shall be described with aspects such as organisational, legal, funding, ..... 14 NASA, SBIR/STTR Basics, http://sbir.nasa.gov/content/nasa-sbirsttr-basics, Visited ...
A POLICY REVIEW TOWARDS THE DEVELOPMENT OF A SPACE INDUSTRY ECOSYSTEM IN INDIA
A dissertation submitted to NALSAR University of Law, Hyderabad in partial fulfilment of the requirement for the award of degree of Master of Space & Telecommunications Law
Under the Guidance & Supervision of Dr. Balakista Reddy, Professor of Law NALSAR University of Law, Hyderabad
Submitted by Narayan Prasad N MSTLH14-03 2014-2016
National Academy of Legal Studies and Research University of Law Hyderabad.
CERTIFICATE This is to certify that NARAYAN PRASAD N Roll no MSTLH14-03 has submitted his/her
dissertation
titled
“A
POLICY
REVIEW
TOWARDS
THE
DEVELOPMENT OF A SPACE INDUSTRY ECOSYSTEM IN INDIA” in partial fulfilment of the requirement for the award of degree of Master of Space & Telecommunications Law to the NALSAR University of Laws, Hyderabad under my guidance and supervision. It is affirmed that the dissertation submitted by him is original, Bonafide and genuine research done by him.
Date: 20/May/2016
Prof Dr. Balakista Reddy
Place: Hyderabad
Guide & Supervisor Professor of Law, NALSAR
i
DECLARATION
I declare that the present Dissertation titled “A POLICY REVIEW TOWARDS THE DEVELOPMENT OF A SPACE INDUSTRY ECOSYSTEM IN INDIA” has been prepared and submitted by me to the NALSAR University of Law, Hyderabad in partial fulfilment of the requirement for the award of Master of Space & Telecommunications Law under the guidance and supervision of Prof Dr. Balakista Reddy, is an original, bonafide and legitimate work of the undersigned, and has been pursued purely for an academic interest. This dissertation shall not be used for any political purposes or connotations or as a testimony against any person or communities or regime. The views and idea expressed in this Dissertation are exclusively of the research and do not represent any person, organization, or community.
DATE: 20/May/2016
Narayan Prasad N
PLACE: Bangalore Roll No. MSTLH14-03 Batch 2014-2016
ii
ACKNOWLEDGEMENT
In the first place, I would to thank my family for supporting me in every possible way, all along the wonderful journey of this Master program. Their confidence in my potential has provided me extraordinary energy and comfort in all my endeavours. I am extremely grateful to Prof Dr. V Balakista Reddy, Professor of Law, NALSAR and my supervisor for his faith in me, working on this challenging thesis topic. Dr. Reddy’s continued guidance has made this thesis possible and provided me with a unique opportunity to express my outlook of Indian space industry ecosystem. I am indebted towards my mentors Prof K R Sridhara Murthi, Vice President, International Institute of Space Law, and Prof Dr. Roger Moser, Director, Asia Connect Center, University of St Gallen, whose inputs and comments have been critical in shaping my work. I am glad for the critical inputs provided by Anita Singh, Research Associate, Centre for Air & Space Law, NALSAR. I wish to record my gratitude to the advice, support and encouragement by Dr. Ranjana Kaul, Partner, Dua Associates, Prof Dr. Ram Jakhu, Professor of Law, McGill University. I pay tribute to my fellow MSTL classmates, for making the two year voyage blissful and memorable. They made our stay in NALSAR enjoyable and made us feel at home.
iii
TABLE OF CONTENTS
CHAPTER I Introduction ................................................................................................................ 1 a.
Statement of Problem ................................................................................................................. 2
b.
Research Questions ..................................................................................................................... 5
c.
Hypothesis ................................................................................................................................... 6
d.
Research Methodology ............................................................................................................... 6
e.
Research Plan .............................................................................................................................. 7
CHAPTER II 1
Evolution of Space Sector in India ................................................................... 9
1.1
India’s Stance in the Global Market and Emergence of New Space .................................... 11
1.2
Motivations to Develop a Private Industry Ecosystem in India ........................................... 14
CHAPTER III 2
Shortcomings in the Indian Space Ecosystem ............................................... 21
2.1
Capacity in Capturing the International Demand ................................................................. 21
2.2
Support Structure for SME Development and Promotion in the Space Sector .................. 22
2.3
Development of Coordinated Long-term Roadmaps for National and Global Expansion 25
2.4
Lack of a Comprehensive Regulatory and Legal Regime ..................................................... 26
2.5
Limited Independent Position and Strategy Analysis ........................................................... 28
2.6
Inability to Leverage Space Assets to Maximum Effect ........................................................ 29
iv
CHAPTER IV 3
Case Study – Potential for Space Business Incubators in India .................. 32
3.1
Space Business Incubation: ESA Case Study ......................................................................... 34
3.2
Need for Business Incubation by ISRO .................................................................................. 35
3.3
Business Incubators: Indian Perspective ................................................................................ 36
3.4
Elements for a Space Business Incubator in India................................................................. 37
3.4.1 3.5
The Incubation Program Structure .................................................................................... 37
The Challenges .......................................................................................................................... 39
3.5.1
Organizational Aspects ..................................................................................................... 40
3.5.2
Legal Aspects .................................................................................................................... 41
3.5.3
Funding Aspects ................................................................................................................ 42
3.5.4
Process Aspects ................................................................................................................. 42
3.5.5
Capacity Building and Gaps .............................................................................................. 45
3.5.6
The Risks and their Management ...................................................................................... 46
3.6
Impact of Space Business Incubator ....................................................................................... 47
3.6.1
Internal Impacts................................................................................................................. 47
3.6.2
External Impacts ............................................................................................................... 47
CHAPTER V 4
Terrain of Space Policy in India ..................................................................... 49
4.1
IPR Issues for Space Industry ................................................................................................. 50
4.2
Export Control in Space Industry ........................................................................................... 51
4.3
Space Security Policy................................................................................................................ 52
4.4
Development of Space Technology based SMEs in India ...................................................... 53
4.5
Establishing an uninterested Regulatory Body ...................................................................... 55
4.6
Technology Transfers ............................................................................................................... 56
4.7
Liability & Insurance ............................................................................................................... 59
v
4.8
Ownership Rights ..................................................................................................................... 63
4.9
National Security ...................................................................................................................... 65
4.10
Tax Rationalisation .............................................................................................................. 66
CHAPTER VI 5
Conclusion & Recommendations for Space 2.0 in India .............................. 68
CHAPTER VII 6
BIBLIOGRAPHY ............................................................................................ 73
vi
TABLE OF CASES Boyle v. United States
61
Feres v. United States
61
Martin Marietta Corporation v. INTELSAT
62
vii
TABLE OF STATUTES Section 5 (2) of the Central Sales Tax Act, 1956 Treaty on Principles Governing the Activities of States in the Exploration & Use of Outer Space, Including the Moon & Other Celestial Bodies, 1967 Convention on International Liability for Damage Caused by Space Objects, 1972 Convention on Registration of Objects Launched into Outer Space, 1975 Commercial Space Launch Act, 1984 Public Liability Insurance Act, 1991 Weapons of Mass Destruction (WMD) and their Delivery Systems (Prohibition of Unlawful Activities) Act of 2005 Weapons of Mass Destruction Act; the amended Foreign Trade (Development & Regulation) Act 2010 Delhi
Geographical
Spatial
Data
Infrastructure
Administration, Safety and Security) Act, 2011 Chemical Weapons Convention (Amendment) Act of 2012
viii
(Management,
Control,
TABLE OF ABBREVIATIONS AIS
Automatic Identification of Ships
AIT
Assembly, Integration and Testing
C4I2SR
Command, Control, Communications, Computers, Intelligence, Information, Surveillance, and Reconnaissance
CAG
Comptroller and Auditor General
CII
Confederation of Indian Industry
COMMINT
Communication Intelligence
CST
Central Sales Tax
DGFT
Directorate General of Foreign Trade
DoS
Department of Space
DoST
Department of Science & Technology
DRDO
Defence Research and Development Organisation
EADS
European Aeronautic Defense and Space Company
ELINT
Electronic Intelligence
ESA
European Space Agency
FICCI
Federation of Indian Chambers of Commerce and Industry
GIS
Geographical Information Systems
GLSV
Geostationary Satellite Launch Vehicle
ICC
INSAT Coordination Committee
ICT
Information & Communication Technology
IDSA
Institute for Defence and Strategic Analyses
IIM
Indian Institutes of Management
IIT
Indian Institute of Technology
IMS
Indian Mini Satellite
IMWG
Inter Ministerial Working Group
ix
INSAT
Indian National Satellite System
IP
Intellectual Property
IRS
Indian Remote Sensing
ISRO
Indian Space Research Organisation
IT
Information Technology
LEO
Low Earth Orbit
MOTR
Multi Object Tracking Radar
MTCR
Missile Technology Control Regime
NIAS
National Institute of Advanced Studies
NGA
National Geospatial Agency
NRSC
National Remote Sensing Centre
NSG
Nuclear Supplier Group
NSR
Northern Sky Research
NSTEDB Board
National Science & Technology Entrepreneurship Development
PPP
Public Private Partnership
PSLV
Polar Satellite Launch Vehicle
RSDP
Remote Sensing Data Policy
SCOMET
Special Chemical Organisms, Material, Equipment, and Technology
SME
Small and Medium Scale Enterprises
SSA
Space Situational Awareness
STP
Software Technology Parks
TTG
Technology Transfer Group
VAT
Value Added Tax
VC
Venture Capitalists
WMD
Weapons of Mass Destruction
WSN
Wireless Sensor Network
x
Introduction India has emerged as one of the most successful space faring countries in the world with the success of the rockets such as the Polar Satellite Launch Vehicle (PSLV), Geostationary Satellite Launch Vehicle (GSLV) and missions such as the Chandrayaan and Mangalyaan being first-attempt mega-successes achieved by the Indian Space Research Organisation (ISRO).
These successful technological developments in the launch, space and ground segment by India is probably only second to China in a developing country having developed complete indigenous capabilities to have the ability to provide end to end turnkey solutions from design, development of satellite systems to providing launch and ground support for making them operational.
While ISRO has made tremendous progress at the home front, the international front has witnessed the emergence of NewSpace companies leveraging large investments from Venture Capitalists (VC), building rockets, satellite constellations, user services based on satellite systems at an unprecedented scale. Market reports by leading analysts such as Northern Sky Research suggest that over 2500 satellites are to be built over the next decade.
This also happens to also be at a time when India’s own space programme has been accelerating at a great pace with the requirements of the country in rocketry, imaging, communications, navigation, scientific missions have reached a scale which one can argue it would not have while looking back to the 80s/90s.
With such a flush of global and local opportunities available, we stand at a point in time where the successfully home grown technologies of ISRO are ripe for being utilised commercially, at a turnkey level.
1
There seems to be a distinct opportunity for Indian space industry to build on a strong foundation laid down by ISRO to replicate the industry success of the technology sectors such as Information Technology and Biotechnology in the space sector and tap the national requirements and global avenues.
a. Statement of Problem Policy making is often an art of drawing a thin line for regulating a particular activity while making sure that there is fair competition/possibility for the sustenance of the players within a market segment to grow their businesses and bring a level a maturity in the performance a particular industry.
Space is a sector that is highly complex in such policy making since there are already set international mechanisms in coordination of space activities alongside implications not just nationally but also internationally. With that being said, it is interesting to capture how different space faring countries have approached development of their local space industry to develop a space economy.
In order to develop a space economy policy initiatives are key to providing impetus for the local industry in exploring business not just in the local market but to use their resources and capabilities to explore markets abroad. The policy initiatives by various space faring countries have had an immense bearing on the development of the space industry ecosystems in their region.
The crucial part of enabling the development of a strong industry ecosystem that can deliver turnkey level solutions shall be in adopting the right policies that can garner a balance between the vision/mission of the governmental agencies and the local industry. Therefore, there is a large impact generated on the back of policy initiatives on the structural, financial and operational aspects of development of an industry ecosystem.
2
It is important to understand the fact that public space entities will always have more resources at the beginning of a space programme, unless there has been a mandate at the policy level to directly develop an active space industry with the public space entity overlooking and managing the contracting and operations. A comparative analyses of the different routes and their effects on the current landscape of the commercial space industry.
The present work provides insights on the development of the space industry ecosystems in different space faring countries which have successfully developed a local space industry that can deliver turnkey level solutions to both national/international demand and shall look at particular policy initiatives taken by their respective governments to foster growth of their local industry.
A background on the development of the Indian space industry ecosystem is provided with detailed analyses on industry developmental policies adopted by ISRO in the past three decades. Subsequently, the current state of the Indian space industry and the ecosystem at large is discussed from a national perspective and a global perspective.
While the opportunity for the Indian space industry to integrate itself into the global supply chain exists, one has to look into what are the policy chances ISRO/Government of India needs to consider to facilitate such development. To this end, there is a need to perform a critical analysis on the effect of the current landscape of policies on the shaping of the space industry in India.
Few of the specific issues in policy in developing a space industry that can be captured for comparison includes subsidies, demand/supply management via industry channel, research contracting to industry, vendor development/selection, etc. Further there are aspects of control of technology in export related matters, intellectual property management, technology transfer, capacity building for clients
3
that are some of key aspects of business in the space sector which needs to be understood.
One of the biggest areas of space exploration that has provided traction for industry to participate in national requirements is space security. Several world leaders in space systems development have honed their capabilities over catering to such requirements over the past five decades. It seems relevant to trace the effect of an active space security policy on the development of the local space industry.
It is often industry players who become the grassroots level voice of the change that is needed for them to perform better as an industry. It is therefore important to capture the perspectives of managers’/decision makers on the governmental/agency level against that of the industry and identify the participation of the local industry in policy making in different space industry ecosystems.
Given the various routes taken to commercialise space sector in several advanced space faring nations, there can be specific lessons for India, given the present context of the global industry and the state of Indian industry. These lessons can range from lessons from Ariane Space as a successful Public Private Partnership (PPP) turned completely private industry in the launch sector to completely venture funded NewSpace entities such as SpaceX looking to substantially change the face of traditional perceptions of performing space activities.
It is also noteworthy to take into account the policy initiatives by the Government of India
to
promote
technology
based
sectors
such
as
Information
Technology/Biotechnology and broadly discuss any extension of policy initiatives taken within these technology sectors to promote industry.
