July 5, 2020The Intersectiontechnologyeconomics

The opening up of India’s space sector is a big reform

Liberalizing India’s space sector is a necessary condition for the country to achieve greater self-reliance not just in space, but in the broader high technology domain.

Mint This is from The Intersection column that appears every other Monday in Mint.

Had we not been so engrossed by the covid-19 pandemic and Chinese transgressions in the Himalayas, the Narendra Modi government’s deregulation of the space sector would have stood out as a structural, big-bang reform. You don’t have to be a breathless cheerleader of the government to appreciate, without exaggeration, that this is the most significant development in the sector since the formation of the Indian Space Research Organisation (ISRO) half a century ago.

The details have yet to be filled in, but the contours are right. By the vision expressed in the government’s communication, it intends to let the private sector participate in the entire range of space activities” from satellite-based service provision to rocket launches. This is to be implemented by a new agency, the Indian National Space Promotion and Authorization Centre (IN-SPACe), which will go beyond providing a level-playing field to private operators and facilitate their growth. The incumbent ISRO will be restructured, with its commercial activities hived-off into a government-owned NewSpace India Ltd, leaving the organisation to focus on research and development, scientific missions and exploration.

This is a big deal, along the pattern of deregulation that we last saw in the 1990s. Tiny as the private sector is today, and turbulent as the immediate pandemic-ridden years will be, India now has an opportunity to discover its competitive advantages in this space and increase its share of the growing global market. That is why it is important to ensure that the devil of the details does not spike the cabinet’s intentions and throw the sector into a purgatory of sorts.

The government must focus on getting the basics right upfront. The regulatory structure is crucial to how the industry develops. As even little children know, it is generally not a good idea to play against someone who is also the umpire, match referee and owner of the stadium. So it is not sufficient for the government to merely declare that the doors to private investment in space are open—it must signal that all investors will be treated fairly and the rules will not be changed mid-way to benefit incumbents or favoured players. A credible signal of this would come from a structural separation of individuals and entities involved in governance from those participating in commercial activities. IN-SPACe is to be an autonomous nodal agency”. The good news is that it will be autonomous, the worrying bit is that it will only be a nodal agency, and not the national space authority.

In their classic book on transforming government, David Osborne and Peter Plastrik identify the separation of steering” and rowing” functions as the core strategy of reform. While K. Sivan, ISROs chairman, categorically stated that IN-SPACe will be a totally autonomous body, which won’t be influenced by ISRO and it won’t influence ISROs work”, he is also concurrently the secretary of the department of space (DoS) and chairman of the space commission. Even if IN-SPACe is independent of ISRO, to the extent that it is under the DoS, it cannot be truly autonomous, and will certainly not be perceived as such. Among the first tasks, therefore, would be the painful one of severing the roles of chairman of ISRO and secretary of DoS. There is no dearth of talent at the highest level and if civil service seniority levels are carefully managed, a satisfactory solution can be evolved.

IN-SPACe itself will face two major challenges from the outset. The first would be to oversee the division of roles and resources between ISRO and NewSpace, and once that is done, to ensure that private players get fair, non-discriminatory access to common infrastructure. The early years for every telecom regulator around the world involved preventing an incumbent from abusing its market dominance and ensuring that new entrants had access to interconnection points. A similar story will play out in the space sector—not because the people running these organizations are malicious, but because of the way their corporate incentives are stacked up. A good regulator will watch incentives carefully and modify them to ensure there is competition, that it is fair, and that customer interests are protected.

For IN-SPACe to be an effective facilitator, the Prime Minister’s Office will have to empower it to go beyond being a nodal agency and take on the authority—perhaps by delegation—to issue the numerous licences and clearances required from other ministries and departments. There are too many catch-22s in this process, and the ability to figure out a regulatory pathway shouldn’t be the criterion determining who enters the market. Small, innovative startups are unlikely to have the energy or wherewithal to navigate government offices in New Delhi for years before they can get off the ground, and are more likely to give up or shift elsewhere.

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Liberalizing India’s space sector is a necessary condition for the country to achieve greater self-reliance not just in space, but in the broader high technology domain. Yet, for that goal to be achieved, New Delhi must aggressively fight for an open global economy. The paradox of self-reliance is that it can only be achieved through openness. This is so in space as in most other things.

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