antrix devas deal controversy

ANTRIX AND DEVAS Antrix (a variation of the Hindi word for space, antariksh) Corporation was set up as the marketing arm of Isro in 1992. The company hoped to promote commercial exploitation of space products, technical consultancy services and transfer of technologies developed by Isro. And most importantly, as Isro said about the Devas deal: "A major objective is to facilitate development of space-related industrial capabilities in India." Enter Forge Advisors, a US-based strategic consultancy. In March 2003, Antrix inked a memorandum of understanding with Forge for exploring opportunities in digital multimedia services. Forge later established an Indian company called Devas Multimedia, with some former Isro scientists on board. On December 24, 2004, Antrix's board approved the draft agreement between the two sides, and the agreement was signed on January 28, 2005. The agreement provided leasing of 90% of the space segment capacity on two satellites for 12 years to Devas. TWO SATELLITES An up-front capacity reservation fee of $20 million per satellite and annual lease charges starting at $9 million per satellite was to be paid by Devas to Antrix. Thus over 12 years, Devas would have ended up paying $300 million to Antrix. Antrix committed to build and launch two satellites - Primary Satellite-1 and Primary Satellite-2. These two would have helped Devas deliver a range of services such as broadband to remote areas. The Cabinet approved the building of both satellites. SCAM OR NO SCAM? So far, so simple. But here's how a "scam" was discovered: first, the Cabinet was not "informed" that the two satellites were being built by Isro for Devas. Second, there was no tendering for awarding the contract to Devas. Third, the satellites were leased to Devas at "throwaway" prices. There are powerful counter arguments. First, Devas was bringing in new technology that had a high risk of failure. Second, Antrix-Isro, regularly leases satellite capacity to private firms in the direct-to-home business without tendering. Third, the estimated loss - media reports said `2 lakh crore - was based on comparing what Devas paid to 3G auction prices. That's a nonsensical comparison because the 3G spectrum and its uses and market are completely different from those of the S-band spectrum and the related technology that Devas would have used. But the damage was done. A hi-tech, high-risk technology venture that was bringing in private and foreign capital to space business in India was killed. "It was reported [by the media] in a very bad fashion," says Ajey Lele of the Institute for Defence Studies and Analyses.

Controversy on Antrix-Devas agreement on S-band spectrum

Did the Antrix-Devas agreement on S-band spectrum go as far as it did because many individuals in the know chose not to intervene?
Quite apart from the fashion in which valuable S-band spectrum was allocated to a single private company for an extended period of time, the Antrix-Devas agreement and the way in which it was sought to be implemented were highly questionable in other ways too. The deal was finally annulled following the expos by The Hindu and its sister publication, Business Line, in February 2011. Much of the upfront cost for the two satellites required to operationalise the agreement and their launch were to be borne by the public exchequer. The issue of making good any satellite malfunctions or launch failures would also have arisen. Whether, and to what extent, higher authorities such as the Space Commission and even the Union Cabinet were informed of the deal and its implications is murky and unclear. The agreement was signed on January 28, 2005 between Antrix Corporation Ltd., the marketing wing of the Indian Space Research Organisation (ISRO), and Devas Multimedia Pvt. Ltd. based in Bangalore. The agreement laid down that Antrix would provide satellite capacity to enable Devas to launch satellite digital multimedia broadcast (S-DMB) services that would be delivered to fixed, portable and mobile receivers, including mobile phones and vehicle-borne devices. As a result of this deal, ISRO was committed to build, launch and operate two custom-built communication satellites, which came to be called GSAT-6 (also known as Insat 4E) and GSAT-6A. The agreement specified that 90 per cent of the capacity on these two satellites would be leased to Devas on a 24-hour, seven-day-per-week basis for 12 years, with a provision to extend the lease by another 12 years. These were not ordinary communication satellites of the sort that ISRO had built and launched before. They involved high-powered spot beams in the S-band requiring a large 6.5 metre antenna (that could be unfurled in space) that was specially developed for these satellites and which ISRO has never flown before. Satellite issues