Therefore, there must a proposed adaptation of the various successful policies in the development of a space industry ecosystem considering the former and current 4
changes in the landscape of the Indian space sector. These policy initiatives must take into account honouring the vision and mission of ISRO, while providing enough impetus to kick-off an industry ecosystem that can cater to the national space based requirements with attracting possible business from the international demand.
b. Research Questions Few of the major questions that needs to be addressed via policy research in the purview of the current topic include •
At infancy of industry ecosystem development, governmental space institutions have better resources (infrastructure, manpower, finances, etc.) than the industry. It goes without saying that therefore governmental space institutions take up the task of facilitating the development of industry ecosystem as vendors at different levels. However, there lies an issue of how policy makers manage a number of government institution-industry interaction issues that shall have a distinct effect on how the ecosystem roles out. Some the key questions in this segment include o What are the organisational development mechanisms (e.g. Formation of Public-Private-Partnerships (PPP), sharing of public infrastructure, etc.) in evolving of a commercial space industry? o How do policy makers manage conflict of interest between the emergence of industry and the capabilities of traditional governmental space agencies? o Given the various models available for enabling the transfer of technology from the tax money funded public institutions to the industry, how effective have these various methods have been across different space industry ecosystems?
•
As the industry gets along to develop turnkey capabilities in both upstream and downstream activities o How do governments manage industry being able to cater to national demand against catering to international demand? o What has been done by governmental institutions to manage the dual use/security related aspects that come along with the tag of space 5
exploration systems development to manage the development of the industry, while making sure that the technology/missions performed are not a threat to the society at large and the intellectual property in the process are not falling into the wrong hands? o What has been the role of policy makers in formation of space clusters that can support the propagation of the industry and growth? •
It is important to note that policy making in itself is a great challenge and the drivers of specific policy can range from politicians to bureaucrats to industry bodies. Given the successful transitions of several industries in the advanced space faring nations, there can be important lessons to India in o How policy changes are initiated in these space faring countries? o What are the perspectives taken by managers at various institutions be it government/industry/political in the policy initiation / policy change initiation?
c. Hypothesis Given the rising potential in the private space industry and globally expanding commercial space opportunities, we in India do not seem to be prepared to commit to support the rise of the private space sector of the country. There are fundamental gaps in this country’s policies or the lack of it to support the emergence and the growth of the private space sector.
d. Research Methodology A mix of doctrinal and non-doctrinal methods of research shall be used in the current work provided that there is much research presented internationally on space policies adopted for industry ecosystem development. This shall provide a foundation to making a comparative analysis with space policies in India.
The research shall possibly include interviews of former policy maker/influencers of space programme in India and key industry players who have supported the space 6
programme for over three decades. Given the terrain of changes that these stakeholders have witnessed, there is tremendous scope to capture their perspectives of past, present and the future outlook.
There shall be an attempt to capture insights on industry ecosystem development of supporters of the Indian space programme via collaborations that have had a positive influence on the Indian space programme such as technology collaboration for the Vikas engine from France.
e. Research Plan The research shall begin with a literature review on the evolution of the space sector in India over the past six decades. It is important to understand India’s stance in the global market and emergence of NewSpace to identify specific merits and demerits in the current policies. Further, there is a need to identify the motivations to develop a private industry ecosystem in India.
Based on the literature review, shortcomings in the Indian space ecosystem shall be identified taking a closer look at our capacity in capturing the international demand, support structure for SME development and promotion in the space sector, strategies for the development of coordinated long-term roadmaps for national & global expansion, the effect of lack of a comprehensive regulatory and legal regime causing inability to leverage space assets to maximum effect.
A case study is proposed as a part of the work to explore the potential for space business incubators in India. Motivations and lessons have been derived from ESA’s experience. Elements for a space business incubator in India shall be identified with a possible incubation program structure. The challenges in having such an incubator shall be described with aspects such as organisational, legal, funding, process. To elaborate on the benefits of the incubator, the internal and external impacts of space business incubator shall be listed. 7
Further, there is a need to ascertain if the terrain of space policy in India is prepared for the emergence of commercial space. The gaps in IPR issues, export control. space security policy, establishing a regulatory body, technology transfers, liability & insurance, ownership rights, national security, tax rationalisation, shall be discussed in detail.
To wrap up the thesis, key recommendations for Space 2.0 in India shall be made that can elevate the current stance of the Indian space adventure to not just to benefit the common man in India but to spread its wings to a exploring global opportunities.
8
CHAPTER II 1
Evolution of Space Sector in India
India has been a long-term investor in the development of space, launch and ground systems infrastructure. The Indian Space Research Organisation (ISRO), a government institution under the Department of Space (DoS), has piloted all the Indian activities in the space sector since its inception in 1969. The Indian space programme has had many successes in the five decades since it was envisioned, but no private turn-key solution provider has emerged out of the Indian space industry, both in the space and launch segments.
The current space value chain of India is predominantly driven by ISRO in both the upstream (satellite manufacturing, launch vehicles, Earth station setup) and downstream (data products, provision of SatCom capacity, ground operations, etc). The participation of the local space industry within the value chain is limited to provisioning products and services that are finally integrated by ISRO institutions in producing a turnkey solution. A variety of issues may have influenced such alignment within the space ecosystem, such as: •
lack of volumes for dedicated investments by the private industry hindering the maturity of the industry to provide turnkey solutions;
•
limitations via export control measures taken by advanced space faring nations such as the United States;
•
timelines for maturity of indigenous technology; and
•
marketability of Indian space upstream and downstream products in the international market.
However, the emergence of India as one of the leaders in the emerging market segment and with a proven track record of a successful space programme has opened the doors for the domestic space industry to break into the international market. With competitive products and services, quality infrastructure, and cost advantages utilising the manpower within the country, the Indian space industry offers a unique landscape for economic exploitation. It is therefore necessary for the Indian space 9
ecosystem to renew its entrepreneurial spirit with encouragement from the national policy-makers, as India cemented its position as a global leader in space technology with a successful Mars orbiter mission in 2014. There is a need for the local industry to move up the value chain within the country’s space programme to essentially occupy the Assembly, Integration and Testing (AIT) role for space and launch systems to capture a larger chunk of the global market, built on the legacy of the Indian space activities.
The initiation of such vision shall involve transfer of roles for successful systems such as the Polar Satellite Launch Vehicle (PSLV), and for applications based on Indian Remote Sensing (IRS) and Indian National Satellite System (INSAT) to the local industry. A recent independent study by Northern Sky Research (NSR) projected that more than 1,800 satellites weighing more than 50 kgs will be ordered and launched over the next decade, generating $300 billion across global markets. 1 It is thus imperative for the policy-makers in government to chalk out plans quickly for capitalising on this opportunity that has the potential to bring in useful foreign exchange and investment into the Indian space sector.
There is tremendous scope to explore commercial space business in India through novel Public Private Partnership (PPP) models which will provide a foundation for a win-win situation for both the national space agency and the local industry. Such options are already being mulled by ISRO. 2It is expected that ISRO would transfer the responsibilities of routine development of space and launch systems to the competitive local industry, while taking up the challenging task of development of next-generation technologies, exploration of outer space, and development of a human spaceflight programme. While doing so, there are a number of hurdles that need to be addressed for smooth business operations in the space arena, some of which are summarised in the subsequent sections.
1
NSR, Satellite Manufacturing and Launching to Face Unprecedented Growth,http://www.nsr.com/news-resources/nsr-in-the-press/nsr-press-releases/satellitemanufacturing-and-launching-to-face-unprecedented-growth-/, Visited 23 Feb, 2016. 2 Madhumathi, D.S., The Hindu Business Line, http://m.thehindubusinessline.com/news/science/isromulls-antrix-tieups-and-industry-launches/article7274383.ece/, Visited 2 Feb, 2016
10
1.1
India’s Stance in the Global Market and Emergence of New Space
The key reasons for a nation to invest in space are to utilise its strategic importance, enhance its scientific capability, create high-skilled jobs and facilitate economic contribution to the nation’s GDP. The continued investments in the space sector have seen the size of the global space industry almost treble in the last decade, as seen in Figure 1. 3 As expected, downstream segments of satellite services and ground equipment generate ~90 percent of the total space industry revenues (Source: SIA). The size of these segments by value has however remained the same as business in upstream services like satellite manufacturing and launch services which has a higher government control due to the dual nature of the technology involved.
Figure 1- Global space industry size evolution between 2004 and 2014 (Source: SIA)
The maturity and size of the space industry is heavily dependent on government investment and policies. The largest share of the global commercial space industry belongs to the United States due to higher investments by government and a welldefined space policy that promotes industrial participation. Futron’s Space Competitiveness Report (2014) found that not only has the US has been successful in leading with globally reputed space companies like Boeing, Lockheed Martin and SpaceX, but it is also leading in creating human capital. Much of this success can be attributed to its large investments in defence space, providing these companies to scale up their operations without largely affecting the cash flow.
3
The Tauri Group, State of the Satellite Industry Report, September 2015, http://www.sia.org/wpcontent/uploads/2015/09/SSIR-September-2015-Update.pdf, Visited 18 Feb 2016.
11
As India ramps up its space defence capabilities, lack of a mature space industrial base will potentially hurt its ambitions. India counts among the top nations in the world in terms of government space investment 4, but is far behind when it comes to creating successful private industry that is globally reputed. India’s space budget has increased in size (Figure 2) and is one of the largest space budgets in the world; however, the lack of an active space industry at turnkey level might have an immense opportunity cost for India in manufacturing satellites and launch vehicles to service the global market. 5 This in effect is also due to absence of a single Indian company among the top space companies in the world (which in itself is an alarming statistic) that needs to be addressed urgently through policy push under the several grand schemes announced by the current government, such as ‘Make in India’ and ‘Digital India’.
Figure 2- Evolution of India’s Space Budget (Source: Outcome of Budget ISRO)
Most of the apprehensions for private investment in space industry come from the requirements of high capital investment, and the long gestation periods of space projects to get substantial Return on Investment (RoI) for the investors. These trends have been put aside by a new breed of space companies calling themselves ‘NewSpace’, which thrive on new business models of low cost access to space by 4
Penelope Macrae, Indian rockets aim for space market, http://www.japantimes.co.jp/news/2013/11/11/asia-pacific/science-health-asia-pacific/indian-rocketsaim-for-space-market/#.VVmqLRdcSgc, Visited 18 Feb 2016. 5 Anchal Gupta, Business Insider India, India’s Space Industry –Sleeping Warhorse Must Wake Up & Run, http://www.businessinsider.in/Indias-Space-Industry-SleepingWarhorse-Must-Wake-UpRun/articleshow/28382468.cms, Visited 18 Feb 2016.
12
capitalising on the advancements made in recent years in small satellite technology, consumer electronics, and computing power. Tiny modular satellites called ‘CubeSats’, weighing 1-4 kgs and costing under $100,000 have revolutionised the way space products and services are delivered to end users. The movement began in Europe and US simultaneously as a by-product of university and space agency collaborated research, but it was the US which took the lead in successfully commercialising these technologies developed in laboratories. Figure 3 shows the forecast of nano satellites weighing between 1-50 kg, which are scheduled to be launched during 2014-16 globally. 6
Figure 3 - Nanosatellites Forecast (Source: NSR)
The high number arises from the fact that such nano satellites have short development timelines, and provide the necessary agility for satellite operators to develop large constellations that can cater to a larger customer base with high service quality. These NewSpace companies have ushered in widespread changes in the traditional satellite manufacturing and launch services industry, with companies like RocketLabs and Firefly Systems building new launchers cheaply using innovative techniques like additive manufacturing, to reduce the cost to orbit for these satellites. The impact of these companies has been felt within the space industry, as practices from these ‘NewSpace’companies have been adopted to keep the costs low and have a factory type approach in building systems in order to cater to the increasing demand. The NewSpace revolution has now led to companies such as Google,
6
SpaceWorks 2015 Nano/Microsatellite Market Assessment, http://www.sei.aero/eng/papers/uploads/archive/SpaceWorks_Nano_Microsatellite_Market_Assessme nt_January_2015.pdf, Visited 18 Feb 2016.
13
Virgin, and Qualcomm investing in small satellite-based communication technologies.
India, however, has remained shielded from the rapid changes that have happened in the global space industry over the past decade. ISRO has been slow to respond on both commercial and academic fronts, with only a handful of university-level small satellite missions being launched during the same period, none of which could transform into a full-fledged commercial opportunity for the people involved in these projects. Lack of clarity on space policy in India is to blame, and partly the lack of willingness of DoS to take up additional responsibility of creating an ecosystem that disrupts their own traditional one, without any visible incentives. In the following sections, the need and motivation to develop a strong private industry ecosystem is detailed with necessary arguments.
1.2
Motivations to Develop a Private Industry Ecosystem in India
Presently, India has inherent advantages over other countries due the availability of skilled workforce, a stable and business friendly government, positive investor climate and low cost of operations. Because India was an early mover in space technology, it is poised to become a major space power albeit slight policy push towards greater commercialisation of the industry. Table 1 shows the PESTLE analysis of India, in lieu of the motivation to develop a strong private space industry.
The PESTLE analysis shows high suitability for services-based business models to operate out of India. The government’s encouragement for private space industry within the country to develop capacity and capability in pursuing space activities should thereby be directed to both the spectrums across the industry value chain. A focused space policy mandate can have multiple direct and fringe benefits to the government, especially in the defence sector which has been the current government’s area of interest through its ‘Make in India’ initiative. Some of the direct and indirect benefits of space technology include:
14
Table 1- PESTLE Analysis of India Political
• Stable government
• Strong leadership
Economic
• Eased banking
demographics
• Investor friendly • Skewed climate
• Lower inflation
friendly
• Big market size
• Open to FDI
• High social
applications
private
unemployment
industry
in organised
on space
Equator for
tech exports
launch service
• Investors
quick tech
regulatory
averse to
transfer
body
financing non
• Lot of
expertise in
paperwork
high-skilled
ICT services
for licensing
workers
• High level of consumerism
• Proximity to
• DOS is the
• Availability of
operations
• Pro-growth via • Low
tech work
• High level of
mobility
for downstream
Environmental
• Restrictions
• Moderately
distribution
Legal
• High quality • Good R&D
income
• Manufacturing • Low cost of thrust
Technological
• Favorable
interest rates
• Business policies
Social
• Low rate of
• No laws for
obsolesce
business protection
IT sector
• Weak environmental laws
• Competition low in market currently
sector
Civilian and Commercial Space industry has the potential to emerge as the third technological success front following the successes of the Information Technology (IT) and Biotechnology in the country. Space has an important role in the overall economic development of the country and in the success of the government initiatives such as Digital India and Make in India. The development of the private space industry shall aid in rural connectivity, e-governance and setting up of manufacturing facilities base for products of high technology in India, creating headways in the overall emergence of the country at the world stage.
