ISRO Explains S-band Deal

On Thursday, ISRO issued a background note explaining its deal with a private company concerning S-band Internet services. The 2005 no-bid deal between ISRO’s commercial arm, Antrix, and Devas Multimedia, has come under severe criticism and charges of corruption. The government has established a “High Power Review Committee” to look at the deal.

The background note is reproduced in full after the break.

Background Note on Agreement between M/s. ANTRIX Corporation and M/s DEVAS Multimedia Pvt. Ltd regarding lease of space segment capacity in SBand spectrum on ISRO’s Satellites GSAT-6 and GSAT-6A

Background

ISRO has a constellation of geo-stationary satellites which provide various services to the country such as telecommunication, television, radio broadcasting as well as various societal applications such as medicine and education. These services are delivered to the customers through transponders that are located on the satellite. These transponders receive and transmit signals using different types of frequency bands that are designated as C-band, extended C-band, Kuband and Ka-band. S-band is another such frequency band.

There is a difference between terrestrial spectrum as allocated by the Department of Telecommunications for users on the ground and the issue of lease of transponders on satellites which require frequency to operate. The Department of Space is responsible for building, launching and operating satellites in the designated orbits. It leases transponders to customers, whether government or private. These are, for example, Doordarshan or DTH operators in the private sector like TV channels.

The frequency spectrum in the bands required for the satellites are allotted to Department of Space by the Department of Telecommunications based on assignments given by the International Telecommunication Union (ITU).

S-band

The S-band frequency spectrum has been in use for the INSAT series since 1983 for broadcasting (for Doordarshan) and later for mobile satellite services. In the 90s the ITU started allocating a segment of S-band for mobile satellite service and land mobiles. The S-band spectrum has acquired prominence in recent years because of the growth of mobile phone services and evolution of the concept of digital multimedia via satellites.

S-Band needs to be utilized in the best national interest both because it is needed for strategic and societal communications and also for conventional communications where the attenuation loss in Ku-band is not acceptable and due to overcrowding in space of C and extended C-band.

World over, including in India, S-band spectrum is shared between terrestrial and space services. Because of the nation-wide reach of satellites, and the limited reach of terrestrial service providers, it is in the country’s interest to use space based S-band.

Further, there is an onus on the country to which a particular slot is allocated by ITU to fill that slot with an appropriate satellite within a specified time. Based on approved allocations by the Department of Telecommunications, Department of Space holds 80 MHz of S-Band spectrum in 3 orbital locations and
70 MHz in 4 orbital locations (operable only at one location at a time) at locations designated by the ITU for India.

Agreement between ANTRIX and DEVAS

Antrix signed an MOU in March 2003 with M/S Forge Advisors, USA to explore opportunities in digital multi-media services. Later, Forge Advisors, USA established an Indian company called DEVAS Multimedia Pvt. Ltd.

The Antrix board on December 24, 2004 approved the Draft agreement between ANTRIX and DEVAS and the agreement was signed on January 28, 2005. This agreement together with the option exercised by DEVAS in June, 2007 provides for leasing of 90% of the space segment capacity by ANTRIX to DEVAS on two satellites for 12 years. This would amount to 70 MHZ at one of the three locations.

The Agreement provides for an up-front capacity reservation fee of US$ 20 million per Satellite and annual lease charges starting at US$ 9 million per satellite. The amount payable by DEVAS is US$ 300 million over a period of 12 years. There are also penalty charges to be paid by ANTRIX in case of late delivery of Satellite or performance failures/service interruptions.

To operationalise this agreement, ANTRIX committed to development and launch of two satellites by ISRO referred to as Primary Satellite-1 (PS-1) and Primary Satellite-2 (PS-2) in the agreement.

DEVAS has so far made a payment of Rs.58.37 crores as upfront capacity reservation fee for the two satellites.

Status of ANTRIX Corporation

ANTRIX Corporation Limited was incorporated as a private limited company owned by Government of India, in September 1992 as a Marketing arm of Indian Space Research Organization (ISRO) for promotion and commercial exploitation of space products, technical consultancy services and transfer of technologies developed by ISRO. Another major objective is to facilitate development of space related industrial capabilities in India.

Chairman ISRO/Secretary, Department of Space is the Chairman of the ANTRIX Board that has six Directors from ISRO and Department of Space and three external Directors, i.e. Shri Ratan Tata, Shri J.N. Godrej and Shri P. Ravindra Reddy (Managing Director, MTAR Technologies Limited).

Actions taken by Department of Space

In December 2005, the Union Cabinet approved building of the GSAT-6 satellite at a cost of Rs. 269 crores, following the approval given by the Space Commission in May 2005.

In October 2009, the Space Commission approved building of the GSAT-6A satellite at a cost of Rs. 147 crores under the Commission’s delegated powers. The launch cost of the Satellites was Rs.350 crores.

The proposals of the Department in both cases did not make any reference to their utilization for the ANTRIX-DEVAS agreement. Accordingly, the Government of India is under no obligation to utilize these satellites for the ANTRIX-DEVAS contract.

On receipt of complaints on the implementation of the Agreement, Chairman ISRO/Secretary, Department of Space set up a Committee in December 2009 chaired by Dr. B.N. Suresh (a former Member of Space Commission). This Committee was mandated to review and examine the legal, commercial, procedural and technical aspects of the ANTRIX-DEVAS Agreement.

