Rise of the Private Space Sector in India

It has just been over a year since India opened its space programme to private operators in a rare and historic policy shift.

Consequently the country’s private space sector has been demonstrating hyperscale growth. We now have more than 350 private space companies, more than major-space faring nations like Japan.

This means the objective of liberalising the space industry is paying off, at least based on these early indicators. The role of private players was earlier limited to specific segments such as manufacturing and fabrication of rockets and satellites. Now, the limits are off and these pockets have expanded.

The Government was quick to realise that the Indian Space Research Organisation (ISRO), in spite of its exceptional capabilities and history, cannot alone cater to the rising demand for domestic space-based applications and services.

The Draft National Space Policy 2020 was thus unveiled with the aim to increase public-private partnerships in space research and exploration activities. Instead of only partnering on the manufacturing and logistical side of operations earlier, private players were now given access to ISRO’s infrastructure, technical resources and data to grow.

One year down the road, we try to assess the progress of these activities by looking into their mandates, financials, performance vis-a-vis the private space sector in other countries and questions regarding their liability.

Government’s Push for Space Tech

Two regulatory inclusions that lie at the core of the 2020 space policy are as follows:

• The Indian National Space Promotion and Authorisation Centre (IN-SPACe) will be the nodal agency that regulates non-government space ventures.
• The NewSpace India Limited (NSIL), a PSU under the administrative control of the Department of Space that will deal with capacity building of local industry for space manufacturing.

The Government says it intends to change the approach of its space policy from a “supply-based model” to a “demand-based model”. For this to happen, a breakaway from the pre-existing system is necessary. The pre-existing system where ISRO’s exclusive capacity for development trumped the commercial needs of the market.

The NSIL is tasked with registering these needs, meaning that it will aggregate user requirements and obtain contracts from the market.

One needs to understand that the demand in space research is not limited to launching more rockets into the sky, however spectacularly. The downstream space segment comprises a whole range of application-based space research (collectively referred to as space tech) into weather forecasting, geological and oceanographic studies, satellite communication, disaster management, etc to name a few.

Then there is the need to boost data analytics with the application of AI and machine-learning algorithms which indirectly creates further demand for remote-sensing satellites. And let’s not forget the scope to enhance operational performance in mission support, satellite broadband gateways and 5G backhauling. Ergo, the scope for commercialisation is immense.

The Debutante Space Belles

A number of space startups have come up in India over the last one year. And a few of them have also started delivering on their mandates.

For instance, Agnikul Cosmos, a startup founded by two 21-year-old college students became the world’s first company to successfully test a 3D printed rocket engine, which is a new and upcoming tech in the space industry and is predicted to replace conventional assembly models.

Then there is Skyroot, another startup founded by two former ISRO scientists. The company is building “Vikram” rockets from scratch, which are the first brand of rockets made by the private sector in India.

Bellatrix is developing its own rocket “Chetak” by 2023 and developing a “space taxi”, an orbital transfer vehicle by 2024.

Bengaluru-based startup Pixxel plans to deploy 30 satellites by December 2022 to form “a global constellation”.

The infused steam from Government’s policy and organisational support has given a lift to these startups, no doubt. Their growing numbers and capacities have led to another new and recent policy that allows private players to build and operate their own launch sites. This is expected to ease the potentially incoming launch traffic at Sriharikota, the country’s only existing launch site currently.

Where’s the Space Cheese Coming From?

Venture capital is evidently pouring into the private space sector in India (investments in the first half of 2021 almost double that of 2020 so far). A total of nearly $31m has been raised by Indian space tech startups in 2021 so far (till May). Both Agnikul and Skyroot have raised $11m in their respective Series A funding rounds, the biggest in the sector to-date.

Government support and healthy performance indices of Indian space startups has given a boost to external funding. It has also alleviated a few misconceptions. For instance, the belief that investments in space startups need a long gestation period. Surely not, judging by their promising developments and early timelines for projects-in-pipeline currently.