The success of the space industry will enhance capacities within the country and complement the government-driven programme, which has been historically proven in advanced space faring countries such as the US. Capacity building in the private industry at a turnkey level for both upstream and downstream shall assist the 15
economic development of the country by keeping up to the pace of requirement of the marketplace (e.g. Direct-to-Home TV, Broadband Internet), while reducing the inherent dependence on foreign assets. For example, as per a recent Comptroller and Auditor General (CAG) report, only one among the seven DTH providers is leasing transponder from the INSAT system. The primary reason for this disparity is the slow pace at which ISRO has added satellite transponders to the commercial market. The net effect is that the DTH providers are incurring higher transponder costs on foreign satellites when INSAT could have been an equally reliable, and more cost efficient, alternative.
Space has its bearings over the imagination of youth and a strong emerging local industry can revolutionise the mindset of the national talent pool and can potentially aid in reversal of brain drain from the country. Public outreach, awareness, and STEM education are some of the intangible impact that investment in space technology produces.
The capacity built up within the industry shall foster Business-to-Business (B2B) collaborations within the country and with enterprises across the globe and create also a strong focus on Business-to-Customer (B2C) applications which moves from the traditional Government-to-Government (G2G) flow of development of capacity and application of technology. The B2B, B2C ecosystem in the space industry has immense potential of tapping the much successful IT infrastructure of the country and extending the IT knowledge base to core software based applications of spacebased information such as Geographical Information Systems (GIS).
It shall create an environment of technological innovation which when supported and encouraged can sustain to create a secondary source of development of high-tech hardware, software and applications for the government. An ecosystem of technological innovation in space technology has the potential of creating the next generation Small and Medium Scale Enterprises (SMEs) in India which shall
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leverage the frugal nature of engineering and can create products and services independently for local and global requirements.
Military In the development of space technology with several dual use capabilities, there exists a case for the building up a sustained indigenous industry ecosystem that shall support the safety and security apparatus of the country. These range from development of capabilities in upstream such as satellite, launch vehicle development to creating specific downstream applications such as Automatic Identification of Ships (AIS), Electronic Intelligence (ELINIT), Communication Intelligence (COMMINT) and other Command, Control, Communications, Computers, Intelligence, Information, Surveillance, and Reconnaissance (C4I2SR) applications.
Space Situational Awareness (SSA) is the ability to view, understand and predict the physical location of natural and man-made objects orbiting the Earth. SSA is a prominent concern for both military and commercial systems, mainly because of the increasing military reliance on space assets. The debris created by the anti-satellite testing by China in 2007 and the Kosmos-Iridium collision in 2009 has raised additional concerns about the safety of space assets. India currently relies on NASA’s data, and will operationalise its own system of Multi Object Tracking Radar (MOTR) by 2017. 7 Meanwhile in the US, commercial operators have established the Space Data Association (SDA) for providing satellite operators reliable and efficient data for increased safety of satellite operations; this is in addition to the Department of Defense’s (DoD) own surveillance network.
The changing space security environment and the rising international concerns over the rapid growth of military assets in space makes space security one of the most important issues to address. The need to have a space security policy is being 7 Business Standard, http://www.business-standard.com/article/current-affairs/isro-to-launch-firstindigenous-multi-object-tracking-radar-in-3-5-months-115051500868_1.html, Visited 23 Feb, 2016
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increasingly debated in India and the IDSA Task force in 2009 produced a report which attempted to conceptualise such a policy. However, there is reluctance to talk about use of space for national security needs including its military applications. Though efforts are being made to synchronize the activities of ISRO which is responsible for India’s civilian space programme and the Defence Research and Development Organisation (DRDO) which works on the use of space for national security needs, the lack of a strong private industry that can meet heightened needs for such sophisticated missions hampers the progress in this direction, apart from the bureaucratic delay that is normally associated when two high security government agencies interact.
Figure 4 - Economic Impacts of Space (Adopted based on OECD, 2012) 8
8 OECD, 2012, OECD 10.1787/9789264169166-en
Handbook
on
Measuring
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the
Space
Economy,
Paris,
DOI:
Figure 5 - Impact of Space Technology: Low Level Approach 9
Capacity building within the space industry shall not only drive commercial applications, but shall aid the government in situations of emergencies (e.g. natural disasters, intelligence gathering for fighting against terrorism) and can eventually develop into a foundation that could potentially contribute as a part of a strong foreign policy drive. Studying the impact of space technology on civilian life is a complicated task, especially when it comes to quantifying the tangible and intangible impact. The spill-over of space technology is in sectors as varied as defence, agriculture and education. There exist many ways to show the impact of investment in space technology; some of them illustrated above.
9
Adopted based on Simmonds et al. (Technopolis), 2012 in Burston, 2013.
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Thus, the technological and knowledge backbone for space technology creates opportunities in the marketplace to create and explore commercial applications on a global scale, which traditionally might not be the fundamental focus a governmental space agency, as well as create multiple intangible impacts across various sectors such as defence, education, agriculture, energy, transportation and environment. India has made substantial investment in its government space programme over the years, but it is a sustained policy push towards investments in the private space industry ecosystem that will create commercial space applications, complementing the societal benefits motivation currently being pursued by the government.
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CHAPTER III 2
Shortcomings in the Indian Space Ecosystem
The space ecosystem of India is driven by the DoS with upstream, downstream and commercialisation of space assets all done by the government institutions with limited support in supplies of products and service by the space industry. As DoS also acts as the regulator for all sectors of the industry, there exists a conflict of interest for it to promote private space industry. This, combined with industry entry barriers like high cost, high risk and long gestation periods, discourages the industries that supply to the space activities currently to be able to reach the turnkey solution provider in space capabilities and launch systems, and their ability to cater to international requirements. Antrix Corporation incorporated as a wholly owned government company attempts to commercialise the products and services including remote sensing data, launch contracts for foreign satellites, development of turnkey spacecraft etc. Yet, given Antrix and ISRO overlap--the former tends to function more like a quasi-government organisation rather than a private one that competes effectively in the international market.
2.1 Capacity in Capturing the International Demand With the extremely busy schedule of ISRO in the current five-year plan with 58 missions 10, due to its reliance over ISRO staff to deliver, the ability of Antrix Corporation to leverage on the facilities and infrastructure developed in ISRO for AIT of satellites, manpower in consultancy will remain limited. The last of such (and the only instance of) satellite development taken up by ISRO via its commercial wing Antrix has been the satellites manufactured and shipped for two major European companies, W2M for Paris-based Eutelsat Communications (subcontracted to India from European Aeronautic Defense and Space Company (EADS) subsidiary Astrium) and for the UK-based Avanti Screen Media. 11 The failure of the
10
Zee News, ISRO plans 58 space missions during 12th Plan, http://zeenews.india.com/news/space/isro-plans-58-space-missions-during-12th-plan_804204.html, Visited 11 Feb 2016. 11 The European Association of Remote Sensing Companies (EARSC) Newsletter, Astrium, Antrix to jointly tap small satellite sector, http://eomag.eu/articles/33/astrium-antrix-to-jointly-tap-smallsatellite-sector, Visited 12 Feb 2016.
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W2M satellite 12 had an effect on the international market sentiment for development of communication satellites by India.
The increased number of missions of national importance alongside such possible market sentiment has resulted in Antrix Corporation focusing its commercial offering to signing of launch agreements for foreign satellites and in data sales from the Indian Remote Sensing (IRS) satellites. However, among the 40 foreign satellite launches that Antrix has done till date, only three satellites weighed 100kgs or more and rest all were small satellites. Despite a strong demand for Low Earth Orbit (LEO) launchers in the international market, and an excellent reliability record of the PSLV, Antrix has not been successful at marketing itself. A possible reason for such unaggressive approach is the schedule uncertainty associated with PSLV launches, as national missions are of higher priority and most foreign satellites are flying in rideshare mode. Delays in the national satellite or the primary payload in this case lead to delays for the other customers, and this does not go down well with commercial companies who stand to lose money in such cases.
2.2 Support Structure for SME Development and Promotion in the Space Sector The current structure of the development of an SME base in India for space products and services is based on the industry development/technology transfer policy of ISRO. Under the technology transfer policy, the space agency aims to transfer the know-how to the industry after which the product/service is supplied back to the agency under buyback, while there is an opportunity for the SME partner to develop spin-off products/services based on the know-how. 13 However, there are no transparent national funds for products/services independently proposed by entrepreneurs in the space sector. Space business incubation funds as a part of 12
Satellite Today, Eutelsat CEO: W2M Failure a ‘Serious Disappointment’, http://www.satellitetoday.com/telecom/2009/01/29/eutelsat-ceo-w2m-failure-a-seriousdisappointment/, Visited 11 Feb 2016. 13 Technology Transfer Group, Indian Space Research Organization (ISRO), Technology Transfer Policy of ISRO, http://www.sac.gov.in/SACSITE/TTIDWebsite/Technology_Transfer/TT_Policy.pdf, Visited 11 Feb 2016.
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supporting independent ideas for space-based entrepreneurship such as the Small Business Innovation Research (SBIR) fund at NASA 14 have propelled independent ideas for development of applications/products/services based on space technology. There is also evidence of these supportive funds being managed professionally by a business concern (venture capital firm) as is in the case of the Open Sky Technology Fund (Figure 6) from the European Space Agency (ESA). 15 This can create a support system environment for start-up and early-stage companies that use spacerelated technologies or satellite applications.
Figure 6 - Components of ESA's BIC Program
Some of the space-faring nations such as UK and Germany have created special clusters for technology development which have fostered space entrepreneurs to utilise such platforms for the development of their ideas, enabling a smoother transition to the global market place. Harwell space cluster 16 and the Berlin Adlershof
17
are typical examples of science and technology clusters that have
enabled the global emergence of space companies such as Satellite Applications Catapult (UK), Oxford Space Systems (UK), Berlin Space Technologies (Germany), Astro- und Feinwerktechnik (Germany), among others. Harwell in itself has grown 14
NASA, SBIR/STTR Basics, http://sbir.nasa.gov/content/nasa-sbirsttr-basics, Visited 11 Feb 2016. European Space Agency, Open Sky Technologies Fund, http://www.esa.int/Our_Activities/Space_Engineering_Technology/TTP2/Open_Sky_Technologies_F und, Visited 11 Feb 2016. 16 Technology Strategy Board, Government of United Kingdom, Harwell Space Launchpad Showcase, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/363055/Launchpad_dir ectory_-_space_Harwell_2013.pdf, Visited 12 Feb 2016. 17 Berlin Adlershof, City of Science, Technology, and Media, Presentation to Union of the Baltic Cities, UBC Business Commission, Union of the Baltic Cities, UBC Business Commission, http://www.ubc.net/plik,5250.html, Visited 12 Feb 2016. 15
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to house £1 billion worth of world-leading research infrastructure. 18 There is room to set up such science and technology enabling infrastructure with the encouragement of partial initial investment for independent ideas of merit by space entrepreneurs in the country.
Besides the governmental support system, there has also been the case of several space-dedicated incubators that have emerged in leading space faring nations such as USA (San Francisco, Colorado, Houston and Florida), UK (London), which are essentially a product of a strong entrepreneurial ecosystem in the respective countries, providing an opportunity for entrepreneurs developing space technologybased products and services to directly pitch to space-friendly angel investors and venture capitalist firms. This phenomenon is now spreading new entrants to the space sector such as Australia, which has established Delta-V start-up accelerator, its first dedicated industry accelerator space-hub as a part of its efforts to capture the NewSpace market (Space 2.0). 19 Moreover, even traditionally State-driven space programmes and activities such as the Russian space programme have now seen the emergence of the NewSpace ecosystem with grants provided to entrepreneurs (e.g. $3.9M Skolkovo grant for Dauria Aerospace) in an effort to stimulate the creation of new products and new technologies in the space sector. 20 Even though India has mature space technology infrastructure and applications, the ecosystem has not evolved beyond the boundaries of the government to create such possibilities for Indian entrepreneurs to capture the resident market as well as the global market, while building on top of the resources within the country. An example could be setting aside a designated section of the proposed Aerospace Technology Park in Bangalore exclusively for space ventures arising from India. This could be supported with a space business incubator that invites and funds new ventures using a combination of private equity and government funding depending on the nature of the enterprise.
18
Science and Technology Facilities Council, Harwell Oxford, https://www.stfc.ac.uk/743.aspx, Visited 12 Feb 2016. 19 Delta-V Space Hub, http://www.deltavspacehub.com/#space20, Visited 11 Feb 2016. 20 Sk-Skolkovo, Space startup wins $3.9M Skolkovo grant for Earth-observation satellite, https://sk.ru/news/b/news/archive/2015/09/18/space-startup-wins-_2400_39m-skolkovo-grant-forearthobservation-satellite.aspx, Visited 11 Feb 2016.
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2.3 Development of Coordinated Long-term Roadmaps for National and Global Expansion The development of an active and scalable private space industry in several space faring nations has been a result of coordinated long-term roadmap involving governmental efforts in the promotion of expansion of local industry to cater to the commercial local market while enabling industry to compete globally. Such coordination in India has been actively pursued by the influential apex business organisations such as the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI), but to limited effect. These organisations, which are to voice the sentiments of Indian businesses and industry in leading policy debates and act as catalysts in bringing about the growth and development of Indian Industry, have failed to provide traction in the space sector for the expansion of the private space industry of India. The last study conducted by CII that provides any comprehensive insights regarding Indian space activity, the state of Indian industry and the trends for future development and opportunities and business potential for the Indian industry dates back to 2010. 21
Development of an ecosystem to develop a space industry has a proven relationship to the ability of academia to realise independent research ideas alongside creation of an environment of sustained academia-industry-agency interactions. In several cases the development of a private industry has resulted as a spin-off of a sustained academic effort within universities (e.g. Surrey Space Technology Limited, UK, a spin-off company of University of Surrey). While there are several premier Indian universities pursuing aerospace-related research and programmes, none of them have been able to generate such an outcome. Though there are some programmes within the country for sponsored space research such as the RESPOND from ISRO
22
, they
limit the scope of academic research to derive outputs of such R&D to support ISRO programmes. This shall limit the execution of independent ideas from academia and 21
CII, Aerospace Overview of Indian Space Sector 2010, http://cii.in/PublicationDetail.aspx?enc=BLugFnj8eqxLjbyH7bTn1tZOnH16pfcR8Z+fdnVJUkzxjzm psPic2BXUPyNf/ON3Vtv6/xh0Hfbjb5sPJjUNBMhRSPEipIjLRnX6NgqSRrCbqX1WSsCUKO7StZ3 oRYjIzfTG1VqkiJ7WYC8gYocYpB9vuFO6MdyYVbo8ThAIR0k=, Visited 11 Feb 2016. 22 Sponsored Research (RESPOND), http://www.isro.gov.in/sponsored-research-respond, Visited 12 Feb 2016.
