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Business News/ Opinion / Views/  A space sector bull run is no longer just a pie in the sky

A space sector bull run is no longer just a pie in the sky

India’s space-sector reforms of 2020 have created a buzz over growth but startups alone won’t take us far. Large private firms that have been working on state contracts must join the action.

ISRO's workhorse rocket PSLV-C48 carrying radar imaging earth observation satellite RISAT-2BR1 and 9 foreign satellites blasts off from the spaceport in Sriharikota (Photo: PTI)Premium
ISRO's workhorse rocket PSLV-C48 carrying radar imaging earth observation satellite RISAT-2BR1 and 9 foreign satellites blasts off from the spaceport in Sriharikota (Photo: PTI)

Since India’s space-sector reforms of May 2020, there has been tremendous excitement around new space startups and small and medium firms in India. Some of them can grow into mid-cap companies, a few can turn out to be large-cap unicorns, and many might see the end of their road or be acquired. However, there is complete silence on an important question: What kind of role is the government contemplating for India’s large corporations in this liberalized space sector?

The Narendra Modi administration is optimistic about the zest and innovativeness of India’s space startups. However, they cannot carry the entire weight of the country’s private space sector.

Large corporations like Larsen & Toubro, Godrej and Tata have long been vendors to the Indian space programme. Thanks to their long association with the Department of Space (DoS), they possess testing infrastructure, manufacturing capabilities, assembly lines and experience working on designs of the Indian Space Research Organisation (ISRO). But space manufacturing is a tiny fraction of their total industrial output, as most of their contracts were made-to-order, with no scope for innovative, independent inputs. Their innovation quotient is lower than that of much smaller startups.

Today, when the government wants to create a demand-driven space sector, these large companies are ready to innovate, invest in research, and grow their small space, aerospace and defence subsidiaries. But this will only happen if they are assured of business continuity and contracts, an uninhibited regulatory environment, and the ability to charge into overseas markets.

The most significant demand for the space industry’s bread-and-butter—satellite manufacturing and rocket-launching—will come from the ‘incidental sectors’ of telecommunications, transportation, banking, defence and meteorology (T2BDM). A Vodafone-Idea, Jio or Airtel will want on-demand manufacturing of telecom satellites. Banks and insurance companies, civic authorities and farmers will be the most prominent end-users of earth-observation satellite services. E-commerce and logistics delivery platforms will use Indian navigation satellite constellations. Private-sector meteorology firms will use Indian meteorological satellites.

India seems on its way to a $1 trillion digital economy by 2025. This feat has been enabled by the privatization of the telecom sector nearly 20 years ago. The global space economy will grow to $4 trillion from the current $600 billion by 2040. If India is to participate in this bullish growth, the government must focus on high potential in the incidental T2BDM sectors.

The DoS should allow the setting-up of parallel Polar Satellite Launch Vehicle (PSLV) and Small Satellite Launch Vehicle (SSLV) assembly lines under a consortium company, with the government holding a minority 20%-49% stake. The vendors that have long helped build PSLVs and SSLVs should take the rest. Business sustainability will be assured by the incidental T2BDM sectors, which will increasingly encourage private-sector satellite manufacturing, and demand that ISRO give up its uneconomic supremacy in the space sector.

With the commercialization of space activities, India’s space sector will not have to bite nails awaiting the finance ministry’s allocations on budget day. However, additional mechanisms to finance the space industry will have to be explored.

The US private space sector does not depend entirely on its Office of Management and Budget. It caters to Nasa’s civilian, Pentagon’s military and other domestic and international commercial contracts. Since the sector has steady business, its finances do not depend on venture capital, nor even revenue inflows. Major corporations raise money through space-themed exchange-traded funds (ETFs) on stock exchanges. The S&P Kensho Final Frontiers ETF has been listed on the New York Stock Exchange since October 2018. The Procure Space ETF has been on Nasdaq since November 2019. Both ETFs have holding companies from the industries of rocket and satellite making, operations and services, ground-segment technologies, satellite imagery and telecom. Privatization enabled this. India must prepare for the day when shares of large space companies are publicly traded.

India has three space agencies: the DoS’s civilian ISRO, the ministry of defence’s Defence Space Agency, and the newest of all, the DoS’s commercial Indian National Space Promotion and Authorization Centre. ISRO isn’t all that private firms must engage. As the latter two find their footing, new business opportunities will emerge. But it’s for the government to expedite their agenda and help them realize their potential in the fast-expanding global space economy.

Though nascent, large space, aerospace and defence companies, along with public-sector companies, form India’s space technology ecosystem. Space is currently discussed mainly between New Delhi, the hub of rule-making, and Bengaluru, an activity hub. As commercialization becomes a strategic necessity and as T2BDM become the main drivers of it, Mumbai’s position will grow. The greater the voice of the country’s financial centre, the more India’s space technology ecosystem will prosper.

Chaitanya Giri is fellow for space and ocean studies, Gateway House

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Published: 04 Feb 2021, 09:36 PM IST
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