By the early nineties, all the four major components of the space programe, namely, Satellite Communications, Meteorology, Earth Observations and Launch Vehicles had entered the operational stage.
The Satellite-based Communication Services (SATCOM) Policy of 1997 and the Remote Sensing based value added services envisaged opening of the space industry to the private sector. Therefore it was considered timely and appropriate to commission a study on the economic aspects of the Indian space program through the Madras School of Economics (Sankar 2006a; 2006b; Sankar et al. 2003).
Accumulated space expenditures since inception to the last fiscal year ending on March 31, 2006 amounted to US$ 7 billion. These expenditures category-wise are given in Fig. 4.
Fig. 4
As is obvious from the figure, 39 per cent investment is on launch vehicles, 36 per cent on Satellite communications and meteorology, 14 per cent on earth observations, 6 per cent on space sciences and the balance on other items. About three-fourth of the total expenditure was incurred towards development of technology in the case of launch vehicles, whereas in the case of satellite communications, meteorology and earth observations, three-fourth of the investment is for building operational systems based on service needs of the country.
The space expenditure of India as a percentage of gross domestic product (GDP) today stands at 0.09 per cent. Compared with the current annual government space budgets of US $2.5 billion for Japan, and US$1.5 billion for France, India’s space budget is US$0.60 billion.
For the purposes of economic analysis, it is useful to classify space activities into two stages, namely, (i) design, development, testing, manufacturing and launch of spacecrafts into desired orbital slots (construction stage), and (ii) applications of satellite services to different uses (exploitation stage). The output basket of the space program contains a mix of private goods, public goods, social goods and strategic/incommensurable goods. Research in space sciences, most meteorological services and information are public goods. Equity considerations are important in provision of certain goods e.g. access to public telephone, access to radio and TV. The social goals dominate in public sector radio and TV programs. Use of the space program as an instrument for guaranteeing strategic, political, scientific and economic leadership yields strategic and incommensurable benefits. The methodology adopted for the two stages, category-wise, is given in Fig. 5.
Fig. 5
Regardless of the nature of goods / services provided and whether it is produced by a public firm or private firm, cost minimization is a valid criterion. The economic costing methodology requires (i) a rational basis for allocation of costs among the payloads of a multi-purpose satellite (ii) apportionment of common and joint costs amongst various ongoing programs of the organization / institution (iii) investment expenditure, their time pattern and cost of capital and (iv) output streams, their time pattern and discount rates for present value.
The global market for communication transponders is generally competitive with many private and public suppliers and many customers buying the transponders. Government induced market distortions are relatively less in this market. Hence, the international market prices can serve as a benchmark for assessing the cost effectiveness of INSAT transponders. A detailed study on economic costing of INSAT transponders with 10 per cent cost of capital on investments and 5.5 per cent discount factor on future returns has brought out the cost advantage of INSAT transponders by at least 25 per cent of the prevailing international prices. The cost performance of INSAT system has been considered to be commendable keeping in view the relatively high capital cost in India and the dependence on some foreign components in the production of the satellites.
A comparative analysis of remote sensing satellites and launch vehicles is rather difficult due to non-availability of reliable estimates of the costs of foreign systems and also due to differences in capabilities. However, preliminary estimates show that the costs of Indian Remote Sensing Satellite (IRS-1D) is very much lower than the reported costs of similar LANDSAT and SPOT satellites. Similarly, the development cost of India’s PSLV and GSLV is US $1.3 billion as compared to about US $ 4 billion for the European Ariane 1 to 4, though there are some capacity variations in these systems.
For measurement of the benefits, the role of satellite technology is considered under three different categories: (a) where the technology is unique, (b) where the technology is a substitute to existing technologies, and (c) where the technology is complementary to existing technologies. In the second case, one can measure cost savings due to satellite technology compared with the existing technology. If the technology is superior to the existing one, one has to estimate the incremental value of the improvement. Where the space technology is used in conjunction with many other technologies, one has to rely on a cost allocation procedure or a benefit sharing method or on expert opinion to estimate the benefit attributable to the space technology.
The INSAT system has played a key role in augmenting Broadcasting, Telecommunications and Meteorological services in the country and has contributed immensely to economic and social development. Satellite communication technologies are terrain and distance independent and they enable governments to achieve goals such as the development of backward and remote areas at low costs and in a short time and thereby achieve technological leapfrogging.
The Major benefits of the INSAT system to Doordarshan (public TV) are expansion in area coverage from 14 per cent in 1983 to 78 per cent in 2005, population coverage from 26 per cent in 1983 to 90 per cent in 2005, increase in the number of channels from 2 to 32, remote area coverage, satellite news gathering, dissemination of weather and cyclone warning and use of TV as a media for training and education.
A detailed analysis show that for enhancing the population coverage further from 90 to 100 per cent with the distribution of a bouquet of 20 DD channels by the public broadcaster Doordarshan, the capital cost and annual operating cost through terrestrial technology is Rs.34560 million and Rs.5184 million respectively while a satellite based solution with direct reception at homes, would involve a capital cost of Rs.6380 million and annual operating cost of Rs.357 million. Thus, given the unique physiographical feature of India, the satellite communications is the least-cost option for achieving 100 per cent population coverage.
