September 10, 2023

Restructuring the Indian Space Program for Financial Efficiency

While India celebrates the success of Chandrayaan-3 in safely delivering the Vikram lander and the Pragyan rover to the surface of the Moon, it should not view this exercise as an end by itself but merely a means to an end. But what is that end goal that India should be looking for?  A lunar base of course, but first, why?

History tells us that the famous Chinese mariner Zheng He carried out seven maritime missions (1405 - 1433) on behalf of the Ming emperor to different parts of East and South-East Asia right up to the Horn of Africa. The goal was to increase trade by 'showing the flag' and impressing the natives of distant lands with the maritime prowess of the Chinese navy and the wealth of products that were available in China. But the fatal flaw in this strategy was that he never established a Chinese colony anywhere. On the other hand, the European mariners who came a century later not only visited the same ports but immediately set up 'factories' or trading posts. These eventually became colonies from which they transferred vast amounts of wealth to Europe and laid the foundations of the opulence that we see there now. Today, China is trying to make up lost ground by trying to establish bases and colonies in the Indian Ocean and Africa, but that is a different story.

The Chandrayaan saga should be seen from this perspective. Landing on the Moon is a demonstration of India’s incredible technical skill. Setting up a permanent base there should be  the business and commercial vision. But before one can set up a base on the Moon, there are three key prerequisites that need to be in place : technology, money and political will. We explore how these can be made to converge in a practical manner.

Technology is of course a necessary condition. Travelling to distant planets calls for technologies that are currently available with only a handful of countries while setting up permanent bases is something that no one has yet done. But however difficult that it may be, the problem is obviously solvable. As long as something is not barred by the laws of physics it is a matter of time and money before human ingenuity will come out with an engineering solution for any problem. Which brings us to the next challenge - money and the political will to spend it. This is where the real problem lies because the quantum of money involved is stupendous and the risk of failure is high.

While the Indian government can certainly fund a couple of Chandrayaan style missions, scaling up to the next level of setting up permanent bases on the Moon would impose an extraordinary level of financial stress on the Indian tax payer. To invest that kind of money would mean imposing a drastic cut on what the nation can spend on national development -- roads, schools, hospitals and other public facilities. Not only would this be politically unpalatable but morally irresponsible. After all this is public, tax-payer money and it should be spent for the greatest good for the greatest number. A base on the Moon may be a worthwhile goal for many but mortgaging the future of a nation on a risk prone endeavour is never a good idea. As long as the investments are small, at the level of Chandrayaan, India can still go ahead but if the cost becomes a thousand times larger, as could be the case for a lunar base, then it needs to look at alternate funding models. For this, let us again look back at history.

The British came to India, not with money provided by the government of England, but as the East India Company -- one of the first joint-stock companies in the world. This private company  was owned and funded by private investors. This small group of people had the required risk appetite that allowed them to invest private funds in this risky enterprise and the results are known to everyone by now. What stops India from adopting the same for space travel and lunar habitats?

Private investment in space is not a new idea, as Elon Musk and Jeff Bezos have already shown. But even these super-wealthy people have barely been able to scratch the surface of the technical and funding challenge. Given the total size of the Indian stock market and the wealth, and risk profile, of the Indian investing community, it is unlikely that an equivalent of the East India Company will emerge from investors in India. This is true even though the success of  Chandrayaan-3 has led to a stupendous Rs 31,000 crore ( USD 3.75 billion ) rally in the shares of companies that have supplied components to this project. Clearly, some creative corporate and financial structures are necessary if we need to fund such large projects from private investors. 

Space operations in India are currently managed by ISRO and  Antrix. ISRO, as a part of the Department of Space, is a government department while Antrix Corporation is a registered company and acts as ISRO's commercial arm. Antrix gets paid by customers who want to launch satellites but the cost of doing so is borne by ISRO. This does not matter, because Antrix is wholly owned by the government and it is simply a matter of transferring money from one pocket to another. This model needs to be expanded further and should be opened up, in a phased manner to private investors, both domestic and foreign.

The first task is unbundling the various services that ISRO offers and the obvious model for this is the way most State Electricity Boards (SEB) in India were unbundled into three different organisations, for generation, transmission and distribution of electricity. While still largely owned by the government, each entity is now a registered company with its own balance sheet, P&L and governance structures. These companies act as customers, suppliers or both of each other or of other similar companies formed from other SEBs. Instead of inter-departmental exchange of services within the same government department, that is the erstwhile SEB, these companies now have independent arm's-length relationships with other similar companies. This eliminates cross-subsidisation and delineates the financial status of each company with greater transparency.

