Bankrupting ISRO
Sam Rajappa
| 19 October, 2015
Petty jealousies and rampant factionalism have landed the Indian Space Research Organisation with a hefty bill of $ 672 million (Rs 4,435 crore) which could well bankrupt the organisation with an annual budget of about Rs 4,000 crore. The Paris-based International Chamber of Commerce Tribunal has ordered Antrix Corporation, commercial arm of ISRO, to pay Devas Multimedia, a Bangalore-based private company, $ 672 million for breach of contract. Devas has already filed an application in the Delhi High Court to direct Antrix to implement the Tribunal’s order without further delay. Antrix Corporation entered into an agreement with Devas in January 2005 to provide satellite digital multimedia broadcast services to fixed, portable and mobile receivers, the first of its kind in the country.The cost of building, launching and operating two specially designed satellites, GSAT-6 and GSAT-6A with 60 MHz S-band spectrum, for the use of Devas for 12 years with the option to extend the lease by another 12 years, was to be borne by ISRO. Devas would make a onetime payment of Rs. 1,350 crore and remit 15 per cent of the profit to Antrix. Failure to perfect the cryogenic engine in time, an essential component of the Geosynchronous Launch Vehicle capable of placing the GSTAT satellites, each weighing more than 2,000 kg, in predetermined orbit at an altitude of 36,000 km, came in the way of ISRO fulfilling its part of the contract. The satellite policy formulated by the government in 2000 wanted to liberalise the use of satellites for private operations. It was in keeping with that policy that the Antrix-Devas contract was drawn up.
K Radhakrishnan who took over as chairman of ISRO in 2009, was neither a rocket scientist nor a satellite expert, core competencies to head the organisation. He was an electrical engineer by training and an accomplished Carnatic vocalist and Kathakali artiste. He was at a loss to implement the contract which had a time-frame with hefty penalty for delay. His predecessor, G Madhavan Nair, had drawn up a 20-year perspective plan for ISRO in which pride of place was given to perfecting the GSLV. The launch of GSTAT-4 by GSLV D-3 on 15 April 2010 was not successful. Radhakrishnan rearranged priorities and GSLV, which had minor glitches to be rectified, was relegated to the backburner. His concern was the Mars mission even if it meant a few photographs only taken from a distance of 380 km at a time NASA of the USA was researching Martian resources to create fuel, water, oxygen and building materials to establish a human colony on the Red Planet.
Outsourcing the launch of GSTAT-6 and GSTAT-6A to European Space Agency having its spaceport at Kouru in French Guyana would have been prohibitive. Such a contingency was not factored into the Antrix-Devas contract. Radhakrishnan chose the easy way out by advising Prime Minister Manmohan Singh to annul the contract pleading huge corruption was involved in the deal which was tersely described as “public investment for private profit.” Information was leaked to a financial daily that the Comptroller and Auditor-General had detected a loss of Rs. 2 lakh crore to the exchequer in the spectrum allotted to Devas for the two satellites. It was the time the Rs 1.75 lakh crore 2G spectrum scandal shook the nation and the UPA government did not want to face another scandal of greater magnitude. The news did not take into consideration the celestial spectrum used in satellites costs a thousand times less than terrestrial spectrum like 2G. Vinod Rai, who was the GAG from 2008 to 2013, says in his book, Not Just an Accountant, that there was no basis for the alleged Rs. 2 lakh crore loss. The CAG report, presented in Parliament, was silent on the loss. Was there a conspiracy to discredit Madhavan Nair?
A review committee appointed by Manmohan Singh comprising BK Chaturvedi, former Cabinet Secretary, and Roddam Narasimha, former member of the Space Commission, expressed the view that short-selling of spectrum or selling it cheaply were not substantiated and had no basis. For operationalising the agreement, Devas was required to obtain separate licences for the terrestrial segment and was required to follow government procedures. Under the government’s Satellite Communications Policy, spectrum allocation should be carried out in consultation with the Insaat Coordination Committee. But the ICC never met since the UPA came to power in 2004 till the agreement was reached. The Chaturvedi Committee found fault with ISRO for not keeping the Space Commission and the Cabinet informed fully about spectrum allocation. These are mere procedural lapses. The Prime Minister’s Office issued a statement claiming no decision was taken by the government to allocate S-Band spectrum to Antrix or Devas and therefore “the question of revenue loss does not arise and any such reports are without basis in fact.”
ISRO meanwhile appointed BN Suresh, a retired scientist, and G Balachandran, financial adviser, to examine the technical and financial aspect of the Antrix-Devas deal. Clause 12 (b) of the agreement stated that Devas had the technology to design Digital Multimedia Receivers and Commercial Information Devices and had the ownership and the right to use the intellectual property involved in their designs. Suresh found out the technology claimed by Devas was not confidential and proprietary Balachandran expressed the view that due diligence was not exercised in the scrutiny of the contract. Neither of them detected any financial irregularity or corruption in the deal. Not satisfied with the reports of the committees, Manmohan Singh appointed one more committee under the chairmanship of Pratyush Sinha, former CVC. The inclusion of Radhakrishnan in the Sinha committee was inappropriate as he was a member of the Antrix board at the time of the deal which was to be investigated. Based in its recommendation which has not been made public, the Cabinet Committee on Security presided over by Manmohan Singh decided to annul the agreement in February 2011 on the ground that the government will not be able to provide the orbit slot in S-band to Antrix for commercial purposes in view of “imminent requirement of vital strategic and societal applications.” When the government could have annulled the contract on the ground of false information provided by Devas in Clause 12 (b) of the agreement, which Radhakrishnan was well aware of, what made him persuade the CCS to invoke a questionable clause of force majeure for the annulment? The first of the two contracted satellites, GSTAT-6, claimed to be of imminent strategic requirement, was launched only on 28 August 2015. GSTAT-6A is yet to see the light of day.
The Antrix-Devas agreement included an arbitration clause in the event one of the parties wanted to renege on the contract. Once the decision to annul the contract was taken by the government, Antrix should have pointed out the false information provided by Devas that it had the ability to design multimedia receivers and commercial information receivers with ownership and Intellectual Property Rights, which it clearly did not have, and avoided the untenable claim of “imminent requirement of vital strategic and societal applications.” Radhakrishnan, in his capacity as chairman of Antrix, obtained the approval of the Cabinet CCS to invoke non-existing Force Majeure to cancel the contract. According to Article 11 (b) of the agreement, Antrix should establish first that events beyond its reasonable control existed. It failed to prove any such event in spite of engaging Messrs Curtis, Mallet-Prevost, Colts and Mosie, one of the most expensive legal firms in New York City, to argue its case. We now have the embarrassing spectacle of Antrix invoking Section 9 of the Arbitration and Conciliation Act before the Delhi High Court and pleading that it does not have the immediate financial capacity to pay damages to Devas and Justice JR Midha observing, “Prima facie I am of the opinion that Section 9 of the Act is not maintainable.” The UPA government rewarded Radhakrishnan with Padma Bhushan and sent Madhavan Nair to the doghouse. http://www.thestatesman.com/news/opinion/bankrupting-isro/97883.html