India CCS annuls controversial Antrix-Devas deal on S-Band spectrum

New Delhi (PTI) Indian government on Thursday
scrapped the controversial S-Band spectrum deal between ISRO's
commercial arm and a private company on grounds of strategic
interest and said it was prepared to face legal consequences.
The Cabinet Committee on Security (CCS), chaired by
Indian Prime Minister Manmohan Singh, decided to annul the
contract Antrix, the commercial arm of Indian Space Research
Organisation (ISRO), had entered into with Devas Multimedia
underwhich it was to lease out 90 per cent transponders on two
of ISRO's satellites GSAT-6 and GSAT-6A.
"The Agreement for the lease of space segment capacity on
ISRO/Antrix S-Band spacecraft by Devas Multimedia Pvt. Ltd.
entered into between Antrix Corporation and Devas Multimedia
Pvt. Ltd. on 28th January, 2005 shall be annulled forthwith,"
announced Indian Law Minister Veerappa Moily after the
meeting.
He said when the question of strategic requirement
arises, the government cannot give S-band spectrum even to
Antrix for commercial use.
"We have thoroughly examined this matter and ultimately
we have come to the conclusion that under provisions of the
agreement and the law governing that, it can be annulled," he
said when asked whether the impact of the decision was
discussed by the CCS.
Under the agreement signed in January 2005, Devas was to
lease transponder capacity from the two satellites at a cost
of USD 300 million (approximately Rs 1350 crore) spread over
12 years.
Some estimates said the deal was heavily undervalued,
which triggered an uproar with the Opposition parties
attacking Prime Minister Manmohan Singh, who is directly
incharge of the Department of Space, over selling the precious
spectrum to a private firm cheaply.
Devas Multimedia had on Wednesday threatened to move
court if the government took any unilateral decision to
terminate the deal.
"Even if they go to court, they are not likely to
succeed," Moily said when asked whether the government was
ready to face the legal challenges put up by Devas.
Joining issues on the deal, Indian Defence Minister A K
Antony told reporters on Wednesday that a "mistake" was
committed in reaching the deal without consulting the defence
forces as S-Band spectrum was mainly for the strategic forces
in which the country's three services got a major stake.
S-Band spectrum was a "very precious asset for us" and
has to be given to the armed forces, paramilitary and other
strategic forces, he said.
Antony said it was unfotunate that ealier they were not
consulted at that time by those who took the decision (to
enter into the deal) and added in the future the first
priority would be for the stragegic forces and strategic
organisations.
After news reports about the possible revenue loss
appeared, the Government and ISRO said the project was already
under review and action has been initiated for termination of
the contract.
The Prime Minister said on Wednesday that the deal had
never been operationalised and rejected suggestions that his
office had held "backroom" talks with Devas after the Space
Commission's recommendation to scrap the deal.
He had said that if there has been delay in scrapping the
deal, this has been "only procedural".
A brief official statement said there has been an
increased demand for allocation of spectrum for national
needs, including for the needs of defence, para-military
forces, railways and other public utility services as well as
for societal needs.
"Having regard to the needs of the country's strategic
requirements, the Government will not be able to provide orbit
slot in S band to Antrix for commercial activities, including
for those which are the subject matter of existing contractual
obligations for S band," Moily said reading out from the
statement.
He said resorting to the force majeure clause of the
agreement was one of the options before the government to
cancel the deal.
The Law Ministry, in its opinion given on June 18, 2008,
had made it clear that in event of termination Antrix shall be
required to reimburse Devas all the upfront capacity
reservation fees and corresponding service taxes received till
that date.
The Agreement provided for an up-front capacity
reservation fee of USD 20 million per satellite and annual
lease charges starting at USD 9 million per satellite.
There are also penalty charges to be paid by Antrix in
case of late delivery of satellite or performance
failures/service interruptions.
Devas has so far made a payment of Rs 58.37 crore as
upfront capacity reservation fee for the two satellites.
The launch of GSAT 6 has already been delayed by at least
two years and ISRO Chairman K Radhakrishnan had said that the
satellite was yet to be integrated.