Morgan Stanley’s research estimates the cost of satellite production to reduce from $500m to $500,000 in the coming years. If this was successfully achieved by the competing free-market R&D machinery of space tech companies then it would massively subsidise launches in the future, which means proliferation of space tech’s demand to a great extent. Therefore, it makes sense for investors to get in at the bottom of these immensely potential growth cycles.

In fact, one of the investors called Speciale Invest (invested in Agnikul and Astrogate) also goes so far as to say that most of its investee partners are either fetching revenues already or are heading towards revenue generation soon, well within the first two years of their investment.

The Legal Greys of Space

One of the things investors used to detest in private space investments (and perhaps still do) is the indemnity and accountability for the activities of their investees to, from and on the way to outer space.

If the world has learnt anything from incidents like Operation Morning Light, SkyLab and the recent crash of a Chinese rocket into the Indian Ocean, it is that space exploration is a risky gambit.

As per the terms of the Outer Space Treaty and the Liability Convention, the two most important umbrella Conventions on international space regulation, national governments are solely accountable for all consequential damages borne out of space-faring explorations. But these agreements are relics of a bygone Cold War-era where space exploration was limited to a handful of sovereign space organisations. With increasing private play in the space sector today, their applicability stands moot.

So does this mean neither private nor the government is liable for these damages?

Not exactly.

Every country has the right to frame its own domestic national space law. Currently, the UN Office for Outer Space Affairs (UNOOSA) has on record the space laws and regulations of 37 countries. India is not one of them.

Take the US, for instance. The US private space sector is increasingly crowded with players like SpaceX, Blue Origin and Virgin Galactic progressing and rivalling each other at breakneck pace. To keep ahead with times, there was a major recodification of US space laws in 2010. Space travel, exploration, mining etc are covered comprehensively across a range of domestic policies to cover all aspects of regulation and penalty. There are also extensive insurance agreements in place for NASA to indemnify third parties for damages during space exploration, save in the case of negligence or wilful misconduct.

The UK and Russia also have well laid-out regulatory framework to govern outer space activities.

India seems to be headed on a similar regulatory trajectory. However, most of our laws are currently in the form of “policies” and are yet to become “Acts”. The former suggests only executive sanction which can be changed by successive Governments whereas the latter has effective parliamentary authority and would become the law of the land.

Setting up a clearly-defined legal framework would automatically boost further investments into the emerging space sector of India.

Brushing Up the Space Canvas

India has taken quick measures to introduce structural reforms in the private space sector since last year, perhaps with the intent to take on the space industries of other countries.

China, for example, has rapidly consolidated the workings of this nascent sector and ramped up its technology fast enough to compete with the US. Some believe this to be the “new space war” in the 21st Century. China became the first country to send probes into the far side of the moon recently. It is soon going to launch its own space station as well, becoming only the second country to do so after the US.

Ever since the successful launch of the Falcon 9 rocket of SpaceX, more and more space agencies are taking efforts to prop up their private industry. The goal is simple: reduce the cost of launch and expeditions. With the future of the space market becoming more and more competitive, cost-effective space exploration will remain key to determining monopoly in the sector.

Clearing the Wastes of Space

But, there remain challenges. Currently, the $7bn space economy of India makes up close to 3% of the global space economy. Even though ISRO’s performance as a leading national agency has been remarkable, it cannot be exclusively banked upon to push our global space dominance.

The state-supported growth of private space players is promising. But it is time for the state to formulate an unambiguous national space law. More horizontal integration with other industries also remains crucial. The telecom, financial services and other digital sectors could help in serving their mandates and requirements to the space players so that their research and production capacities are tailored to the cross-industry needs.

The composition of the private industry is largely made up of small startups (SMEs), which is good as far as independent creation and innovation quotient is concerned. Big corporations who have a history of doing business with ISRO (e.g. L&T, Godrej and Tata) could be also motivated with lasting contracts and relaxation in regulatory norms to invest, innovate and grow their own space and defence subsidiaries too.

Democratisation and diversification of the space industry is the first step towards creating a value-based space economy. India is on the right path so far. But it ought to pick up pace and capitalise on the global demand chains quickly if it aims to become the space startup hub of the world.

(Originally published July 12th 2021 in transfin.in)