Similarly, the unbundling of the Ministry of Defence operated Ordnance Factory Board by the Government  of India and the creation of seven defence Public Sector Units, namely, Munition India Limited, Armoured Vehicles Nigam Limited, Advanced Weapons and Equipment India Limited, Troop Comforts Limited, Yantra India Limited, India Optel Limited and Gliders India Limited is another good model of this unbundling exercise. What were earlier departments in the Ministry of Defence are now registered companies, each with its own balance sheet, P&L and governance structure. While these defence PSUs are currently all owned by the government, it is a matter of time before some of them, especially those that deal with FMCG type products like toiletries or dress uniforms will most probably be listed on the stock exchanges and eventually privatised.

If we apply the same logic and process to ISRO, the task of setting up and operating a lunar base can be unbundled into several major activities and managed by different companies. These companies may be directly promoted by the government as PSUs or could have as promoters, other corporate entities  -- public or private -- that have the requisite technical and managerial expertise in the specific business domain. These could be : 

  • RocketCo - The Rocket Company that will provide the primary interplanetary transport services for both equipment and personnel to the other companies. RocketCo would be promoted by or be a successor to the existing Antrix Corporation.
  • PowerCo - The Power Generation Company.  Energy is the primary requisite for all other activities and since, as explained in another article, ( nuclear power is the long term solution for an industrial economy on the Moon, this could be promoted, for example, by the Nuclear Power Corporation of India.
  • MineCo - The Mining Company. Mining for valuable minerals will be the one of the primary activities on the base. This company should be promoted by companies already engaged in mining, for example, Coal India, National Mineral Development Corporation and Vedanta.
  • InfraCo - The Infrastructure Company. This will build not just the habitats where eventually people will stay but also the basic civil infrastructure needed by PowerCo and MineCo. This company could be promoted by or have significant equity participation from major infrastructure majors like Adani, Shapoorji Pallonji and GMR.
  • RoboCo - The Autonomous Machine Company. This will build autonomous machine tools and vehicles that will be used by PowerCo, MineCo and InfraCo  to meet their business goals. This company could be promoted by heavy engineering companies like Larsen & Toubro.
  • LifeCo - The Life Sciences Company. This company will not only focus on space medicine but will leverage genetics, bio-engineering and similar techniques to identify and promote plants, microbes and other life forms that will survive on the Moon and other planetary destinations like Mars and Titan. This company could be promoted by Serum Institute, Biocon and other leading biotech companies in India.
  • AdminCo - A management company that will regulate the technical, commercial and legal relationship between the other six companies and provide the mechanism for dispute resolution and maintaining law and order. This company will be the administrative backbone of the lunar base and of course would be entirely owned by the government as an extension of the Home Ministry.

In each case, the existing terrestrial expertise in each domain would need to be upgraded to support the expectations and requirements of space and the Moon. Obviously creating this capability is a huge expense but dividing the work amongst different companies will make it easier. Each company would have a narrow focus and they will become operational in a phased manner

More importantly, the vast investment required for such an enterprise can be raised in a phased manner by private placement of the shares of these companies to venture capitalists, both in India and overseas. Eventually, when a certain level of maturity has been achieved, each company can go for an IPO in local and global markets. The quantum of dilution in each case would be determined by the government based on strategic imperatives. For example RocketCo may have only a small fraction of non-government shareholding whereas InfraCo could be diluted almost entirely leaving only a small part of the ownership with the government.

Setting up a lunar base is the first step in our evolution towards becoming an interplanetary civilisation. To go to the Moon and beyond is not just a commercial or business compulsion. It is an expression of the atavistic urge to break the bonds that tie us down to our zone of comfort and explore the vast unknown that lies beyond the horizon. 

Engineers at ISRO have demonstrated extraordinary skills in taking India to the Moon. Now it is for the corporate sector to follow it up with the right financial engineering so that India can continue with the next step and build a base on the Moon.

In the words of Rabindranath Tagore, "এবার তোর মরা গাঙে বান এসেছে জয় মা বলে ভাসা তরী" - Now that the tide is surging through the dry river bed, Hail the Mother and launch your boats.