ISRO communication satellites have had their share of problems that led to partial and, in the case of the Insat 2D launched in 1997, total loss of onboard capacity. As recently as July 2010, a problem with the Insat-4Bs power supply system led to half its communications capacity being shut down. With what are essentially developmental satellites like the GSAT-6 and the GSAT-6A that have not been flown before, the risk of problems arising are greater. Such concerns are particularly high in the case of the large antenna that could be unfurled in space. If it failed to open out properly, the entire satellite would be rendered useless. In addition, the Geosynchronous Satellite Launch Vehicle (GSLV), on which the satellites were to be launched, has also not settled down to provide reliable service. Yet, the Devas contract has stringent penalty clauses for when the satellites must become operational, the quality of service to be provided and tough norms for declaring a Total Satellite Failure. In the latter event, a replacement satellite has to be provided within a specified time span at no extra cost to Devas. Experience elsewhere in the world indicates that mobile satellite services in the S- and L-band frequencies have often proved financially unviable. Regulatory authorities in the U.S. and elsewhere are therefore permitting some part of the satellite frequencies to be used for lucrative terrestrial communications. If regulatory authorities in India were to permit similar flexibility, the S-band frequencies that the deal had allotted to Devas would have become a highly valuable resource. In fact, a note prepared for the Cabinet Committee on Security in February 2011 by the Department of Space, the parent body of ISRO and Antrix, pointed out that the company had plans to get into terrestrial broadband services. Such a dispensation might not ensure a level playing field for the other service providers using terrestrial spectrum, especially considering the significant demand for S-band spectrum, it noted. CAG estimate A preliminary estimate prepared by the Comptroller and Auditor General in 2011 had suggested that the spectrum allotted to Devas could have been worth as much as Rs.2 lakh crore. According to ISRO, the amount payable by Devas over a 12-year period was just $300 million (about Rs.1,500 crore at the current exchange rate). While Rs.766 crore of public money would be spent on building and launching the two satellites, Antrixs revenues from Devas would come to only Rs.1,350 crore over a 12-year period. The note to the Cabinet Committee on Security admitted that this would have not been sufficient compensation for all the costs incurred by ISRO.

There is also the question of how this particular company was chosen for the deal. The line taken by ISRO has been this was the only company that came forward with a viable plan for the sort of satellite-based multimedia applications that were envisaged. However, no open competitive process seems to have been even attempted in making such a choice. Considering that Devas is headed by a person, who once held a senior position in the space programme, the onus on the Department of Space, ISRO and Antrix to make sure the deal was in public interest and not tainted by any whiff of cronyism was all the greater. Given all these factors, the Department of Space ought to have ensured that both the Space Commission and the Union Cabinet were formally informed and fully briefed on the Antrix-Devas deal and all its implications when seeking approval to build the two satellites required. The Space Commission was established by the government four decades back to formulate the countrys space policies and oversee implementation of space programmes. All important programmes and projects have to be cleared by the Commission, and it also has delegated powers to clear financial expenditure on projects up to a certain amount. Headed by the Secretary for the Department of Space (who is also chairman of ISRO), this powerful body has top officials from the Central Government among its members. Currently this includes the Minister of State in the Prime Ministers Office, the National Security Adviser, the Principal Secretary to the Prime Minister, the Cabinet Secretary, a Secretary in the Department of Expenditure, a Secretary in the Finance Ministry who is the Member (Finance), and the Principal Scientific Adviser to the Government. After the Space Commission gave its clearance, the Union Cabinet approved the building of GSAT-6 in December 2005. Four years later, the Space Commission, under its delegated powers, gave the go-ahead for the follow-on GSAT-6A. The proposals from the Department of Space seeking approval for the GSAT-6 and GSAT-6A did not make any reference to their utilisation for the Antrix-Devas agreement, according to the background note issued by ISRO last February. Only at its July 2010 meeting, when it recommended annulling the contract, was the Space Commission apprised on this contractual agreement for the first time. However, in a recent interview with The Hindu, G. Madhavan Nair, who was chairman of ISRO and Antrix when the deal was signed and approval for the two satellites taken, has said that several people in the government, including from the Prime Ministers Office, were aware of the details of the deal at every stage.