The growth of satellite TV has also aided in the emergence of new economic activities. The advent of satellite TV contributed to the growth of several industries like the manufacturing of TV sets, cables, receiving antenna and other equipment and program production. There are about 100,000 cable TV operators and about 35 million cable TV households in the country. The gross earnings of cable TV operators is nearing Rs. 10 billion.
Remote area communication is an important objective of public policy. There is considerable cost savings due to use of satellite technology compared with the alternative of optical fiber cable network in remote area communication. The cost of connecting 393 remote areas, currently served by INSAT, by optical fibre cable would be Rs.23580 million while the comparable cost for satellite technology would be Rs.10460 million. It may be noted that there are 30,000 remote villages of similar nature needing connectivity. The other uses of satellite technology are: alternative media back up for terrestrial services, business communications, portable terminals for disaster management, Tele-medicine and Satellite Aided Search and Rescue.
Apart from the cost saving, there are many external benefits which are diffused economy-wide. In case of Andaman and Nicobar (AN), rapid expansion of telecom since the mid-nineties facilitated the integration of AN with the mainland thereby boosting the growth of industry, trade and tourism and raising the growth rate of gross state domestic product to more than 8 per cent.
Satellites have made significant contributions to the generation of meteorological information by extending observation to oceans and remote areas on land, enabling generation of new types of observations, facilitating new concepts of data assimilation into models, reducing costs of a few types of observations and enhancing the reliability of certain types of data.
Meteorological services are recognized as public goods. The major contributions of satellite technology are in the areas of weather technology (cloud motion vector, wind-sea surface temperature and outgoing long wave radiation) and tropical cyclone (identification of genesis and current position, intensity of change and transmission of cyclone warnings). A comparative study of 1977 (before INSAT) and 1990 (after INSAT) cyclones which hit Andhra Pradesh, shows that even though the two cyclones are similar, due to the successful tracking of the cyclone in 1990 with the INSAT imaging instrument (VHRR) and the success of preparatory steps taken by the government, the loss of lives in 1990 was only 817 compared with 10,000 in 1977. This is an important incommensurable benefit of satellite technology.
The advantages of remote sensing are synoptic coverage, multi-spectral capability, multi-temporal capability and digital capture of data. Remote sensing technology is being used in three different situations. It is an exclusive tool for estimation of snow melt run-off, rapid assessment of areas affected by natural disasters, identification of potential fishing zones in offshore areas and mapping of inaccessible areas. It is a substitute tool to conventional methods in mapping of land use, waste lands, and urban land use; preparing ground water prospect maps, watershed development plan, coastal zone management plan etc; and in monitoring forest cover, urban sprawl, status of environment etc. It is a complement in cases like area and crop forecasting and urban development plans. Its advantage is that it yields unbiased, timely and enhanced information. Based on case studies of applications of remote sensing in India’s development programs, Table 3 provides estimates of investments, direct returns, and economic benefits.
Apart from the major benefits enumerated above, the policy of self-reliance has also enabled internal competence building and technology development and spin-offs to non-space sectors. For example, the spin-off outputs till 2005 include 224 Technology Transfers, 165 patents, 10 trademarks and 17 copyrights. ISRO has nurtured a symbiotic partnership with more than 500 Indian firms. The flow of funds to industry currently is about 40 per cent of the space budget. This partnership has generated significant spin-off effects to the industries in terms of improved manufacturing processes, quality control and management practices.
Table 3: Investments and Benefits in Remote Sensing
|
A |
Investments |
Rs. Millions |
|
Operational Missions |
10,080 |
|
|
Data Reception, Processing and Applications |
5,540 |
|
B |
Direct Returns |
|
|
1. |
Returns from sale of Satellite Data and Value Added Products by NDC |
1,600 |
|
2. |
Returns from ANTRIX through access fees and royalty |
600 |
|
3. |
Opportunity cost (cost of foreign satellite data equivalent to IRS data used). |
~ 5,000 |
|
4. |
Cost saving due to value addition |
~ 12,000 |
|
5. |
Cost saving due to mapping using RS data |
~ 11,000 |
|
C |
Economic Benefits |
Rs. Millions |
||
|
Program |
Nature of Benefit |
Estimate from Case Studies |
Potential Benefit to the country in the Long-run |
|
|
1. |
National Drinking Water Technology Mission |
Cost saving due to increase in success rate |
2,560 (5 States) |
5,000 – 8,000 |
|
2. |
Urban Area Perspective / Development / Zonal / Amenities Plan for Cities / Towns |
Cost saving in mapping |
50.4 (6 Cities) |
16,000 – 20,000 |
|
3. |
Forest Working Plan |
Cost saving in mapping |
2,000 (200 Divisions) |
11,860 |
|
4. |
Potential Fishing Zone Advisories |
Cost saving due to avoidance of trips in non-PFZ advisories |
5,450 |
16,350 |
|
5. |
Wasteland Mapping: Solid Land Reclamation |
Productivity gain |
990 (UP) |
24,690 |
|
6. |
Integrated Mission for Sustainable Development: Horticultural Development in Land With and Without Shrub |
Gross income |
Rs.0.20 to 0.40 (per hectare) |
13,000 – 26,000 |
|
7. |
Bio-prospecting for Medicinal Herbs |
Value of Indian life saving drugs |
800 |
|
Note: 1US $ = Rs. 45.