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OAS Mains Q&A: Private Sector in Space

Context

Recently, the Union Cabinet has approved the creation of the Indian National Space Promotion and Authorization Centre (IN-SPACe) to provide a level playing field for private companies to use Indian space infrastructure. This is part of reforms aimed at giving a boost to private sector participation in the entire range of space activities.

Question

Discuss the need of introducing Private Sector in Space

Sample Answer

IN-SPACe is supposed to be a facilitator, and also a regulator. It will act as an interface between ISRO and private parties and assess how best to utilise India’s space resources and increase space-based activities.

(IN-SPACe), which is expected to be functional within six months, will assess the needs and demands of private players, including educational and research institutions, and, explore ways to accommodate these requirements in consultation with ISRO.

IN-SPACe will also hand-hold, promote and guide the private industries in space activities through encouraging policies and a friendly regulatory environment.

Need of Private Sector in Space

ISRO and its limited resources: It is not that there is no private industry involvement in India’s space sector. In fact, a large part of the manufacturing and fabrication of rockets and satellites now happens in the private sector. There is increasing participation of research institutions as well. Indian industry, however, is unable to compete, because till now its role has been mainly that of suppliers of components and sub-systems. Indian industries do not have the resources or the technology to undertake independent space projects of the kind that US companies such as SpaceX have been doing or provide space-based services.

India and the global space economy: Indian industry had a barely three per cent share in a rapidly growing global space economy which was already worth at least $360 billion. Only two per cent of this market was for rocket and satellite launch services, which require fairly large infrastructure and heavy investment. The remaining 95 per cent related to satellite-based services, and ground-based systems.

Catering to domestic demands: The demand for space-based applications and services is growing even within India, and ISRO is unable to cater to this. Indian Space Research Organisation (ISRO)’s annual budget has crossed ₹10,000 crore ($1.45 billion) and is growing steadily. The need for satellite data, imageries and space technology now cuts across sectors, from weather to agriculture to transport to urban development and more. If ISRO is to provide everything, it would have to be expanded 10 times the current level to meet all the demand that is arising.

Promoting other private players: Right now, all launches from India happen on ISRO rockets, the different versions of PSLV and GSLV. There were a few companies that were in the process of developing their own launch vehicles, the rockets like ISRO’s PSLV that carry the satellites and other payloads into space. Now ISRO could provide all its facilities to private players whose projects had been approved by
IN-SPACe.

Overall growth of space sector: Private sector participation is needed to ensure overall growth of the space sector. ISRO has a strong association with the industry, particularly with Public Sector Undertakings (PSUs) like Hindustan Aeronautics Limited and large private sector entities like Larsen and Toubro. Role of private industries should be increased.

Country’s security: The most basic way to secure our space capabilities is to distribute them across many different satellites and spacecraft, so that continuity is unaffected even if an adversary manages to disable one or more of our satellites. For instance, the US is highly vulnerable in space because it depends on thousands of its satellites. But it is also best equipped to deal with a potential attack on its space assets because it can find alternatives to switch to.

International trends and experience: Elon Musk’s “SpaceX” and its high profile projects have highlighted the increasing significance of the private players in the space sector. In India, despite the various strategic, security and regulatory constraints, a limited private ecosystem has evolved around the ISRO.

Greater pool of resources: Public resources- land, labour, capital are limited. Private sector participation will open a new pool of resources and talent. It will bring more funding, and experience into space exploration activities.

Human Capital: Restricting space activities to ISRO, limits proper utilisation of talent all over the country. With demographic dividend, private sector participation can exploit the talent across the nation contributing a lot to space explorations in India.

Technological advancement: Commercialisation will also develop better technologies which are important. It will allow integration of many other technologies like artificial intelligence into space exploration activities. With experience from space activities, the private sector can increase the role of technology in other areas.

Risk Sharing: Every launch consists of various risks. Private sector helps in sharing the risk of cost factor. Failure costs will be distributed. Also with increased private participation, failures will reduce due to increased available human capital and mind.

Commercial demand:There is a need to enhance internet connectivity for the masses, which is another demand pull factor for increased commercial interest in space. Asteroid mining is also another potential area that looks promising, with scope for monetisation and disrupting commodity markets.


Extra-Material

Benefits to ISRO

  • The demand for satellite launches is growing. ISRO has estimated it must launch 15,000 satellites in the next six-nine years. It doesn’t have the manpower to do this and would require massive budgetary increases to build that capacity even though the satellite business represents a $30-billion opportunity. The private sector could help meet shortfalls without placing extra burden on the exchequer.
  • There has also been relatively little investment in space exploration. As of 2019, cumulative funding for 120 start-ups was estimated at just $6-7 million. More investment in space will have huge positive externalities.
  • The private industry will also free up ISRO to concentrate on science, research and
    development, interplanetary exploration and strategic launches.Right now too uch of ISRO’s resources are consumed by routine activities that delay its more strategic objectives.
  • ISRO can earn some money by making its facilities and data available to private players.

Benefits to Industry

  • Permission to use the facilities of the Indian Space Research Organisation (ISRO) will relieve companies of the burden of going overseas to test equipment, perform launches, and access geospatial data.
  • Apart from access to facilities, access to the ISRO team would be invaluable for any start-up. The government has also said that the repository of geospatial data from ISRO satellites will be made available to private firms, although strict guidelines would be followed in releasing this data due to its sensitivity.
  • The opening up of the sector will deepen those relationships and help to overcome
    manpower and budgetary constraints.
  • Modern communications systems, as well as geospatially-dependent businesses,
    including agricultural and environmental management, and road alignment, depend on space activities. Space exploration has led to huge advances in health care, weather prediction, and material sciences.

Challenges

  • Access to capital: In 2015, approximately $129 billion in VC funding was deployed
    globally across 7,872 deals. Of this total, just over $2 billion was deployed to space based companies across 44 deals. Space-based enterprises represent much longer
    investment horizons with a far greater risk of failure.
  • Access to insurance: Few financial institutions are capable of providing space-based enterprises with the financial insurance that matches the scale of initiatives in space. Insurance is key for private businesses to offset the risk that was previously absorbed by governments, and to be able to engage in cosmic activities profitably with minimal risk, insurance capital needs to be available more freely.
  • Issue of regulation ,privacy and national security
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