Separately, the growth in the requirements for strategic and societal imperatives also became evident. The circumstances since 2005 have undergone a sea change. The last few years have seen a tremendous demand for allocation of space based spectrum, including for the S-band. This includes the needs of defence, paramilitary forces, railways and other societal applications, all of which are dependent on S-band.

It was also observed that the agreement was approved only at the level of the ANTRIX Board and the Department thought it prudent and essential to place the matter before the Space Commission.

Based on consultations with the Ministry of Law & Justice and Department of Telecommunications, the Department of Space recommended annulment of the agreement to the Space Commission.

Directions of the Space Commission

The Space Commission in its meeting in 2 July 2010 considered the matter. It, inter alia, noted specifically that the Commission was being apprised on this contractual arrangement for the first time. After deliberations, it gave the following directions:

i) Department, in view of priority to be given to nation’s strategic requirements including societal ones may take actions necessary and instruct ANTRIX to annul the ANTRIX-DEVAS contract.

ii) Department may revive the INSAT Coordination Committee mechanism.

iii) Department may evolve a revised utilization plan for GSAT-6 and GSAT-6A satellites, taking into account the strategic and societal imperatives of the country.

iv) Department may also review the working of ANTRIX and restructure it appropriately. Commission agreed to Chairman’s suggestion that this could be done by a Committee chaired by Member (Finance), Space Commission. He will take assistance of DOS Administration, as and when required.

v) Department shall take necessary internal actions on the report to be submitted by Additional Secretary, DOS on Suresh Committee Report and issues arising from therein, and keep the Commission apprised of the same.

Termination provisions

Article 7 of the ANTRIX-DEVAS Agreement provides for termination of agreement. Clause (c) provides for termination for convenience by ANTRIX, and reads as follows:

“ANTRIX may terminate this agreement in the event ANTRIX is unable to obtain the necessary frequency and orbit slot coordination required for operating PS-1 on or before the completion of the pre-shipment review of PS-1. In the event of such termination, ANTRIX shall immediately reimburse DEVAS all the Upfront Capacity Reservation Fees and corresponding service taxes received by ANTRIX till that date. Upon such termination, neither party shall have any further obligation to the other party under this agreement nor be liable to pay any sum as compensation or damages (by whatever name called).”

The satellites, PS-1 and PS-2 are still being developed by ISRO and have not yet been launched. No transponders have been given on lease to ANTRIX or DEVAS.

The Government of India has taken no decision on allocation of space segment using S-Band spectrum to ANTRIX or DEVAS.

Follow up action by the Department of Space

The Department sought legal advice from the Ministry of Law and Justice and the Additional Solicitor General, which were given as follows.

As per Article 3(c) of the Agreement, ANTRIX shall be responsible for obtaining all necessary Governmental and regulatory approvals relating to the orbit slot and frequency clearance. However, it does not mean that orbit slot shall be compulsorily given to ANTRIX by ISRO/Government. The Central Government/ISRO is not duty bound to provide orbit slot to ANTRIX for commercial activities, especially when there are strategic requirements. The Ministry of Law and Justice opined that as per Article 7(c) of the Agreement, ANTRIX may terminate the Agreement in the event it is unable to obtain necessary orbit slot.

Therefore, the Government in exercise of its sovereign power and function may take a policy decision to the effect that due to strategic requirements, it would not be able to provide orbit slot in S-band for operating PS-1 to ANTRIX for commercial activities. In that event, ANTRIX in terms of Article 7(c) read with Article 11dealing with Force Majeure may terminate the Agreement and inform DEVAS accordingly. However, on such termination ANTRIX shall be required to reimburse DEVAS all the Upfront Capacity Reservation Fees and corresponding service taxes received by ANTRIX till that date.

Additional Solicitor General also opined that the annulment should be done through a policy decision taken at the level of Government of India, acting in its Sovereign capacity.

Accordingly, the Department has prepared a Draft Note for submission to the Cabinet Committee on Security. The Note is under circulation for comments of the concerned Ministries – Law & Justice, Telecom, Finance, Defence, Home Affairs and MEA, and will be placed soon before the CCS for a decision by the Government of India.

C&AG’s comments

In its official clarification on February 7, 2011 to media reports, the C&AG has stated the following. The audit of certain activities of the Department of Space is under way. Very preliminary queries have been raised which are yet to be replied by the Department of Space. Since the audit is at very preliminary stage, it can by no stretch of imagination, be concluded that information as given the media reports are findings of the C&AG.

Establishment of a High Powered Review Committee

The Government has constituted a High Powered Review Committee with the following mandate:

1. (i) To review the technical, commercial, procedural and financial aspects of the Agreement between ANTRIX and M/s. Devas Multimedia Pvt. Ltd. taking into account the report of internal review conducted by the Department of Space;

(ii) To suggest corrective measures;

(iii) To fix responsibility for lapses, if any; and

2. In the light of the above, to review the adequacy of procedures and approval processes followed by ANTRIX, ISRO and Department of Space, and to suggest improvements and changes, taking into account the review mandated by the Space Commission at its 2 July 2010 meeting.

The Committee has been directed to submit its recommendations to the Prime Minister as Minister-in-charge within one month.

The Committee Members are:

(i) Shri B. K. Chaturvedi, Member Planning Commission and former Cabinet Secretary

(ii) Prof. Roddam Narasimha, Member Space Commission