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the ability of spin-off companies that can build over such independent ideas.
Development of new launchers |Interplanetary Planning satellite constellation l ih
t
Medium term goals (3-5 years)
Completing on-going projects
Long term goals (5-10 years)
Short term goals (1-2 years)
Figure 7 - Example of Long-term Roadmap for Space Programme
2.4 Lack of a Comprehensive Regulatory and Legal Regime India is a party to the space treaties under the United Nations General Assembly (UNGA), however the country has not enacted any national space laws. The current regime of legalities for space activities are under the policies created by ISRO such as the SatCom policy, Remote Sensing Data Policy (RSDP) among others. These policies, as in the case of the SatCom policy provide a loosely written framework for entrepreneurs without transparency in decision timelines, licensing authorization for commercial space launches, insurance, liabilities, dispute resolutions among others. 23 These have led to adverse business conditions in the Indian market with not a single Indian enterprise being able to set up its own satellite system. Moreover, there is no clarity in regulatory and legal regimes for entrepreneurs who may want to set up non-telecommunications satellites such as the Low Earth Orbit (LEO) satellites for commercial remote sensing based applications. The Centre of Air and Space established at NALSAR University of Law has been focusing on promoting space 23
Ram S. Jakhu, National Regulation of Space Activities: 5 (Space Regulations Library), p. 165, Springer; 2010
26
policy within the country and is pursuing research in some of the legal issues in space; however, the pursuit in developing national space legislation which shall encourage entrepreneurs to develop independent turnkey products and services remains at infancy.
Figure 8 - Legal Issues in Space Industry (Source: EU-Brazil Sector Dialogues, 2014) 24
The current prevalent opportunities in the upstream of the space ecosystem in India which can help scale private enterprise-level and the country’s competitiveness in the global space market include AIT of the launch vehicles to increase launch frequency, building up turnkey solution provider capability in development of satellites independently or based on Indian Mini Satellite (IMS)/ IRS/INSAT bus, and establishment and operation of Earth stations for NewSpace companies emerging in the global market within India. These listed opportunities have the potential for the private industry in India to gain a greater share of the international market as well as cater to the untapped local market such as military space. However, some of the key issues in regulatory and legal regimes such as licensing, technology certification, operational safety, financial investment, insurance, liability, protection of Intellectual Property (IP), dispute resolution, norms for environmental protection and export control have to be sorted out in enabling Indian entrepreneurs to take risks in engaging in such activities.
24 EU-Brazil Sector Dialogues, 2015, http://sectordialogues.org/sites/default/files/acoes/documentos/micro_nano.pdf, Visited on 18th Feb, 2016
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2.5 Limited Independent Position and Strategy Analysis There are presently no dedicated independent platforms for developing positions and strategies that can be provided to decision-makers with an independent view and analysis on mid-to-long term issues relevant to the use of space in the country. Some of the examples of such institutes of repute internationally include the European Space Policy Institute, Space Policy Institute of the Elliott School of International Affairs at George Washington University and Institute of Air and Space Law at the McGill University. The studies and research by these institutions have benefitted in not only shaping the space ecosystem of Europe, United State and Canada over decades, but also in providing an independent assessment of the performance of the national space programme, geo-political issues related to space, building a knowledge base on the international developments in the space sector (for both State and non-State actors), etc. Some of the research pursued by such think tanks on the commercial space industry has contributed in examining emerging policy issues, providing a survey of the similar developments around the world, and offered case studies on national goal applications and international implications while pursuing such activities. While some of the Indian think tanks and institutes such as the Institute for Defence and Strategic Analyses (IDSA) as well as the National Institute of Advanced Studies (NIAS) have periodically put out studies under the purview of their interests such as militarisation/geo-political issues of space 25 and perspectives for a national policy 26, the studies pursued by these think tanks are limited in size and scale when compared to those of their counterparts in the aforementioned institutes.
One of the only sources of an independent economic analysis of India's space programme dates back to 2007 when the Madras School of Economics pursued an exploratory analysis of the Indian Space Programme. 27 The premier management
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Ajey Lele, Institute for Defence and Strategic Analyses, Asian Space Race: Rhetoric or Reality?, Springer, 2012 & Strategic Technologies for the Military: Breaking New Frontiers, SAGE Publication, New Delhi, 2009. 26 Mukund Rao, K R Sridhara Murthi, National Institute of Advanced Studies, Perspectives for a National GI Policy, 2012, www.nias.res.in/docs/R11-2012-GI-Policy.pdf, Visited 30 Feb 2016. 27 S Chandrashekar, The Hindu, Economic analysis of India's space program, http://www.thehindu.com/todays-paper/tp-features/tp-bookreview/economic-analysis-of-indias-spaceprogram/article2266958.ece, Visited 12 Feb 2016.
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schools of the country such as the Indian Institutes of Management (IIMs) have not engaged in mapping the national space supply chain, relating India’s space market to the global market, nor provided independent insights into the development of an active space industry ecosystem in their management reviews. The only other source of an independent assessment of the space programme in purview of the national goals remains the independent reports produced by the Comptroller and Auditor General of India (CAG) office. However, these reports are limited to the performance of government departments, government owned corporations (in this case DoS and Antrix Corporation) and provide retrospective assessment of government investments in space.
2.6 Inability to Leverage Space Assets to Maximum Effect The CAG of India has published several reports on the shortcomings of DoS when it comes to managing its space assets. As per a recent CAG report on the satellite capacity allocation, the INSAT Coordination Committee (ICC) which was entrusted with allocating satellite capacity over Indian satellites was not convened for seven years (2004-11). During the same time, three communication satellites were launched and theirs transponders leased to DTH operators by DoS directly, violating the mandate of the Satcom Policy. There is still no documented directive of how satellite capacity will be allocated by DoS, despite this being an action item under its purview after the Satcom Policy was brought into effect in 1999. The first-comefirst-service policy that DoS has maintained orally was lambasted by the CAG report, which found Tata Sky was given a preferential slot over DD despite being lower in the waiting list for capacity allocation. 28 Such irregularities apart, Antrix maintains strict control over transponder pricing in India, which is one of the lowest in the world. The prices are clearly undercut ($775,000/transponder/year according to a government press release) in comparison to global standards as can be seen in Figure 9. 29 Despite such low prices, only one DTH customer among the seven operating in India is presently using INSAT capacity, and rest all are on foreign 28
Chapter 5 –Conclusion and Recommendations, Management of satellite capacity for DTH service by Department of Space, http://www.saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/union_audit /recent_reports/union_compliance/2015/SD/Report_22/chap_5.pdf, Visited 18 Feb 2016. 29 ISRO Parliament budget, 2011, http://www.isro.org/parliament/2011/Budget/LUSQ3430.pdf, Visited 27th Oct, 2015
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satellites, whose transponder pricing is again regulated by Antrix. 30 Far from being a free market, the business of leasing transponders in India is seen by the industry as “deal-based” or specific opportunity based rather than a healthy marriage of demand and supply. A corollary of this market scenario is that private companies are not willing to invest in satellites to serve the Indian market exclusively given the policy risks of being able to sell in the Indian market. Furthermore, short term contracts and price diktats by Antrix mean that it is residual or incidental capacity that gets allocated to India by the large global satellite operators.
Foreign satellite capacity pricing in India INSAT capacity pricing
Figure 9 - Transponder Leasing Prices Globally (Source: NSR, 2012)31
The CAG had also conducted a performance audit of the National Remote Sensing Centre (NRSC), the nodal agency for ISRO's remote-sensing activities that is involved in acquisition and archiving of satellite/aerial remote-sensing data and its dissemination. The CAG report found that there was a substantial gap between the number of images captured by the satellite and the data product generation capacity because of the limitations on the ground segment front, leading to less than 50 percent utilisation of the satellite’s capacity. It also looked at the RoI for seven remote sensing satellites launched till 2010 and made pertinent observations that the revenue generated from the sale of data products from each satellite was far below the expenditure on them. The analysis of operational returns alone, where return against operational expenditure is compared instead of return on total investment, 30
ISRO, 2011, http://www.isro.org/pdf/transponder-capacity.pdf, Visited 27th Oct, 2015 NSR, 2012 - http://www.nsr.com/news-resources/the-bottom-line/-per-transponder/, Visited 18th Feb, 2016 31
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revealed that even the operational returns for the seven satellites were negative in all the years, implying that revenue from sale of data products was not sufficient even to meet the operational expenditure. 32
Another setback of DoS was the implementation of the well-intended EDUSAT programme, which aimed to provide tele-education and tele-medicine facilities to rural India. It was observed in the CAG audit that EDUSAT failed to achieve its objectives due to “deficiencies in planning for the network connectivity, content generation and failure to have a robust management structure”. 33 The implementation of the programme had deficiencies, with the establishment of ground network being delayed, disparities in the allocation and idling of satellite bandwidth, inadequate content generation and shortcomings in monitoring and evaluation. Even the replacement strategy for the existing satellite was lacking, resulting in idling of operations after 2011. With an investment of INR 549 crores, EDUSAT remains an example of ISRO’s good intentions but shortcoming in execution due to overall downstream project management. 34A public-private partnership model for such a novel programme could have lessened the burden on the government exchequer as well as brought about efficient management practices to implement such a largescale project.
32
The Frontline, Sensing Deficiency, http://www.frontline.in/static/html/fl2810/stories/20110520281011500.htm, Visited 17th Feb 2016. 33 Report No. 22 of 2013, http://www.saiindia.gov.in/english/home/Our_Products/Audit_Report/Government_Wise/union_audit /recent_reports/union_compliance/2013/SD/Report_22/chap_3.pdf, Visited 18 Feb 2016. 34 Press Trust of India, Business Standard, EDUSAT failed due to deficiencies in actual implementation: CAG, http://www.business-standard.com/article/pti-stories/edusat-failed-due-todeficiencies-in-actual-implementation-cag-113090600803_1.html, Visited 18 Feb 2016.
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CHAPTER IV 3
Case Study – Potential for Space Business Incubators in India
Business incubators are a mechanism to promote and support innovative entrepreneurship which has emerged as highly popular means for stimulating economic growth. Their impact is most significant in the technology-based SMEs sector, as they prevent business failures and encourage business networking through resource sharing. 35 There exists no standard definition of the business incubation concept, and a general understanding of the incubation process is that it is a dynamic manner of business development which nurtures young firms, helping them to survive and cope with difficulties in the early stages of business. The number of incubators has risen quickly around the world in the past decade, which is an evidence of the importance attributed to these institutions by governments and industry.
Technology intensive areas of business like space-based products and services that rely heavily on innovation necessitate the need for incubators. These business incubators enable interaction with professional resources such as mentors, experts, consultants and advisors for the incubated companies. 36 They also provide their expertise in the identification of technologies and innovations which have commercial prospects, its promotion, and in general, carry out activities that facilitate the creation of knowledge, fostering innovation and entrepreneurship. They also provide a platform for these startups to prepare and pitch their business plans to Venture Capitalists (VCs) and Private Equity (PE) funds, and develop network among other incubators. To summarize, incubators provide an ecosystem where high-growth companies can be nurtured from an early stage and thrive longer.
Ömer Çağrı Özdemir and Yasin Şehitoğlu, ‘Assessing the Impacts of Technology Business Incubators: A Framework for Technology Development Centers in Turkey’, Procedia - Social and Behavioral Sciences, The Second International Conference on Leadership, Technology and Innovation Management (2012), 75 (3 Feb 2013): 282–91, doi:10.1016/j.sbspro.2013.04.032. 36 ‘infoDev Incubation Support Center (iDISC) - Business Incubation Support’, infoDev, accessed 15 March 2016, http://www.infodev.org/idisc. 35
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These technology startups offer products and services which either disrupt the existing markets or create new markets and supply chain networks, through a combination of technical and business model innovation. For a national space program, investment in business incubation activities bears multiple fruits as shown in Figure 10.
Figure 10 - Business Incubator Benefit
The key elements of a business incubator can be identified according to Zasiadly’s (2012) report as the following: •
Office space (preferably modular) - for companies to function, with an affordable rent on flexible terms
•
Shared area and office services - conference room, discussion room, internet services, fixed telephone lines, cafeteria, and furniture
•
Seed capital - available at the incubator or through easy loans, guarantees or equity investments
•
Access to information, connections and networking opportunities
•
Training & Consultancy – to enhance competencies and skills
•
Accounting, legal and technological services 33
3.1 Space Business Incubation: ESA Case Study The ESA and NASA have been championing the need for entrepreneurship by supporting innovation and economic development for more than two decades. ESA created an annual fund called the ‘Open Sky Technology Fund’ of €100 million for supporting start-ups that make use of ESA’s technology. The fund is managed by a VC firm called Triangle Ventures. The ESA BIC program has succeeded in creating around 50 viable companies and serves as a good model for space agencies to encourage entrepreneurship. The components of the programs are shown in Figure 11.
Figure 11 - Components of ESA's BIC Program (Source - ESA, 2014)
Supporting small business and innovative technologies has always been on the agenda of space agencies. Spin-offs and technology transfer policies are framed to reap the tangible and intangible benefits of space technology. These steps help space agencies leverage their core competencies and gain a competitive advantage over other nations because of the presence of a robust SME sector supporting the space program. Such policy mechanisms allow space agencies to make the shift from being efficiency driven to being an innovation driven organization. A few examples of business incubation success stories by ESA’s program are shown in Figure 12. As can be seen from the success stories in Figure 6, the technology products were both spin-offs and potential spin-ins as well. This shows a healthy sign for the incubator, as it is able to deliver products and services for both ends of the vertical markets.
