Ikigai LawIkigai LawIkigai LawIkigai Law
  • About Us
    • About
    • Our Team
    • FinTales
    • Tech Ticker
  • Practice Areas
  • Blog
  • News & Events
    • Ikigai Law in the news
    • Ikigai Law at events
    • Ikigailaw on the social media
  • Careers

Reaching for the Stars: Structural Reform in the Private Space Sector in India

    Home Aerospace & Aviation Reaching for the Stars: Structural Reform in the Private Space Sector in India
    NextPrevious

    Reaching for the Stars: Structural Reform in the Private Space Sector in India

    By Ikigai Law | Aerospace & Aviation | 0 comment | 22 July, 2020 | 4

    India has taken steps in quick succession to liberalise its private space industry. In June 2020, the government approved the setting up of the Indian National Space Promotion and Authorisation Centre (IN-SPACe) to facilitate private activity. These steps signal definite changes in policy but there are reasons to be cautious.  

    India has taken steps in quick succession to liberalise its private space industry. In May, the Finance Minister Nirmala Sitharaman announced the opening up of the Indian Space Research Organisation’s facilities to the country’s private sector as part of its Covid-19 special economic stimulus. More recently, the Indian Cabinet approved the setting up of the Indian National Space Promotion and Authorisation Centre (‘IN-SPACe’) to facilitate private sector participation “through encouraging policies and a friendly regulatory environment”. These are early but laudable steps.

    The private industry, however, is cautiously optimistic because of its disappointing experience so far. In 2017, US-based company Hughes had announced a USD 500 million satellite communications system in India. Till date, Hughes has received neither an approval nor an expected timeline. Multiplicity of approvals and procedural ambiguity have been repeatedly cited as barriers to growth. A satellite company, for example, will typically need to navigate the Department of Space (‘DoS,’ which sits under the Prime Minister’s office), ISRO (sits under the DoS), Antrix (ISRO’s commercial arm) and the Committee for Establishment and Operation of Indian Satellite Systems, and in the case of communication satellites, the Department of Telecommunications (‘DoT’) and the Wireless Planning and Coordination Wing (‘WPC’; both DoT and WPC sit under the Ministry of Communications). The roles of each of these agencies are not clearly defined, further complicating the process. An example of this was the Antrix and Devas dispute. In 2005, Antrix (ISRO’s commercial arm) inked a 12-year spectrum deal with Devas Multimedia to provide satellite-based mobile services. In 2010, the deal was cancelled without as much as prior information to Dewas. ISRO reneged on its contract with Dewas over allegations of impropriety in granting the contract – one impropriety being that ISRO earmarked spectrum for Dewas without securing approval of the WPC or consulting the DoT. Procedural ambiguity in the regulations allowed for this to happen.


    Multiplicity of approvals and procedural ambiguity have been repeatedly cited as barriers to growth.


    A discussion on the disappointments of the private sector experience in India is incomplete without mention of Team Indus. The venture was racing against international participants to launch a rover to the moon, in its bid to win the US$ 30 million Google Lunar X Prize and had secured a contract with ISRO to launch the rover on a dedicated PSLV mission. In 2018, seven years after it started on the mission, Team Indus had to abort the mission when its launch contract was cancelled. The company was unable to raise adequate funds to pay its instalment to ISRO. Raising capital was a struggle for Team Indus, as it is for the rest of the industry. Private capital follows markets that have clear, specific and predictable regulations, making it difficult for an Indian space company to raise from foreign markets. Also, given the long gestation periods and capital-intensive nature of the technology, the sector needs access to ‘patient’ capital, which can come from the government or yet again, from global private equity markets which can better afford to take long-term, innovative bets. This also requires FDI reforms. Currently, the establishment and operation of satellites has a 100% FDI limit subject to government approval. Industry bodies have repeatedly raised concerns of projects being held up for years while waiting for such approvals. One way to balance industry needs and the security considerations which the Government rightfully looks to protect is to adopt the telecommunication services model. The telecommunication sector in India was the subject of legitimate security considerations that are in some ways similar to the space sector. At the same time, the Government recognized the benefits that can accrue from a high-growth telecommunication sector. The balance was therefore achieved through a model of liberalization that now permits investments up to 49% under the automatic route and through the government approval route beyond that limit. This prevents foreign entities from getting a majority stake without Government approval while also providing Indian companies with seamless access to capital for a non-controlling stake in the company.