Besides, there are persons who are members of both the Space Commission and the Antrixs board of directors. One such individual is the Member (Finance). Another is the Director of the ISRO Satellite Centre that is responsible for building the satellites. So it is difficult to see how the Space Commission could have been entirely in the dark about the deal with Devas. The Insat-2E lease All of this is in stark contrast with the approach taken by the Department of Space in leasing capacity on the Insat2E. Half the capacity on this satellite, launched in April 1999 and now nearing the end of its life, was leased out to Intelsat. (Intelsat, which since been privatised, was then an international consortium operating satellites in which India too had a stake.) In the case of this satellite, some customisation had to be done, including its transponder characteristics and beam shape, to meet user requirements. As ISRO had just begun building communication satellites, the deal was seen as a way to gain credibility and thereby access to the international market for building satellites. In the case of the Insat-2E, the Department of Space made sure that the Space Commission and the Union Cabinet were formally informed about the Intelsat deal and why it was being carried out. With the Insat-2E, the annual reports of the Department of Space, which are documents presented to Parliament each year at the time of the Union Budget, clearly indicated the capacity that would be leased out to Intelsat. When it came to the GSAT-6, however, the annual reports of the Department of Space are silent about the satellite capacity that had been allotted to Devas. While individual accountability can and should be fixed, it is obvious that there was a system-wide malfunction. The question is how many individuals up and down the government and Space hierarchy knew what was happening but chose not to intervene. The Hindu Editorial The saga of the scandalous deal that would have given a private company, Devas Multimedia Private Limited, control over a large chunk of valuable S- band spectrum has not ended. If the agreement signed with Antrix Corporation in 2005, the marketing wing of the Indian Space Research Organisation ( ISRO), had been allowed to stand, Devas could have made a killing. However, doubts over the deal began to surface and, in December 2009, after K. Radhakrishnan took over the Department of Space, the parent

body for both ISRO and Antrix, an internal committee was set up to review the deal under B. N. Suresh. It was Business Line, the business daily of the The Hindu group, that first brought to public notice what was going on behind closed doors. Subsequently, in February 2011, The Hinduand Business Line, published the text of the Antrix- Devas agreement and revealed the enquiries being pursued by the Comptroller and Auditor General of India. Later that month, the deal was finally annulled by the Central government. In the wake of The Hindugroups expos, the government constituted a high- powered committee made up of B. K. Chaturvedi and Roddam Narasimha to review the technical, commercial, procedural and financial aspects of the agreement. This committee submitted its report to the Prime Minister in March 2011. In May, a five- member high- level team headed by a former Central Vigilance Commissioner, Pratyush Sinha, was set up to examine the deal and identify acts of omission and commission by government officials. It was, the government said, after carefully considering the reports of the Chaturvedi- Narasimha committee and the high- level team that action was ordered. Four former officials, including G. Madhavan Nair who was ISRO chairman when the deal was signed, were barred from holding any government position. But this action begs many questions. Is it the governments considered view that these four officials were solely responsible for the deal? What about the Space Commission, which has a key oversight role over the space programme? Were the members of the Commission as blissfully unaware of the deal as is made out? Mr. Nair has said the Space Commission was told about the agreement with Devas. He has also indicated that there were government officials, including some in the PMO, who were well aware of the Devas contract. That apart, how was it that members of the Space Commission who were also on the Antrix board of directors knew nothing of what was going on? The Antrix- Devas deal has raised fundamental questions about decisionmaking and oversight processes in the space programme. The government must come clean on what actually transpired by placing in the public domain the reports prepared by Dr. Suresh, the Chaturvedi- Narasimha committee and the high- level team.