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Figure 12 - ESA BIC Program Success Stories (Source - ESA, 2014)
3.2 Need for Business Incubation by ISRO Economic growth is accelerated by creating the need for more jobs, better skilled human resources, diffusion of technology, and access to new markets, both domestic and international. As the national space program advances into its next phase, the concept of a having a BIC will provide ISRO with an alternate mechanism to commercialize its technologies. It would also create a strong industrial foundation for supporting the future missions and strategic goals of ISRO. Value added space products and services in remote sensing, communications, and navigation technologies have economic multiplier effect, which comes with lower investment and lower risks.
India’s space industry primary stakeholder is the government, and it has remained so ever since the inception of the national space program due to lack of volumes in the industry. Efforts have been made in the past to bring together industry giants to form a consortium and undertake commercial space activities, but all such efforts have been unsuccessful due to the lack of a domestic market. The global market for space technology products and services is highly oligopolistic, with a few big firms having excellent capabilities and a high degree of market share. An industry cannot be created based purely on external demands for goods and services, and such demand for space-based services has to be generated internally.
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The establishment of a business incubator could potentially achieve that by creating new markets and making access to global markets easier, paving way for more involvement for bigger players for upstream activities like satellite manufacturing and launch services.
3.3 Business Incubators: Indian Perspective The National Science & Technology Entrepreneurship Development Board (NSTEDB), established in 1982 under the umbrella of Department of Science & Technology (DoST), acts as a policy advisory body for promoting entrepreneurship by utilizing in-house infrastructure. Most incubators in India are linked to technical institutions like the Indian Institute of Technology (IIT) or Indian Institute of Management (IIM), with DoST itself managing a few incubators called the Software Technology Parks (STPs). Therefore, the main areas of focus are naturally in the fields of Information & Communication Technology (ICT), Electronics, Mechanical engineering, and Biotechnology, as shown in Figure 13.
The southern part of India has the maximum concentration of business incubators, owing to the presence of good academic infrastructure and industrial network. A few examples of active VCs in India are Blume Ventures, 500 Startups, Accel Partners, Indian Angels Network, Helion Venture Partners, and Sequoia Capital. The Silicon Valley of India, Bangalore with $2.6 billion funds, came in fifth in a list of cities globally that received the most venture capital in 2014 (TOI, 2015). The southern peninsula of India also happens to contain ISRO’s space clusters in Bangalore, Trivandrum, and Sriharikota. Thus, Bangalore becomes the obvious choice for the incubator location, due to presence of 7 ISRO centres including the headquarters, excellent financial infrastructure for start-ups, and an easily available young talent pool due to its reputation as the IT capital of India.
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Figure 13 - Types of Incubators, and their Thrust Areas (Source: NSTEDB, 2014)
3.4 Elements for a Space Business Incubator in India 3.4.1
The Incubation Program Structure
The process of business incubation and its operations requires a systematic approach, from the time of conception till operationalization. The most common way of steering business incubation program is shown in Figure 13.
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Figure 14 - Systematic Approach to Establish a Business Incubator (Source: Zasiadly, 2010)
The formation of a central steering committee after conceptualization of the Business Incubator determines the smooth flow of work, from the stage of feasibility study till the incubator’s operations and monitoring. According to Zasiadly (2012), “the studies made by this steering committee will assist in determining the location, property selection, type, size, resources available, service offerings, target businesses, local and regional support, and the economic situation in the region”. This Steering Committee shall consist of members from the space commission, academia, industry, and relevant government departments. A tentative three-tier structure is as proposed in Figure 15.
Steering Committee
Tier 1
Tier 2
Tier 3
DOS/ISRO
VSSC, LPSC, ISAC, SAC, SDSC, NRSC
IIST, IITs, IIMs
Figure 15 - Steering Committee Structure
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DoST, HRD ministry
NSTEDB, STPs, Research Institutions
After the feasibility study is conducted by the Steering Committee, the incubator operator is selected after carefully selecting the applicants of the tender. The desired characteristics of the BIC operator are as follows (Zasiadly, 2012): •
Having previous experience in BIC work;
•
Preferably an existing organization for BIC management for quick deployment of facilities, resources, and staff for the BIC;
•
Having local administration support
ISRO, in cooperation with the stakeholders and the local administration shall have the obligation to provide the incubator with financial resources till the time when the incubator activities stabilizes and starts generating revenues. Such financial allocation will ensure that the start-ups that are operating within the framework of the incubator can withstand the initial phases, and hence this commitment holds importance for the sustainability of the incubator. It is therefore imperative that the government and ISRO together establish a separate fund disposal mechanism for this purpose alone.
The next step in the process is to generate a business plan for the incubator for streamlining the activities. This activity shall be done with professional consultants with the following objectives: •
The evaluation of the feasibility of the project and the gaps in the system
•
Recognizing potential areas of incubation like agriculture, supply chain and logistics
•
Organizing financial support for the incubator
•
Identifying and involving the stakeholders
•
Incubator management principles
3.5 The Challenges The challenges expected to be faced during the process of business incubation can be broadly classified into the following four main fronts: 39
3.5.1
Organizational Aspects
The organizational challenges stem from the way ISRO and its public-private partnerships currently function. The business incubator aims at smoothing of the end-to-end processes, especially those related with technology transfer and nurturing of independent business proposals using this technology. Considerations may be given to the following:
Establishment of a Liaison office at ISRO HQ for Technology Transfer - Technology transfer would form an important aspect of the business incubator program, and it could become one of the bottlenecks for its smooth operations if not managed appropriately. Each ISRO unit has a section named ‘Technology Transfer Group’ (TTG) which works throughout the year to identify potential technologies that could be put up for transferring to the business incubator through a liaison officer at ISRO’s central Technology Transfer office at the headquarters in Bangalore, as seen in Figure 16. Apart from technology transfer services, the liaison officer could also facilitate IP and business consultancy services to the incubated start-ups, which is currently carried out for ISRO by Antrix.
Figure 16 - Technology Transfer Process
Incentives for ISRO employees facilitating Technology Transfer – To make the business incubator initiative a success, ISRO must internally incentivize the involvement of scientists in the incubation process, right from the stage of technology development to its commercialization. Without the availability of proper incentives, the initiation and the creation of an ecosystem for successful technology transfer can be a hassle and will be seen as ‘additional work’ by the scientists due to 40
lack of personal return on investments for them. These incentives can be either in the form of assistance in patent filing, getting royalties on commercialization of their IP, and for internal performance appraisal.
3.5.2
Legal Aspects
Legal and regulatory environment immensely affects the way business is perceived in a particular ecosystem. India does not have a declared space policy or a national space legislation yet. The current businesses that support the space program mostly work within the company law framework with a few policies dedicated to utilization of outer space or its products in segments such as the SatCom policy, the Remote Sensing Data Policy, and the Industrial Participation Policy, as declared by the Department of Space, Government of India.
To establish a downstream space-services based BIC, the current legal and regulatory regime has to move from providing a bare-bone framework for these policies to a comprehensive legal and regulatory regime. These loosely written policies should be addressed and complemented with a strong legal and intellectual property framework to alleviate the process of doing business in the space sector, while maintaining complete transparency. Businesses need to be able to move from being mere subsystem vendors within the system to more outward looking turnkey solution providers, with a strong sense of export-oriented vision.
A comprehensive legal and regulatory framework with well planned, time bound and transparent procedural aspects in implanting the same is the need of the hour to encourage Indian space enterprises to make their mark in the international marketplace. Some of the critical issues that face challenges in the area of legal arena include authorization of activities, technology transfer, licensing, liabilities, export control, insurance and an appropriate definition of the method and procedures of oversight as declared under the international treaties.
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It is important to note that the business ecosystem in the space sector is not limited to just enabling technology transfer but in encouraging the technology to be taken to the market the way it is scalable in the international marketplace on one hand and in creating a strong sense of clarity for investors to enable entrepreneurs in risk-taking towards development of a product or a service.
One of the possible moves in enabling such possibilities for entrepreneurship and commercialization could be to create a dedicated ‘Office for Space Commerce’ that shall act as a catalyst in creating this ecosystem of legal and regulatory, bridging the commercial possibilities in utilization of space technology. Such approach is already present in the USA with the US Department of Commerce creating strategic plans via its Office of Space Commercialization under the National Oceanic and Atmospheric Administration.
3.5.3
Funding Aspects
Along the lines of ESA’s ‘Open Sky Technology Fund’, a dedicated fund vehicle must be created by ISRO and DOS solely for the purpose of providing seed money to early-stage startups whose business plans revolve around space technology based products and services. Their primary responsibility shall be to take up consideration for independent business proposals on a quarterly basis. The selection panel shall have relevant technology experts from ISRO, while the financial and markets aspects shall be vetted by Antrix and the VC firm. The involvement of a VC firm is necessary to streamline the process of selection of business plans with good market potential and providing sound financial advice to entrepreneurs during the course of incubation.
3.5.4
Process Aspects
The process aspects of establishing a space business incubator necessitates clear and transparent procedures of incubatee company selection and incubator operations. The activities involved in the business incubation process such as technology transfer, IP and legal consultancy services shall be time-bound for consideration by the
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incumbents involved. For attracting and selecting good ideas at an early stage, ESA and UK DOS/ISRO Space Tech Fund
Funds
Antrix Venture Capital Firm
Tech Transfer
Incubator's Startups
Execution
Figure 17 - Flow of Funds to the Business Incubator’s Startup
Space Agency have resorted to organizing selecting good ideas at an early stage, ESA and annual business plan competitions such as the ESA Copernicus Masters, which awards cash prizes and business support packages sponsored jointly with industry partners. Such events also go on to act as marketing and public outreach entrepreneurs and investors. activities of the incubator to attract
In the case of business incubation for a start-up, there can be two main possible ways of proposals that the incubator might attract. One being entrepreneurs who want to build their product or service based on the core IP developed by ISRO and have a go to market strategy based on it. The second being entrepreneurs having an independent product/service proposal that is in the interest of the local and/or global market. The incubator needs to have an evaluation and support mechanism for both these kinds of proposals so that the entrepreneurs have freedom in designing their business models and the ecosystem supports independent approaches as well.
Case 1: Start-up building product or service based on ISRO’s technologies / IP with global market focus This model is an extension of the already present model of technology transfer by ISRO with proposed changes in technology licensing regimes and in aiding
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entrepreneurs financially in taking the product/service with a global market focus rather than as a buy back to ISRO.
The current technology licensing regime of ISRO has mandated non-exclusive licensing of IP/technologies, however, there is a licensing fee based on the technology / IP. Start-ups are often bootstrapped and starved for capital. There is a need for ISRO to revise its technology transfer mandate to accommodate for a more of an ESA/NASA approach of free and non-exclusive licensing. Such an approach is especially necessary for entrepreneurs who would want to take the technology into the global market rather than the move into the vendor base within the Indian ecosystem as vendors via the buyback scheme. An overhauling in the licensing regime will not only foster an environment of entrepreneurs being attracted to take several technologies into the global market but will trickle down to investors taking note of a better business environment in the sector itself, resulting in bettering investor confidence.
Once the proposal under this head is evaluated by the VC firm and authenticated as a fundable business case, the ISRO centres involved in development of the core IP on the basis of which the product or service can support the entrepreneurs in adoption of the technology in realising the product/service.
Case 2: Independent product/service ideas that need incubation Entrepreneurs with independent business proposals with a go-to-market strategy for both local and global propositions need to be encouraged. There are currently no such mechanisms of support within the space ecosystem in India. These independent proposals may undergo a technical, market viability and fundability checks before these can undergo business incubation and eventual funding.
One of the templates that can be followed in encouraging such ideas may be the Small Business Incubation Grants given away by NASA for independent ideas 44
where the grants are given away at a stage by stage level. Phase-A being in demonstrating proof of concept to then moving towards a Phase-B in showcasing a minimum viable product, eventually with a Phase-C in completing the complete product/service as is to be marketed.
In both the cases, basis of business ethics need to be followed in not funding conflicting business models. Approaches to provide visibility for these start-ups may be designed such as help in marketing and sales. For example, alongside their startup’s own marketing and sales efforts, Antrix can very well support in sale of the product/service as it is well placed in the international market in reaching out to possible customers. Similarly, these start-ups may be given a free showcasing opportunity at the Bangalore Space Expo which is organized every year.
3.5.5
Capacity Building and Gaps
Domestic innovation levels have been limited to the IT, e-commerce, and pharmaceuticals sector. The contribution of Indians all over the world in the field of STEM education and technological innovations is a proof of the immense talent that goes untapped domestically. This problem of brain-drain has been attributed most commonly to lack of capacity building and skill development, and difficulties in navigating through the Indian bureaucracy for establishing and running a business. Through the government’s popular branded campaigns like ‘Make in India’ and ‘Digital India’, these difficulties may be eased out gradually to increase the ease of doing business in India. The biggest hurdle however for realizing the goal of a thriving space technology based downstream industry will be the gap that presently exists between the technologists and the market forces.
Space activities in India has been primarily ISRO’s domain, and its closed structure functioning has failed to bridge disciplines commercially. There exists a knowledge mismatch within the space industry ecosystem among the stakeholders (scientists, investors, entrepreneurs), which could be addressed in the following ways –
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•
Engaging in workshops for training scientists about topics such as project management, financial management, intellectual property rights, and legal aspects of space industry. For the business and investor community, workshops can be on topics like space applications, space markets, space financing, value-added space product and services.
•
Increasing the number of candidates ISRO sponsors under its RESPOND program for pursuing higher education abroad in the field of space science and technology. The exposure to international space industry would provide the gap ‘filler’ between individual’s knowledge and skills.
•
Introducing short term executive courses at IIST, ISRO’s academic centre, in collaboration with reputed management institutes such as the IIMs, or the IITs, to provide specialized training for young entrepreneurs and investors interested in commercial space.