    
    
    
    
    


    The sector needs access to ‘patient’ capital


    Lastly, ISRO is both a regulator and an operator. The apparent conflict of interest is another reason cited for the Team Indus debacle. The conflict manifests in various ways. For example, ISRO and the private sector have not transitioned beyond a ‘vendor-supplier’ relationship. ISRO establishes intellectual property and then shares technical expertise with the private sector in order to buy back components. ISRO maintains complete control over the final product. Private companies are precluded from exercising intellectual property, thereby limiting export and innovation. Private sector players need to be treated as equal market participants. Startups need to be actively incubated by ISRO and be allowed to exercise intellectual property. The inevitable competition between startups will be a net positive for ISRO, which will get access to an overall better quality product. Moreover, private companies will be able to leverage their intellectual property to export products to the burgeoning international satellite and launch vehicle market.


    ISRO and the private sector have not transitioned beyond a ‘vendor-supplier’ relationship.


    The Government’s recent decisions are welcome steps in the right direction. The intention appears to be to re-focus ISRO’s role to research and development and empower IN-SPACe to promote private space operations. This should be accompanied with a replacement of the present, overlapping regulatory framework to offer a single-window licensing system with a clear application process, precisely drafted exceptions, and strict timelines to be adhered to.

    Relevant regulations will also need to be updated to reflect the aspirations of the private sector. It remains crucial for the Government to consult key stakeholders in the private sector while overhauling regulations. This may prevent increased red tape from being the price to be paid for private sector participation. India’s space startups are hoping change will come in the form of a conducive policy environment that creates the right incentives, provides access to capital and assures clarity in regulation.


    Authored by Varun Baliga, Consultant and Anirudh Rastogi, Managing Partner at Ikigai Law

    For more on the topic, please reach out to us at contact@ikigailaw.com

    Antrix, Ikigai Law, INSPACE, ISRO, Space industry

    Ikigai Law

    More posts by Ikigai Law

    Related Post

    • Space Tech and Satcom Roundup 2022

      By Ikigai Law | 0 comment

      Law, policy and other developments in the Indian space and satcom sector in 2022. Policy Geospatial policy launched: The national geospatial policy was released on 28 December 2022. The policy seeks to enhance use ofRead more

    • Our comments on the draft National Geospatial Policy, 2021

      By Ikigai Law | 0 comment

      This post provides a brief overview of the draft National Geospatial Policy, 2021 released recently by the Department of Science and Technology of the Indian government, and discusses our comments on the draft policy. InRead more

    • Our comments on ISRO’s Space Remote Sensing Policy and Norms, Guidelines and Procedures 2020

      By Ikigai Law | 0 comment

      The Department of Space of the Indian government released a draft ‘Space Remote Sensing Policy 2020’ and ‘Norms, Guidelines and Procedures to implement the Space RS Policy 2020’ in November 2020. This blogpost discusses ourRead more

    • Tech Ticker Issue 45, April 2023: A cosmic surprise, a lie detector, and other short stories

      By Ikigai Law | 0 comment

      “Should we fire up this bad boy”- Television’s Homi Bhabha to Television’s Vikram Sarabhai at India’s first ever rocket launch (Rocket Boys, 2022) Back in the 60s, Dr. Vikram Sarabhai – the pioneer of India’sRead more

    • FinTales Issue 29: Fintech’s AI insurrection

      By Ikigai Law | 0 comment

      Image credit: Shutterstock

    Leave a Comment

    Cancel reply

    Your email address will not be published. Required fields are marked *

    NextPrevious

    Tags

    #DataProtection #Fintales bitcoin Blockchain Budget Consent Consultation Consultation Paper cryptocurrency data Data Controllers data governance Data localisation Data Protection Data Subjects digital economy Digital India Digital Lending Drones E-Commerce Facebook Fintech Government healthtech Ikigai Law India Indian government Innovation MeITY Notice Payments Personal Data policy Privacy RBI Recommendation Regulation Srikrishna Committee Stakeholders Startups Surveillance Technology Tech Policy TechTicker TRAI

    Connect with Ikigai Law

    Copyright 2018 Ikigai Law | All Rights Reserved             

    Information

    • Practice Areas
    • Blog
    • Careers
    • Contact Us
    • Privacy Policy

    Contact us

    Office
    2nd Floor, 44 Regal Building,
    Outer Circle, Connaught Place, New Delhi, Delhi - 110001

    Email Address

    contact@ikigailaw.com

    • About Us
      • About
      • Our Team
      • FinTales
      • Tech Ticker
    • Practice Areas
    • Blog
    • News & Events
      • Ikigai Law in the news
      • Ikigai Law at events
      • Ikigailaw on the social media
    • Careers
    Ikigai Law