New Delhi, Feb 17: Against the backdrop of an uproar, Government today scrapped the deal ISRO's commercial arm Antrix had struck with a private company for lease of premium space segment, saying it was not in the country's strategic interest.
The Cabinet Committee on Security (CCS), at a meeting chaired by Prime Minister Manmohan Singh, decided to annul the contract Antrix had entered into with Devas Multimedia under which it was to lease out 90 per cent transponders on two of ISRO's satellites GSAT-6 and GSAT-6A.
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 BJP-led opposition attacking Prime Minister Manmohan Singh who is directly incharge of the Department of Space.
"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 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.
Devas Multimedia had yesterday 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.
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 yesterday 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.
As the Government annulled the S-Band spectrum deal between ISRO's commercial arm Antrix and Devas Multimedia, BJP today sought to know the reasons for signing the agreement in the first place and as to why it took so long to scrap it.
BJP spokesperson Nirmala Seetharaman said the people of the country should clearly understand why it took several months for the government to scrap the deal despite Space Commission's recommendation to do so.
"Why wasn't the deal scrapped (then) when the Space Commission recommended for its scrapping. There should be a complete inquiry and people (concerned) should give nation the due answers," she said.
She was reacting to the decision by the Cabinet Committee on Security (CCS) to annul the deal on the basis of a recommendation from the Space Commission.
The annulment came in the wake of a raging controversy over the deal for handing over 70 Mhz of S-Band spectrum to the private firm for Rs 1,000 crore on which the CAG has already initiated action.
She said the BJP wanted to know why the deal was being terminated at a "critical stage" when it was to come into effect in a few months.
"We want to know what went wrong leading to the cancellation of the deal. We can accept the commissions and omissions in the governance of the country," she said.
She wanted to know whether the government was allowing foreign firms to have a "back-door entry" into the fields where private firms have not been allowed so far.
"The band of spectrum which was to be sold is being used by agencies like Coast Guard. It certainly raises issues of national security," she said.
Devas Multimedia, whose contract with Antrix Corporation was cancelled by the government today, said it was still awaiting a formal communication on the development.
"We are still awaiting a formal communication from the Government of India on the status of our contract," a Devas Multimedia statement said here.
It said the company will be in a position to comment once it receives information on the contract.
Devas Multimedia had threatened to move court if the government takes any unilateral decision to terminate the deal. PTI