3.5.6
The Risks and their Management
The risk identification and mitigation measures for the business incubation by ISRO proposal is as shown in Table 2. Table 2 - Risk Management Risk Identification Lack
of
investor
Risk Rating
interest,
leading to low growth-stage
Risk Management Plan
Who
Likelihood – C
Organize regular investor-
Impact - 3
incubated
capital
Incubator management
company-ISRO
meetups
Lack of entrepreneur interest
Likelihood – C
Bridge the capacity gap
in space technology business
Impact - 4
through training programs,
Incubator Stakeholders
and promote the incubator nationally Lack of domestic markets for
Likelihood – B
Organize/Participate
incubated company products
Impact - 4
industrial expos to reach
in
Delays in bringing out the
Likelihood – C
Continuous mentorship and
product
Impact- 3
skill development
Likelihood – B
Having
Impact - 3
committee of IIST alumni
Incubator management
diverse market
due
to
lack
of
Incubator management
knowledge and skills Gap between
in
communication
incubator
operator
and BIC stakeholders
for
an
the
advisory
Steering Committee
incubator
management activities Lack of incubator occupancy
Likelihood – B
Tie-up with other incubators
in the long run
Impact - 2
to
diversify
activities
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range
of
Incubator management
3.6 Impact of Space Business Incubator The SWOT analysis in Table 3 shows the factors that will play a role in conceptualizing and establishing a business incubator for space technology based services in India.
3.6.1 •
Internal Impacts Creation of new space technology services markets that lead to demand for upstream products and services like satellite manufacturing, ground segment, and launch services.
•
Upstream services demand could trigger ISRO’s long-term goal to transfer commercial launches aboard the PSLV and GSLV to private industry.
•
Popularization of application-oriented academic training in the area of space technology, which is primarily viewed as a scientific research domain.
•
The business incubator could be an initiation point for a ‘space cluster’ in future, with technology intensive manufacturing and services driving innovation in the country.
•
Government departments are expected to benefit the most with greater ‘information intelligence’ being provided by space-based services and products in the area of urban planning, disaster management, agriculture.
3.6.2 •
External Impacts FDI in space sector could potentially increase as the incubator will provide a suitable platform for Indian start-ups to interact and collaborate with foreign space start-ups as well as established companies
•
India’s favourable international relations in space could receive further boost with the business incubator providing global players an opportunity in the unexplored space services markets of India.
•
Open new international markets for Indian space industry players.
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Table 3 SWOT Analysis of Space Business Incubator Establishment
External Origin
Internal Origin
Helpful in Objective
Achieving
the
• Cabinet Level focus on civil space sector • Highly skilled and motivated human resource base • Strongly articulate linkage between national space goals and economic development
Harmful to Achieving the Objective
• Commercial marketplace remains immature and highly dependent on domestic government programs • Gap between the scientific and business community in this sector
S • Ability to leverage IT and software development capabilities • Low cost of production could stimulate exports • Ability to leverage large and talented Indian diaspora for startup capital and synergistic entrepreneurial activity
W • "Brain drain", as skilled Indian workers or top students may use this opportunity as a means of employment globally • Slow bureaucratic process of doing business in space tech • Lack of a definitive legal and IP regime for space business, and a national space policy
W
O T
ISRO’s achievement in running a world-class space program at a shoe-string budget is lauded on global forums. Its vision of using space technology for national development is noble and is an unimaginably arduous task for a country as vast and diverse as India. The space technology business incubator would not only help ISRO in filling the gap between itself and the big domestic sub-contractors in accomplishing its goals, but also in creating new space markets previously inaccessible to ISRO. Being a large organization running on public money, ISRO is success oriented and risk averse like any other space agency. Its role in fostering innovative space solutions and entrepreneurship could be achieved through this business incubator initiative, which would also act as one of its public outreach program. The incubator has the potential to strengthen the space sector’s SMEs, provide innovative solutions for government and commercial needs, and deliver these services at a fraction of the cost that is usually associated with such activities.
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CHAPTER V 4
Terrain of Space Policy in India
The Indian space programme currently operates using loosely defined space policies under several heads of services such as the SatCom Policy (1999), Remote Sensing Data Policy (2011), and the Industry Participation Policy (2002). Since marketing of space technology applications can involve several issues, like allocation of frequencies for satellite operations, data distribution policies, and Intellectual Property Rights (IPR), lack of transparency, clarity in steps and processes in allotment of these resources hinders the private industry’s will to participate in a comprehensive manner. Ultimately, these translate into reduced risk appetite by venture capitalists to entrepreneurial ideas. A comprehensive national space legislation that shall create transparent regimes of liability and procedural aspects of engagement in outer space activities is the need of the hour for greater engagement of the private sector.
Lack of constant updation of policies is another aspect that DoS needs to address urgently. For example, the Satcom Policy, which was adopted in 1999, has not been changed since then. In contrast, the Department of Telecommunication has kept abreast with rapidly changing cellular technology by updating its policy framework every two years. Such latency in responsiveness by the DoS, especially with regards to lack of guidelines for adopting new satellite communication technologies in the Ka-band
or
non-geostationary
orbits,
has
affected
the
Indian
satellite
communications infrastructure. Despite the availability of excess transponder capacity worldwide, Indian end-users are faced with a situation of ‘transponder crunch’ due to delays in ISRO’s GSAT program and artificial bottlenecks created by the DoS, by placing Antrix as the gatekeeper of transactions between a satellite service provider and end user service provider like DTH operators.
To overcome these challenges, the position of ISRO and DoS in the space industry value chain has to be defined clearly to avoid the conflict of interests, which happens presently with DoS being the regulator, ISRO being the Original Engineering 49
Manufacturer (OEM), and Antrix being the service provider, and the Chairman, ISRO also acting as Secretary, DoS and Chairman, Space Commission, heading all these three entities at the same time. Other established space agencies like NASA, ESA, or JAXA, have limited their involvement till Tier-2 applications and left the downstream applications for commercial companies to add value to and exploit profitably towards aiding their nation’s development. Such free-market approach has proven to be highly beneficial for the domestic industry, with the impact spilling over to government and commercial end-users. The National Geospatial Agency (NGA) 37 in the U.S. is an example of decentralisation of downstream activities to encourage a competitive marketplace, and ISRO could take a cue out of their books to ease out the entry barriers for commercial satellite applications companies as well as do some ‘hand-holding’.
4.1 IPR Issues for Space Industry Since India does not have a national space legislation in place, one of the direct challenges of such a scenario is the lack of clarity in the conduct of business related to space activities within the country, especially those which involve technology transfer. One can argue that the requirement of a national space legislation has not be a priority since the scenario of activities related to outer space is driven only by ISRO, and almost every industry involved in the value chain is a direct supplier to ISRO and participate in its programmes. Hence ISRO shall have the oversight to a certain extent with the agency itself aligning its activities and ideals in maintaining international treaty obligations of India. However, this is not very encouraging to industries that want to invest into turnkey solutions and want to take advantages of capital and running costs of the Indian market to reach out with their space products and services to the globe. Some of key issues that therefore need addressing with respect to IPR include the licensing and certification norms for space entrepreneurs who envision commercial activities and applications from India, liability provisions, insurance, matters of indemnification and technology transfer. [19]
37
National Geospatial Agency, https://www.nga.mil/Pages/Default.aspx
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Specific IP related issues may arise in serving commercial opportunities such as space weather, image/video based analytics, insurance, etc. The legal issues mainly in the copyright and neighbouring rights, data protection, data privacy, licensing, consumer protection, product and services liability, patent law aspects are of greater concern for the commercial services/applications sector of the industry is in the area of remote sensing and space based data. In the current state, the Remote Sensing Data Policy provides some framework for the usage, distribution of remote sensing data. However, there is no clarity even in this policy instrument that provides a reference to IPR for ISRO’s own data. [20] A comprehensive, transparent legal regime for the commercialisation of space based data investment into commercial remote sensing missions with the user data generated out of data analytics combined with GIS platforms within the country shall aid entrepreneurs to have a better outlook towards investing into the sector.
4.2 Export Control in Space Industry The relationship between export control and Indian policy makers is a gradually evolving one. The Indian government has till now demonstrated a responsible face to the world by successfully controlling trade of sensitive goods, but it quintessentially views export controls within the context of the technology denial regime. After the economic liberalization in 1991, India moved closer to its western counterparts to get access to technology to meet its economic growth requirements. However, the United States was not sure if India’s export control laws were intact for ensuring the non-proliferation of dual use technology like space. The imposition of sanctions on ISRO for importing cryogenic engines from Russia for its GSLV programme in the 1990s is a testament of the mistrust between the two nations. Nevertheless, India’s economic resurgence in the early 2000s meant that it was a producer, consumer, importer, as well as exporter of strategic materials. In this regard, three relevant legislations or amendments were passed - Weapons of Mass Destruction (WMD) and their Delivery Systems (Prohibition of Unlawful Activities) Act of 2005, generally known as the Weapons of Mass Destruction Act; the amended Foreign Trade (Development & Regulation) Act 2010; and the Chemical Weapons Convention (Amendment) Act of 2012. [21] Soon after in 2011, the US removed nine Indian space 51
and defence companies, including units of ISRO and DRDO, from its export control 'Entity List' in an attempt to expand high technology trade and strategic cooperation with India. 38
Currently, there is an integrated control list, which echoes with the Nuclear Supplier Group (NSG) and the Missile Technology Control Regime (MTCR). Dual use technologies, and the conditions under which they can be exported are presently placed under a list called Special Chemical Organisms, Material, Equipment, and Technology (SCOMET) list.21 The export of such dual use items are permitted only on the authority of a valid license. There are in total eight categories of items in this SCOMET list, of which Categories 4 and 5 contain items like rocket propellant, guidance system, inertial gyros, and several other items that are related to the production of missiles and rockets. Additionally, DoS has established compulsory compliance requirements (validation, certification, and monitoring mechanisms) that must be fulfilled before issuing the license to the private party, so as to ensure its facilities and technology is not used loosely by non-state parties. Evaluation of the applications via the Inter Ministerial Working Group (IMWG), which includes ISRO/DoS as a member alongside documentation requirements in export control (such as end user certificate, purchase order/contract, bills of entry of previous exports, technical specification of the item) and enforcement via Directorate General of Foreign Trade (DGFT) seem to provide enough cover to ensure businesses in space activities align themselves to the non-proliferation of restricted technology. [22] However, legislative initiatives and implementation mechanisms as a part of a national space law may be essential for safeguarding dual use technologies and can provide a legal backbone for engaging in trade for such technologies by the space industry.
4.3 Space Security Policy Unlike several other leading space faring countries, India’s mandate to enter the space arena started with a strong civilian/societal application focus and has remained 38
US removes ISRO and DRDO from entities list, http://archive.indianexpress.com/news/usremoves-isro-and-drdo-from-entities-list/741974/, Accessed on 28th Feb, 2016
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so. A declared space security policy shall help India to realise some of the important space security interests mentioned technology perspective and capability roadmap of the Integrated Defence Staff. Further, it can be key for the industrial complex in India to further grow from the SME to larger integrators.
A declared space security policy shall allow ISRO to continue to focus on the civilian/societal applications, while the industry can make relevant investments into extending upstream and downstream services to the country’s security needs. Investments into the space security realm can drive several security interests of the country including development of space based Automatic Identification of Ships (AIS), Electronic Intelligence (ELINT) missions, Wireless Sensor Networks (WSN), etc.
4.4 Development of Space Technology based SMEs in India The final frontier of space brings challenges that are unique to its environment (e.g. vacuum, radiation, temperatures) which make the development of reliable products and services extremely challenging for any institution. ISRO took to the development of the SME ecosystem in India in the mid-1970s with the motive behind such a flagship program being the potential of buy back of products, enabling industry to play a part in space applications and towards facilitation of application of technologies as spin-offs. [23] The policies adopted by DoS have been instrumental in establishing an industrial base that can cater to ISRO’s mission needs. Association of more than 500 small, medium and large-scale industries with ISRO has been a key feature of its space industry partnership. Active co-operation with the industry in the form of procurement control, technology transfers, and provision of technical consultancy has been the highlight of ISRO’s industrial development policy, which had enabled it to meet the increasing challenges of advanced technology and complex manufacturing jobs. [24]
The role of the private sector has been increasing globally towards the realization of national space programs and the development of commercial space markets, as well 53
as for dissemination of space technology into non-space industries. Developed space faring nations have taken a pragmatic approach to budgetary constraints by focusing on enhancing the competitiveness of the private space industry while rethinking about long term, high-cost programs. The Indian Space Programme has followed a similar path, and takes pride in having established domestic facilities in a self-reliant manner when it comes to satellite communication, remote sensing and meteorological applications. It has acted as an enabler for national industries in the realization of space systems.
Indian capabilities represent a wide spectrum of expertise ranging from the conceptual design to building and operating a variety of space systems which are matched only by a few nations in the world. Despite these capabilities, the domestic SME landscape catering to the space program is bleak when compared to the U.S. or Europe; mainly due to lack of volumes in the industry and a matured export oriented industry. The European consortium Arianespace launched 11 rockets in the year 2014, and United Launch Alliance, the company formed out of the marriage between Lockheed Martin Corporation and Boeing Space Systems, launched 13 rockets in the same timeframe. However, ISRO is able to launch only three or four times in a year, which is partly due to delays in the satellite missions, lower production capabilities than large space industry OEMs, and only two launch sites (of which, only one is being currently used for the routine PSLV launches).
A strong SME landscape would ensure that the chunks in the space industry value chain in India would be filled, leading to greater production capabilities. ISRO has to back such development by committing to buy on long-term basis and share the risks with the entrepreneurs, which would lead to greater production capabilities and newer techniques in precision engineering and quality control. With the space industry landscape changing rapidly across the globe due to the entry of IT giants like Google and Facebook, both planning to deliver internet connectivity globally, [25] strategies for India’s domestic industry to maintain its competitiveness amongst the other space faring countries need to evolve.
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4.5 Establishing an uninterested Regulatory Body The present space value chain in the country puts ISRO at the top and Antrix Corporation Limited as the premier commercial agency for space activities. 39 As part of its existence, ISRO undertakes activities such as providing launch vehicles and launch services for payload owners. Therefore, ISRO, as both a research body as well as a service provider cannot also be the regulatory body if India decides to encourage private sector participation. It will thus have to fall upon the government to create an agency to oversee, monitor and regulate space activities in India taking cues from several templates available for governing space activities. 40
At present, as per Section 3.5 of the Satellite Communications (SATCOM) Policy, The Committee for Authorising the Establishment and Operation of Indian Satellite Systems (CAISS) consisting of secretaries to the Government of India for the Department of Space, Department of Telecommunications, Ministry of Defence and Ministry of Industry, Ministry of Home Affairs and Wireless Advisor, is the authority constituted to grant license for the establishment and operation of the Satellite Systems. As per Section 3.7.1, an applicant is required to give specifications of not just the satellite system but also launch vehicle and third party insurance among other things. Thus, the existing SATCOM Policy has a number of points which are already conducive for private sector participation and also symptomatic of India’s vision for the private space sector.
