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6 January 2021, Mint

Strengthening India’s space reforms

India needs a policy mix that nurtures the Space 2.0 industry, secures it from hostile takeovers and predatory investments from overseas investors, and does not suffocate it under excessive protectionism.

Fellow, Space and Ocean Studies Programme

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The Department of Space (DoS) is on a hyperdrive of space sector reforms. In May 2020, it pledged to allow home-grown  space start-ups and companies access to Indian Space Research Organization’s (ISRO) cutting-edge laboratories and hardware testing infrastructure. Some of these nascent rocket and satellite start-ups are now signing up with the DoS to evaluate and demonstrate their prototypes and move to the next phase of their space business development cycles.

It hasn’t come too soon. A tremendous democratization of near-Earth space has taken place in the past one decade. Countries big and small, including Bangladesh, Luxembourg, Australia, New Zealand, United Arab Emirates, have created space programmes. Germany and the United Kingdom, which had cutting-edge satellite and spacecraft competence, have recently entered the contest for low-cost space-launch vehicles. All these countries have long been customers of ISRO, but soon, they will have contracts at home and regionally. The democratization is accelerating the marriage of Industry 4.0 technologies to the space sector, leading to the second space age.

India has been late to the private space play. Though the DoS has, over the decades, nurtured a few private space companies by empaneling them as vendors and component suppliers, the rapid global entry of multiple players into the business of outer space has made the DoS think more strategically. The timely reforms will enable the DoS to spawn these empaneled companies into a full-fledged national space industrial ecosystem. The DoS intends to be a coach, not a nanny. Can it keep the delicate balance?

A lesson can be learned from the mythological Greek architect Daedalus who built wings of wax for his son Icarus, so he could fly. But Icarus flew too high, the sun melted his wings and he fell into the sea. Similarly, the DoS must ensure that the newly attached, delicate wings of the private space sector, does not send it flying too close to the sun – or too low near the sea. The current reforms only prevent the private sector from flying too low near the sea of technological stagnancy and from falling behind its peers in the second space age. They do not contain enough precaution to prevent the space Icarus of India from flying too high and dangerously close to the sun.

India’s space technology start-ups are nascent and far from acquiring big SpaceX-like valuations or market share. Most are pre-seed and seed stage players, investing below $2 million. Beyond that, even if they mature and demonstrate success using the new access to ISRO facilities, there is a major lacuna from the finance side: a near-absence of large capital-expenditure (cap-ex) financing entities in India that can fund space start-ups in Series A and subsequent financing stages. There’s plenty of foreign interest and funding – almost $10 billion as venture capital was deployed in 2019 – but negligible domestic  venture capital or private equity, or public market finance mechanisms that can provide the substantial funding of $50 million and up.

In this scenario, exacerbated by the economic upheaval of the COVID-19 pandemic and China’s intensified techno-political ambitions, many Indian space start-ups of vital importance to India’s civilian and military space ecosystems, will either part with large stakes or be acquisitioned by affluent overseas investors – a potential national security hazard.

A lesson is also to be learnt from Germany, which cited national security threats when in December 2020 it blocked the acquisition of its domestic satellite and critical technology manufacturer, IMST, attempted by Addsino, a subsidiary of China’s state-owned aerospace enterprise CASIC.

The Indian government must urgently constitute an inter-ministerial Cabinet Committee on Futuristic Science and Technologies (CCFST), which includes the DoS, and prepare to ward off the inevitable takeovers, mergers and acquisitions of India’s fledgling space sector. A key agenda item of the CCFST should be to sustain India’s space sector predominantly with Indian capital. The CCFST can be tasked to vet foreign-direct investments, create a clear regulatory environment, craft and oversee future-ready industrial, financial and security policies pertaining to new and emerging science and technologies. Additionally, the CCFST must maintain a national security-oriented vigil on foreign dominance in key technology, R&D and manufacturing sectors, on technology supply chains, and their economic impact on related sectors. The key is to have the CCFST coach the strategic space sector of the second space age, without being over-protective.

In 2017, Ted Cruz, Senator of Texas, and a Member of the U.S. Senate Commerce Subcommittee on Space, Science and Competitiveness said, “the first trillionaire will be made in space.” Nations with a comprehensive government-military-finance-technology-policy and industrial complex will be the first to create a trillionaire. India should have ambitions for this as the space sector can kick off and leapfrog the country into a virtuous, futuristic industrialisation. For India, the space sector is like the divine, wish-fulfilling tree Kalpavriksha. Every minute mechanical component, every material, every microelectronic, every drop of fuel that emanates from the sector must find functions across numerous non-space industries, an enabler of incremental but vital innovations that can eventually assist in socio-economic upliftment. The green shoots  of this Kalpavriksha have emerged after seven decades of India’s technopolitical manthan (churn), and the DoS in co-operation with the proposed CCFST, with an expanded agenda, can enable it to bloom at last.

Dr. Chaitanya Giri is Fellow, Space and Ocean Studies Programme, Gateway House.

This article first appeared in Mint