The next Virgin Galactic or SpaceX could well be from India. With the government opening up the space sector for private players, the monopoly of state-owned companies is over. Could this be the fillip that Indian companies with space ambitions were looking for?
As SpaceX’s state-of-the-art Crew Dragon spacecraft docked with the International Space Station (ISS) in May, the final frontier for start-ups across the world had been breached. It proved to decision-makers and the average Joe that public-private partnerships were the future of the global space industry. The successful launch of the Crew Dragon atop a Falcon 9 rocket ended US dependence on Russia’s Soyuz launchers for ferrying astronauts to space – a full 9 years after NASA’s Space Shuttle program ended in 2011. To their credit, start-ups like SpaceX have been working hard to bring down the cost of access to space for both commercial and government operators with active support from NASA.
Watch: SpaceX Crew Dragon docks with International Space Station
Private investment in space activities has also been on the radar of India’s own ISRO (Indian Space Research Organisation) for quite some time. On June 25, the Modi government announced that it was opening the space sector to India’s private sector in a significant move that could spur innovation and create millions of jobs in an economy wracked by the coronavirus crisis. The decks have been cleared for the formation of an all-new Indian national Space Promotion and Authorization Centre – or In-SPACE, for short – as a springboard for Indian entrepreneurs. In-SPACE will serve as a kind of business accelerator cum mentor to Indian tech companies, helping them overcome red tape and access government-owned test facilities.
Genesis of In-SPACe
From humble beginnings, India’s space program has notched many historic milestones with the country’s first manned mission scheduled tentatively for 2022. Along the way, ISRO has nurtured a network of private sector suppliers for outsourcing key components and sub-assemblies used in launch vehicles like the PSLV and its bigger cousin, the GSLV. It now wants them to assume the role of system integrators and move up the value chain. ISROs long term aim is to move away entirely from building satellites and launch vehicles, giving way to private companies. With In-SPACe, the government wants to boost India’s competitiveness in an industry that is expected to top $558b in potential revenue by 2026.
Indian companies like L&T, Godrej, and others already build more than 80% of the PSLV, having been associated with the program for years now. ISRO believes that there is enough competence in the private sector to build its own satellites and rockets. There is considerable interest from private industry. However, the memory of the 2010 Devas-Antrix fiasco – where ISRO reneged on a deal to provide bandwidth to a Bengaluru based start-up alleging financial irregularities – still hits a raw nerve with many in the private sector. Industry watchers say that ISRO might not cede its turf to private companies unless there was a policy level intervention by the government. With In-SPACe, Indian companies can finally hope for a level playing field.
Private sector woes
Unlike ISRO, start-ups are wary about investing in production facilities because of long business cycles and lead times which could create cash flow problems downstream. There is also the fear that the Department of Space- which oversees the space sector – may favour public sector undertakings like Bangalore-based Bharat Electronics Limited or Hindustan Aeronautics Limited (HAL) over their private competitors. There is no clarity on whether they would be allowed to bid for strategic projects like building military satellites.
Unlike ISRO, start-ups are wary about investing in production facilities because of long business cycles and lead times which could create cash flow problems downstream.
Start-ups also worry about being outbid by their larger public sector counterparts as they lack experience and not having access to government subsidies like the latter. While companies like Alpha Electronics, Tata Power Strategic Electronics Division (SED), and Astra Microwave have significant in-house technological expertise in building subsystems, they will need to learn the ropes of final integration and checkout of complex systems from peers like ISRO. Without a clear Transfer of Technology (ToT) policy, private companies might prefer to wait and watch at least for the time being.
Watch: The story of India’s private Space pioneer
Foreign Direct Investment (FDI) in the space sector needs to be considered so that private players can meet their capital needs in a sustainable manner. Alternatively, the government should hand out fixed-price contracts covering development costs incurred by companies shortlisted for projects. This is the practice followed in countries like the US which has, by far, the most well-oiled contracting and evaluation system anywhere in the world. This will be crucial for ensuring private sector participation in upcoming projects such as India’s first-ever manned space mission, Gaganyaan-1, for which 4 Indian astronauts are undergoing advanced training in Russia.
Empowering the private sector
Public-private partnership in the space sector can help India retain its cost advantage over competitors like SpaceX that are fast closing the gap. India’s own bandwidth requirements are likely to grow by leaps and bounds in the next few years with the arrival of 5G and IoT. The space sector is at a major inflection point where the right regulatory environment and sustained investment is essential for the private sector to come into its own.
Bonus Watch: India plans to build its own Space Station by 2030. How hard will it be?