Space technology startups want Centre to share insurance liability

Indian space companies, under the aegis of the Indian Space Association (ISpA), are in discussions with the government on a “shared liability” model for third-party liability insurance for domestic satellite and rocket companies.   

Indian Space Research Organisation (Isro), the liability is taken by the government through a sovereign guarantee. In the case of the private sector, those who are wanting to offer services globally, have to pay up in case of any damages in space. 

Lt General A K Bhatt (Retd), director general of the ISpA, says: “When private firms get into this business, some kind of insurance has to be taken by them. There are various options — for instance, private sector firms have to insure for up to a particular amount for liabilities and risks covered. Beyond that the government offers sovereign guarantees. The other way is to create a corpus fund to which the companies will contribute and it will be supported by the government. This will spread the risks. As Isro always had a sovereign guarantee, none of the insurance firms have any policy on this. However, for satellites and rockets there has to be third-party insurance.”

Bhatt says a similar structure was undertaken under the Indian Nuclear insurance Pool, wherein General Insurance Corporation and other insurance firms, created a pool of Rs 1,500 crore to provide insurance to cover liabilities as prescribed under the Civil Liability for Nuclear Damage Act, which facilitated work in the new nuclear power plants.   

The issue could be key to attracting foreign direct investment (FDI) in India’s space tech companies, especially since the government has finalised details of a more liberal FDI regime, which will be announced soon. Bhatt points out that under the current policy, 100 per cent FDI is allowed in satellites, but that is through the government route. So one has to take approval from the government, which may take three to seven years.

“The government is now working on a more liberal policy where, depending on the segment and activity, it could be in the automatic route in different domains with a cap of  74 per cent to 50 per cent. Even in defence they have gone up to 74 per cent,” he says.

According to Bhatt, in crucial areas like rocket launches the cap on the automatic route could be even lower as the government might have to shoulder part of the liability risk. Clearly, space is not a low-investment business. Bhatt reckons the satellites manufactured by Indian startups would cost around Rs 100 crore apiece. But the good thing is that venture capital and private equity (PE) funds are bullish on Indian space tech firms. 

According to ISpA, $322 million has been raised, with around 80 per cent of the investments coming into space tech startups between 2021 and till date in 2023. The number of these firms have also shot up to 368, which means India is now in the fifth place in the global pecking order, behind the US, UK, Canada and Germany. Homegrown companies have already made substantial progress. For instance, Azista-BST Aerospace, a joint venture between Azista Industries and Berlin Space Technologies, is developing the capacity to manufacture small satellites in the 50kg-150kg range. The factory is expected to make 250 satellites per year, and in June launched its first satellite through Elon Musk’s Space X, says ISpA data.

Pixxel, another domestic space tech venture, has plans to launch a constellation of 36 hyper spectral satellites, which will be built and operated by them to collect and analyse data through imagery. In June, it raised Series B funding to the tune of $36 million from Google,  Lightspeed, Blume ventures, GrowX and Sparta, and plans to launch six satellites in 2024 and 18 in 2025.

Hyderabad-based Dhruva Space, which is manufacturing small satellites, is now looking at raising $20-25 million in the next one to two years to build infrastructure to launch 100-kg satellites. It is now working on putting satellites weighing 30 kg into orbit. 

Agnikul Cosmos, another space tech startup has raised $38 million from PE funds to make India’s first rocket engine factory in Chennai. 

Shared liability
 

- Isro’s risk liability on launches have been taken up by the government through a sovereign guarantee  

- Private sector firms say costly insurance burden could impact startups with limited funding