for every mature launch vehicle.

India needs capacity far beyond what ISRO can itself supply

There is also a question of scale.

India wants a much larger space economy. Yet for decades the Indian space sector was effectively organised around a single dominant customer, designer and systems integrator: the government.

That structure can produce exceptional national missions. It cannot by itself create a large commercial market. Commercial customers operate differently. They want launch schedules, competing suppliers, rapid turnaround, financing and customised services.

The government’s ambition is to grow India’s space economy dramatically from its present size.

What about giving away taxpayer-funded technology?

This objection also needs closer examination.

Yes, Indian taxpayers funded the development of PSLV, SSLV and many other technologies. But the purpose of public R&D is not to imprison technology permanently inside the laboratory that created it. A technology creates greater public value when it diffuses through the economy.

The relevant question is on what terms should publicly funded technology reach private industry. Transfers should be competitive where possible. They should avoid creating private monopolies. The government should obtain appropriate consideration for commercially valuable intellectual property. Domestic supply chains should be encouraged. Strategic conditions may be imposed where necessary. Multiple suppliers should be developed where the economics permit it.

Taxpayers benefit if technology developed with their money creates new companies, skilled employment, exports, cheaper launches, downstream applications and a broader national technological base.

Commercialisation can therefore be the return on public investment rather than its dissipation.

The harder question is capability, not ownership

There is nevertheless one warning the government should take seriously.

ISRO must not lose the ability to understand and, where necessary, recreate strategically important systems.

This does not require ISRO to remain the principal manufacturer of every rocket.

It requires maintaining design authority, systems-engineering competence, testing capability, mission-assurance expertise and sufficient hands-on exposure to ensure that institutional knowledge does not disappear.

The State might, for instance, retain the ability to manufacture or integrate critical systems when national needs require it, even while routine production shifts to industry. Government engineers can remain deeply embedded in qualification, certification and failure investigation. Strategic programmes can be treated differently from civilian commercial programmes.

The important qualification that the current transition is principally concerned with is civilian space activity. ISRO has simultaneously stated that strategic and nationally critical capabilities will continue to remain subject to government control, national-security requirements and public oversight.

That distinction should be made explicit and institutionalised.

India’s choice is therefore not between ISRO and the private sector. It is between a space programme whose capabilities remain concentrated in one exceptional institution and a space economy in which that institution becomes the technological engine for an entire nation.

Authored by Anirudh Rastogi, Managing Partner at Ikigai Law. Anirudh leads the Aerospace and Deeptech practice at the firm.

Image credits: AI generated

The firm’s space sector work includes advice on Axiom Research Lab / Team Indus’ lunar mission, Pixxel Space’s negotiations with Momentus for launch with SpaceX, PierSight’s USD 6 million seed round co-led by Alpha Wave Ventures and Elevation Capital and its JV negotiations to form a Public-Private Partnership to build India’s first fully indigenous constellation of earth observation satellites at an estimated project cost of more than USD 130 million, SatLeo Labs’ seed round, and Qosmic Space’s USD 3.33 million seed round led by Accel and Prosus.