However, the area of concern remains the absence of specific time frames and deadlines for disposal of applications seeking authorisation build, launch and operate space systems. In addition, as ISRO remains an interested party and comes under the Department of Space, investors lack the confidence that their applications seeking licenses will receive a fair consideration. It thus falls upon the impending space legislation to define ISRO’s role as being of research and development only and to 39
‘Deepu Krishnan, Space News, Commentary | Challenges and Opportunities in the Indian Satcom Market, http://spacenews.com/39541challenges-and-Opportunities-in-the-Indian-Satcommarket/#sthash.4wXHLkVN.dpuf, Visited 01 March, 2016.’, n.d. 40 ‘Dr. George C. Nield, The Origin and Practice of U.S. Commercial Human Space Flight Regulations, Glasgow, Scotland, 59th International Astronautical Congress, September 30, 2008, https://www.faa.gov/news/speeches/news_story.cfm?newsId=10299, Visited 02 March 2016’, n.d.
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initiate disinvestment of the existing governmental establishments in space operations. This will ensure that ISRO can retain its position as India’s leading innovator in space technology, at the same time allowing for private sector to take over the nitty-gritties of space operations. In addition, the impending space legislation has to impose upon the CAISS to define time frames within which applications seeking approval of satellite systems and launch proposals, will be disposed off.
Although Section 3.7.4 of the SATCOM policy gives wide powers to the Department of Space to monitor and regulate spacecraft design and Satellite Control Centres, it is incumbent upon policy makers to review the infrastructure available to meaningfully exercise these powers and examine if the same is sufficient to discharge the functions envisaged under the SATCOM Policy. Unless this is done, private sector participation sans the means to regulate space activities, will make India vulnerable to International Liability.
4.6 Technology Transfers The existing policy for technology transfer can be summarised by the categorical affirmation that no uniform standard can be evolved to address technology transfers and instead a situation specific methodology is prescribed. Thus it is not really a policy, as much as it is a challenge statement.
Although the policy specifies the priorities for transfer of ISRO technologies, the eligibility criterion for securing licenses for ISRO technologies is way too vague. Resultantly, technology transfer is left to the discretion of the bureaucracy. In an ideal scenario the policy should be worded in such a manner that there is some accountability and transparency in the way technology transfer is affected.
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A glaring example of the policy’s vagueness is the fact that “organisational prestige” is a consideration for grant of license. 41 This, to us, reflects the need to redirect ISRO’s energies towards more tangible goals like research and development and augmentation of India’s overall space aspirations, which would, in fact augment organisational prestige anyways.
It is perhaps too early in the history of our Space Program to suggest that ISRO makes available its technologies on an open source based platform. But we maintain that there should be some clarity in terms of what ISRO’s fundamental thought process will be for the license of technologies. The provisions of Section 15 of the Commercial Space Launch Act, 1984 in the United States of America advocates a two tier approach where outright sale of Government property is sought to be subjected to fair market value based approach, whereas other kinds of transfer like license is subjected to a “direct cost” based approach. It would be useful for the impending space legislation to offer similar policy directives while dealing with transfer of ISRO assets (both tangible and intangible) and access to the same.
Although we fear that it is too early to suggest an open source based approach to licensing ISRO technologies, never the less, the space legislation should create platform or a road map for an open source approach to space technology which can be licensed to private space agencies on a non-exclusive basis. But such an ideal scenario is probable only if ISRO can fall back on governmental funding to meet its needs. To that, extent feasibility studies should be commissioned by the State to determine what are the requirements to make room for open source based licensing of technologies and the time frame within which the same can be achieved.
41
‘Technology Transfer Group, Indian Space Research Organization (Isro), Technology Transfer Policy of Isro - Policy On Transfers Of Isro Know-How To Industry, Pricing Of Isro’s “Spin-Off” Technologies And Choice Of Licencees For “Spin-Off” Technologies, Policy on Transfers of ISRO Know-How to Industry, Pricing of ISRO’s “Spin-off” Technologies and Choice of Licensees for “spin-Off” Technologies. Para. 5.3, http://www.sac.gov.in/SACSITE/TTIDWebsite/Technology_Transfer/TT_Policy.pdf, Visited 15 Feb 2016.’, n.d.
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With specific reference to the issue surrounding data generated by ISRO, existing experience indicates that companies engaged in building space assets as well as companies engaged in application of space sciences and space assets (like weather forecasting agencies) are finding it quite challenging to access data generated by ISRO’s space assets. The absence of a comprehensive National GI policy has only compounded the problem. Therefore, the raw data, in so far as it is not prejudicial to national security, should be made available to the relevant public without the need for requests for information. 42 A case in favour of this approach already exists in the form of Delhi Geographical Spatial Data Infrastructure (Management, Control, Administration, Safety and Security) Act, 2011.
The next question that arises is if ISRO should make its technology and data more accessible to the relevant public, that too, at marginal cost or no cost at all, then what does it get in return? The Space legislation or rather, rules framed thereunder can answer this by seeing to it that in lieu of technologies that are licensed and data made available, ISRO will remain a stakeholder in the Intellectual Property generated or developed from such technology and data transfer. The percentage of ownership can be negotiated for each scenario. We anticipate that if ISRO invests its technology and data into development of such commercial space applications based on shared IP ownership model, the resulting royalty payments to ISRO would not only provide a steady stream of revenue to it, but also ensure that start-ups in the space sector would feel encouraged.
The legislation will also have to specify offences in the event the technology licensed by ISRO is used by the licensee in a manner prejudicial to national interests or in violation of national and international law. We also urge ISRO to consider developing template agreements for the grant of such technologies which will include stringent clauses against sub licensing, redistribution of licensed technology, etc. and make provisions for damages in respect of the same.
42 ‘Mukund Rao and K.R. Sridharh Murthy, National Institute of Advanced Studies, Perspectives for a Comprehensive G.I. Policy (Including a National GI Policy Draft), September, 2012, www.nias.res.in/docs/R11-2012-GI-Policy.pdf, Visited 15 March 2016.’, n.d.
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4.7 Liability & Insurance Perhaps the biggest deterrent for the State to encourage private sector participation is the question of liability. This is a rather complex area of concern. For the purpose of this paper, we have divided the concept of liability into two, one being International Liability under International Law and the other is Liability under Domestic Liability. As India (being a signatory to the Outer Space Treaty) remains responsible for space activities arising out of its territory or mandate, its reluctance to be accountable for private space activities is not entirely misplaced. However, given NASA and ESA have developed successful models based on private space agency participation, it would be useful for India to recognise the inevitable nature of engaging with private space agencies.
International Liability in the context of space activities is three fold, •
The first scenario is of space debris.
•
The second scenario, connected with the first one to some extent, is accidents in space leading to loss of payload, destruction of launch vehicle, etc.
•
Interference by one space asset in the functioning of another such as signal interference.
It is relevant to note that as per Article II of the Convention on International Liability for Damage Caused by Space Objects, a launching state shall be absolutely liable to pay compensation for damage caused by its space object on the surface of the earth or to aircraft flight. As per Article III, for damage being caused elsewhere than on the surface of the earth to a space object, by a space object of another launching state, liability arises only when there is fault or fault of persons for whom the state is responsible. Under Article VIII, a State which suffers damage or whose natural or juridical persons suffer damage, may present to a launching State, a claim for compensation for such damage. Article XIV stipulates the constitution of a Claims Commission to resolve the question of compensation, where negotiations between the disputing states fail.
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It is thus clear that for damage caused by space objects on Earth or to aircraft flight, regardless of whether there is fault or not, liability arises. Therefore, India has to take considerable precautions to ensure that private sector operators exercise the highest standards of diligence or care, failing which it is answerable under the said Convention.
In this connection, we propose that an enactment similar to the Public Liability Insurance Act, 1991 is brought into the picture. Such an enactment, or an amendment to the said Insurance Act, should classify space assets and systems as high risk material and require operators engaged in building, launching and operator of space assets to subscribe to an insurance mechanism by paying appropriate premiums. This could be made a condition precedent for the grant of license to build, launch and operate space assets. Somewhere, one would be tempted to encourage private space operators to subscribe for insurance with a private insurance company. The Commercial Space Launch Act, 1984 in the United States requires maximum available insurance in the market to be availed. However, we must recognise that the nature of risk in space activities is far higher and more complex than conventionally known risks such as motor vehicle accidents. Thus the propensity for things going wrong despite exercise of due diligence is quite high. In such a scenario, indemnity for damages cannot become hostage to the profit making motive of private insurance companies. Consequently, we reiterate the need for a national and state operated insurance scheme to meaningfully mitigate the risk of accidents and space debris thanks to activities of private space sector.
Having said that, mere existence of insurance cannot be allowed to become excuses for negligence and cost cutting with the intention of unjust enrichment. Therefore, wherever space activities lead to space debris and such a situation was a result of not meeting the standard of duty of care required to prevent debris in the first place, it should be made a criminal offence with monetary penalties. To that extent India’s space legislation needs to spell out offences and penalties and have the regulatory authority under the space legislation investigate and prosecute such offences. 60
We add that the insurance scheme envisaged above is with the intention of shielding India from International Liability under the Outer Space Treaty for space accidents or space debris in outer space and against third party liability. The issue of domestic liability involves entirely different dynamics and we enter into an altogether different paradigm.
In the context of domestic liability, we are concerned with liability of the State and/or ISRO on one hand and commercial liability between contract parties for accidents in space. In the United States of America, The Federal Tort Claims Act (“FTCA” for short) defines the extent to which the State can held tortuously liable. Save for certain exceptions, the FTCA makes the United States Liable for injuries caused by the negligence or wrongful act or omission of any federal employee. While this expanded the scope of the liability of the state to third parties affected by a tort, attributable to the State or its employees, injuries sustained by the personnel working for state itself, still fell within the scope of the defence of sovereign immunity. In Feres v. United States, it was held that the Government is not liable for injuries sustained by servicemen, which arise out of or in the course of activity incidental to the service.
This doctrine has come in the way of families of astronauts who died while on duty to claim damages for the tort of negligence. In fact, in Boyle v. United States, the immunity of the government was extrapolated to hold harmless even government contractors, in product liability claims, where the product designed by the government contractor was in accordance with government specifications pursuant to government contracts.
It is worthwhile for India to consider a legislation such as Federal Tort Claims Act in the USA to define the scope and limitations of liability in respect of ISRO. As ISRO remains a premier national body dedicated to advancing India’s space aspirations, they remain within their right to claim sovereign immunity from any kind of tortious 61
liability. If the ISRO decides to confine itself to Research and Development only, leaving operation to private parties, the issue of its liability becomes largely a moot point. This should also motivate ISRO to confine itself to research and development only.
But given that private operators will be discharging a government mandate, it is still important that the legislation addresses their liability vis-à-vis the defence of sovereign immunity. We reiterate that liability should not be diluted under the guise of sovereign immunity if there is clear evidence of negligence. However, the government contractor defence in Boyle v. United States, should protect private operators where their products and services comply with Government design and terms imposed by Government contracts.
There is still the question of inter se liability between the payload owner, launch service provider, customer, contractors, sub-contractors, etc. A typical example of liability is when payload is destroyed in an accident involving the launch vehicle. This potentially, is litigation between payload owner and the launch vehicle owners.
The Commercial Space Launch Act, 1984, as amended in 1988, required inter party waivers to be introduced into contracts between contracts, subcontractors and customers involved in the launch services. In the case of Martin Marietta Corporation v. INTELSAT, claims for damages by INTELSAT against Martin Marietta Corporation (the launch service provider) were dismissed on the ground of inter party waivers in the contract barring such claims. Given the inherent challenges of space activities and the hostile atmosphere of space, such inter party waivers do seem to make sense. However, inability to seek reparations in spite of evidence of gross negligence might be a deterrent for commercial ventures. In fact, if ISRO should continue acting as an operator of space activities in addition to being an R & D organisation, it is only fair that it exposes itself to liability to customers, where it or its personnel are guilty of negligence.
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Thus, it would be wise for India to refrain from insisting on inter party waivers through legislation and leave that aspect for the parties to negotiate. What is instead advisable is for the legislation to waive off sovereign immunity wherever ISRO is the service provider, but continues to recognise (as opposed to insisting for) interparty waivers in contracts, wherever found, and to clarify that such waivers will preclude claims even under tort. In this way, the legislation can achieve level playing fields for ISRO and private space operators to compete, if ISRO chooses to be more than just an R & D organisation. In the same breath, it will ensure a just and fair system that insists for accountability, but makes provision for forgiveness whenever the injuries are inflicted due to factors’ beyond the parties’ control.
Lastly, a dispute resolution platform should be established which will ensure that signal interference and other forms of interference by one satellite against the other can be easily resolved. We stress the need for a specialised dispute resolution platform, as the technical nature of facts involved in such dispute may overly burden conventional judicial forums. Such a platform should be given powers to order such measures as are necessary to undo interference of this nature and failure to obey such directions should come within the purview of offences specifically introduced into the legislation.
4.8 Ownership Rights While the SATCOM policy has addressed the issue of authorising building and operating of Satellites in great detail, the impending Space legislations needs to answer certain queries that come in the light of the same. For example, if a private operator is allowed to assemble, launch, operate and maintain a Satellite in space, does it then mean the said operator is the owner of the Satellite? Or given that India remains internationally liable for the said Satellite, will the State own the Satellite System with the operator merely holding a license to operate it? These are pertinent questions for the simple reason that answering them will ensure clarity over several points ranging from taxation of transactions in orbiting satellites to understanding the question of liability.
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Given that we are mindful of India’s responsibility under the Outer Space Treaty as well as under the Convention on International Liability for Damage Caused by Space Objects, the need for the government to regulate objects in space is quite high. We cannot reasonably expect the government to embrace this responsibility wholeheartedly, if its ability to dictate the said object’s fate, is constrained by the usual procedure required for it to take ownership of private assets (issue of notice, hearing of objections, payment of compensation, answering to litigations around such acquisitions), etc. On the other hand, the 74% FDI allowed under the SATCOM policy is meaningless if investors are told that the Satellite they have pumped money into, doesn’t belong to them or to the entity they have invested in. Striking a balance of these competing interests is not easy and we don’t claim to have a ready answer to this problem.
Under the circumstance, it is incumbent upon policy makers to fundamentally define the regulations around ownership under the impending legislation. To begin with, private space assets should be identified as a distinguished category of property. It would be useful to have a separate legislation altogether dedicated to the powers and procedures for expropriation/nationalisation of space objects, for specific purposes ranging from shielding India from International Liability to National Security. Additional responsibilities should be placed upon the government to justify expropriation that is not for limited time. The powers of judicial review of such expropriation should clarify that no stay of expropriation can be issued by courts and any violation of fundamental rights, in the act of expropriation should be compensated by monetary damages commensurate with the investments made and losses suffered.
India is still some time away from having research and development activities in Space. But it is incumbent that we develop the vision for such R & D activities. The national Patent regime that exists in India does not specifically provide for the space related inventions. It thus follows that the existing Patent Regime should be suitably amended to recognise innovation that occurs in space (which strictly speaking, is outside India’s territory). The impending legislation might consider the existing 64
realms of law according patent protection to the inventions made in the outer space. The U.S. Patents in Space Act provisions have very methodically extended the territorial patent provisions to the inventions made in the outer space, and treats them at par with the inventions made right here on earth. In addition, wherever India has provided the infrastructure, opportunities, equipment (like launch vehicles, space stations, etc.) leading to such innovation, the legislation should clarify that innovation from such license, use or sale of government technology shall reflect the government as a proportionate owner.
4.9 National Security We recognise that national security remains a significant concern against private sector participation, particularly in the field of satellite imaging. We remain sensitive to this concern and propose a returns filing based approach. A separate policy framework could be evolved where imaging satellites capable of taking photographs of a specified resolution should be required by law to file periodic returns documenting the coordinates on Earth so photographed with the Ministry of Defence or the regulatory authority to be established for that purpose. It is only after approvals of the coordinates; can the images be shared or published by the satellite owner. Either distribution or procurement of photographs without such approval should be defined as punishable offences prosecutable under law either under the existing Official Secrets Act (wherever photographs of sensitive areas relevant to national security are distributed or procured) or separate offences defined under the impending Space Legislation. The Ministry of Defence or ISRO could be given additional powers to audit such returns to verify their genuineness.
As activities in space have a bearing on humanity at large, a strong case exists to ensure that specifications of space assets are available in public domain. This automatically acts as a deterrent against surreptitious use of technology with national security implications. But this will invite the ire of the private space agencies. One way to draw a balance would be to issue a notice to the asset owner when the specifications are sought to be made public and have the owner convince the ministry of defence, ISRO, CAISS and the Department of Space, as the case may be, 65
as to why the specifications should not be released into public domain. Such a recommendation has already found some consensus. 43
Lastly India needs to develop strong export regulations for both data as well as space products. The concept of end user certificates, which is sought for in the defence industry for supply to countries need to be incorporated as a requirement for authorising export of space assets and data generated from space assets. To this end, the existing Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) needs to be revised to be more clear and explicit about the classification of products and data for the purpose of safeguarding national security interests. 44
A related and a very significant area of national security and private sector participation is involvement of foreign personnel in development of space assets. India needs to realise that in order to make meaningful progress in research and development in space technology, it is important to attract the finest minds across the globe and India has to develop a liberal immigrant entry policy for the space sector. However, to mitigate national security risks, the legislation can specify that such foreign personnel shall not in anyway, directly or indirectly, participate in development of technologies with bearing on India’s defence and national security aspirations, except with the express written approval of the defence ministry.
4.10 Tax Rationalisation We begin this section of our paper on the assumption that transactions in space were not really contemplated when concepts like Central Sales Tax (CST) and Value Added Tax (VAT) were introduced.
43
‘Bonnie E. Fought, Legal Aspects of the Commercialization of Space Transportation Systems, Berkeley Technology Law Journal, Article 4, Volume 3, Issue 1, Spring, January 1988, http://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=1068&context=btlj, Visited 15 March 2016.’, n.d. 44 ‘Directorate General of Foreign Trade, Guidelines For Export Of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) Items, http://dgft.gov.in/exim/2000/scomet/scomet2011.pdf, Visited 15 March 2016’, n.d.
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We hope the State will appreciate that the private space industry in India, besides the vendors that supply to ISRO, is in its infancy and requires a considerable nudge to make them competitive in the international market. Thus the state should consider a comprehensive and reasonable tax holiday and beneficial exemptions/rates of tax for the private space sector to bring them up to speed with the international market standards.
The area of complexity however, will be sale of assets in space. As the asset sold is situated in outer space which is recognised as belonging to humanity at large and not to any single country, the sale of such an asset would be outside of India’s taxable territory and therefore exempt from payment of Value Added Tax.
An analogous exemption is found in the form of Section 5 (2) of the Central Sales Tax Act, 1956 which recognises that high sea sales are outside the purview of the said Act. We anticipate that as part of its legislative exercise, India will have to extend such an exemption to sale of assets in Space. The limited scope for taxability under Value Added Tax would arise only if the legislation would recognise the sale of license to operate assets in –space. Transactions of such nature can be brought within the constitutional framework for levy of VAT and enough precedent exists for the same.
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CHAPTER VI 5
Conclusion & Recommendations for Space 2.0 in India
If Indian industry needs to claim a greater traction in the international space market there is a need to promote and develop a model for promotion of SMEs with independent technology ideas, which carry the potential of leapfrogging product/service offerings out of India and are scalable globally.
If such an ecosystem needs to be established, the government must consider instituting a national fund for promotion of entrepreneurship in space industry on similar lines of the Small Business Innovation Research and the Open Sky Technology fund to replicate the success of promotion and development of SMEs by NASA and ESA.
The emergence of Bangalore as an IT and Aerospace hub for the country should be leveraged for the space industry as well. Land should be allocated to space ventures emerging from India to assist them in the startup stage. In addition, mentorship by senior ISRO and Antrix executives will ensure they operate within the Indian space policy framework but are still able to leverage technical expertise built by ISRO in an appropriate manner.
Active engagement of clustered activities engaging academia-industry-agency is of significant importance for creating systemic changes in establishing a globally leading research output environment. One of the excellent methods of moving away from an ‘Islands of Excellence’ model to actively promoting inter-dependent engagement of academia-industry-agency is by creating flagship programmes (where each of these stakeholders have concrete involvement in deliverables and gain significant benefits having long term ecosystem prospects of spin-offs). Such templates are already available with programmes such as Hodoyoshi by the Japanese government.
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Enacting space legislations within the country to define regulatory, legal and procedural regimes with transparent timelines for pursuing space activities by the private space industry is currently at a nascent stage with no national legislations governing space activities, which however remains critically necessary. Enacting stand-alone policy packages for regulating a service/product as a retrospective measure on commercial interest can only be an initial step to the leap required in development of a holistic act for active promotion and encouragement of commercial space activities. Developing time-bound, transparent procedural aspects of delivering authorisations, licenses, frequency allocations, etc. are the need of the hour.
Issues around national security shall always be a concern when any actor chooses to pursue space activities. However, holding back possible commercial possibilities in utilising outer space hostage in purview of national security will only hold back the country in expanding products/services globally. This may also lead to an ecosystem of Indian space entrepreneurs creating holding companies in space commerce friendly countries and operating their product/service, eventually creating loss of high-technology jobs and tax revenues for the country. Several scenarios of commercial space activities have played out in leading space faring nations and there already lies a template in steps taken by their respective governments in securing national security while actively promoting space commerce. These can provide significant lessons to the DoS in formulating an active commercial space strategy for promotion of Indian space industry.
The government has taken significant steps in creation of an active investor mind-set by rolling out programmes such as Make in India. Space has been an identified sector in the ‘Make in India’ campaign. However, there have been no significant proposals made under the ‘Make in India’ for manufacturing space related systems in India. There is a need for a transparent strategy on how the potential of space sector can be leveraged under Make in India. There are significant opportunities in manufacturing (e.g. small satellites) and services (e.g. GIS) for which a framework for engagement needs to be developed.
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There is scope to establish an independent, wholly space activities focused think tank within the country on the lines of the European Space Policy Institute constituting distinguished experts in the space field while preserving its independence in the preparation of its various publications, research materials and expert gatherings. Such a think tank will not only provide a fair assessment in purview of national goals; it can potentially provide key insights on space programme management, dual-use of technologies, economic impacts of space expenditures, space law, international cooperative space agreements, among other matters.
FDI in defence has been opened up to 49 percent by the government. However, there is need for an active stand on leveraging outer space by defence forces. The first step in encouraging FDI in defence space shall be in rolling out a mandate in utilising outer space for defence operations and moving away from the present model of dualuse.
For the small satellite industry to establish and flourish in India, the government can set up a dedicated fund vehicle which would disburse money based on a national prize event along the lines of Google’s XPrize with ISRO being the primary promoter and bringing potential investors and stakeholders on the same table to promote innovation and entrepreneurship in this sector.
These recommendations are provided to build a commercial ecosystem around the national space programme to reap the benefits of government investment in a better manner. The ultimate objective is to utilise the downstream services that aid the economy and provide actionable intelligence for end users. Figure 18 shows the summary of how the DoS/ISRO can leverage the collaboration with public policy think tanks and universities, in addition to their national responsibilities and international commitments, creating a robust downstream space sector that supports the government’s policy push for doing business in India (Make in India) and for connecting everyone with internet (Digital India).
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Figure 18 - Recommendations for Space Industry Ecosystem in India
The Indian space programme has taken giant strides in the area of space technology and its applications in the last two decades, ably supported by government funding and a vision to use space technology for societal benefits. Despite creating a strong knowledge base and taking steps to transfer this knowledge to other sectors, ISRO and DoS have been unable to exploit the commercial potential of space applications due to lack of policy guidelines and regulations.
Trickle-down effect, which is one of the primary reasons for governments to invest in space technology has not been felt as widely as it could have due to several factors like a weak private industry base, lack of independent policy think tanks and poor management of expensive projects. There is no doubt that ISRO has shaped the space industry ecosystem in the past 40 years, and has led capacity building in areas pertaining to space technology. Still, there exists a need for structural and policy reforms for the Indian private enterprises to play a bigger role, both in the local and international markets. 71
The idea of presenting my views in this thesis is to provoke excitement in the policy making circles about the myriad opportunities waiting to be explored if the private sector participation in space sector is recognised and encouraged. But this cannot happen unless the government feels that encouraging private sector in the space sector is beneficial to its aspirations and will compliment and not compromise national security. Where we have increased participation from the private investors we will also have to provide the necessary incentives to ensure that no contribution goes unrewarded.
By the means of patent rights while the private sector gains recognition for their contribution to the high end technology, there is less government expenditure. If the country endorses this, then it needs to make a comprehensive assessment of all the topics relevant to the private sector’s aspirations in India’s space program and then begin the heavy task of enacting its space legislation and corresponding amendments. Thus, the foundation for such robust private sector participation rests entirely on the kind of vision and goals the Indian state will set for itself.
As the voice of the private sector, we remain enthusiastic in our goal of aiding India in reaching the zenith of its glory in space. I only hope that if and when the government decides to walk the line of international trends in welcoming the private space sector, it does so in a well thought out and holistic manner by addressing all the points raised in this thesis.
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6
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program,
http://www.thehindu.com/todays-paper/tp-features/tp-bookreview/economic-analysis-of-indias-spaceprogram/article2266958.ece, Visited 12 May 2015. The
Frontline,
Sensing
Deficiency,
http://www.frontline.in/static/html/fl2810/stories/20110520281011500.htm, Visited 17th May 2015. US removes ISRO and DRDO from entities list, http://archive.indianexpress.com/news/us-removesisro-and-drdo-from-entities-list/741974/, Accessed on 28th Oct, 2015 Zee
News,
ISRO
plans
58
space
missions
during
12th
Plan,
http://zeenews.india.com/news/space/isro-plans-58-space-missions-during-12th-plan_804204.html, Visited 11 May 2015.
e) ONLINE RESOURCES Berlin Adlershof, City of Science, Technology, and Media, Presentation to Union of the Baltic Cities, UBC Business Commission, Union of the Baltic Cities, UBC Business Commission, http://www.ubc.net/plik,5250.html, Visited 12 May 2015.
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CII,
Aerospace
-
Overview
of
Indian
Space
Sector
2010,
http://cii.in/PublicationDetail.aspx?enc=BLugFnj8eqxLjbyH7bTn1tZOnH16pfcR8Z+fdnVJUkzxjzm psPic2BXUPyNf/ON3Vtv6/xh0Hfbjb5sPJjUNBMhRSPEipIjLRnX6NgqSRrCbqX1WSsCUKO7StZ3 oRYjIzfTG1VqkiJ7WYC8gYocYpB9vuFO6MdyYVbo8ThAIR0k=, Visited 11 May 2015. Delta-V Space Hub, http://www.deltavspacehub.com/#space20, Visited 11 May 2015. European
Space
Agency,
Open
Sky
Technologies
Fund,
http://www.esa.int/Our_Activities/Space_Engineering_Technology/TTP2/Open_Sky_Technologies_F und, Visited 11 May 2015. infoDev Incubation Support Center (iDISC) - Business Incubation Support, infoDev, accessed 15 March 2016, http://www.infodev.org/idisc. NASA, SBIR/STTR Basics, http://sbir.nasa.gov/content/nasa-sbirsttr-basics, Visited 11 May 2015. National Geospatial Agency, https://www.nga.mil/Pages/Default.aspx NSR,
Satellite
Manufacturing
and
Launching
to
Face
Unprecedented
Growth,http://www.nsr.com/news-resources/nsr-in-the-press/nsr-press-releases/satellitemanufacturing-and-launching-to-face-unprecedented-growth-/, Visited 23 May, 2015. NSR, 2012 - http://www.nsr.com/news-resources/the-bottom-line/-per-transponder/, Visited 18th May, 2015 Science and Technology Facilities Council, Harwell Oxford, https://www.stfc.ac.uk/743.aspx, Visited 12 May 2015. Sk-Skolkovo, Space startup wins $3.9M Skolkovo grant for Earth-observation satellite, https://sk.ru/news/b/news/archive/2014/09/18/space-startup-wins-_2400_39m-skolkovo-grant-forearthobservation-satellite.aspx, Visited 11 May 2015. Sponsored Research (RESPOND), http://www.isro.gov.in/sponsored-research-respond, Visited 12 May 2015. Technology Transfer Group, Indian Space Research Organization (ISRO), Technology Transfer Policy
of
ISRO,
http://www.sac.gov.in/SACSITE/TTIDWebsite/Technology_Transfer/TT_Policy.pdf, Visited 11 May 2015.
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