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Rediff.com  » Business » Why India lost Rs 256 crores in one minute

Why India lost Rs 256 crores in one minute

July 14, 2006 19:06 IST

When India's most ambitious Geo-synchronous Satellite Launch Vehicle GSLV-F02, which was carrying the state-of-the-art communication satellite INSAT-4C, crashed into the Bay of Bengal on Monday, gone with the spacecraft in 60 seconds was a whopping Rs 256 crore (Rs 2.56 billion)

Indian Space Research Organisation spokesperson S Krishnamurthy confirmed that neither the launch vehicle, nor the satellite -- on which ISRO spent Rs 160 crore (Rs 1.6 billion) and Rs 96 crore (Rs 960 million) respectively -- was insured against any mid-air or space disaster.

"We have not insured satellites that are launched from India. But we have insured every satellite that ISRO has launched from foreign stations like Kourou in French Guyana," Krishnamurthy told rediff.com

Indian satellites launched from foreign soil have been insured with New India Assurance, a public sector Indian company that has been the traditional insurer for ISRO's programmes.

For instance, ISRO had insured the Rs 250 crore (Rs.2.5 billion) INSAT-4A -- launched from Kourou by Arianespace -- for a premium amount of Rs 92 crore (Rs 920 million).

Though New India Assurance issues the insurance policies to ISRO for foreign launches, the risk factor was taken care of by international re-insurer Spaceco of the Allianz group, which is the world's largest space insurer.

But why are satellite launches from Indian space stations not insured?

"The simple reason is that New India Assurance is a government company and ISRO is a government agency. The loss in a space disaster, in any way then, is the government's," pointed out a senior ISRO official.

But he said in space insurance schemes, the launch vehicles (here, the GSLV-F02) are not insured as they are designed to break up in various stages before the satellite is put into orbit.

That means the insurance covers only the satellite and the mission cost.

ISRO sources said the launch cost of the INSAT-4C mission was around Rs 220 crore (Rs 2.2 billion), which included the satellite cost of Rs 96 crore (Rs 960 million). The remainder was the mission development cost.

How much could the failed INSAT-4C mission have been insured for?

Bangalore-based insurance consultant K Kumaraswamy, who covers defence-related cases, put that figure at Rs 220 crore (Rs 2.2 billion).

"I think ISRO has not been insuring the indigenously launched satellites because of its association with New India Assurance, and also because the premium is huge," Kumaraswamy told rediff.com.

In Western countries, he said, the insurance premium for satellites is over 25 per cent.

"In this case, ISRO could have had to pay a yearly premium of Rs 55 crore (Rs 550 million) on the INSAT-4C mission. That is indeed a huge sum," Kumaraswamy said.

Space insurance, he pointed out, was a relatively new area in India. And because the risk involved is huge and complex, not many private insurance companies have taken keen interest on it.

ISRO officials said they are looking at international insurance companies -- most of whom have set up shop in India -- to insure satellites.

To tackle the problem of space disasters, ISRO is also planning alternative approaches to insurance.

One such idea is to build up in-orbit spare satellites so that even if one satellite fails, the spare one is put in place.

"We can develop extra satellites with the hefty insurance premiums that we have to pay insurance companies each year," an ISRO official said.

Large space-fleet operators like Intelsat, PanAmSat or SES Americom always put up extra satellites to take care of any contingencies.

But ISRO officials themselves admitted it is not an easy solution, as the preparation and launch of each satellite takes years of research and development.

Incidentally, ISRO has received insurance compensation from satellites launched from foreign soil when the INSAT 1A and 1C failed, and the INSAT 2D died in orbit. The apex Indian space agency got about Rs 240 crore (Rs 2.4 billion) as insurance compensation for the failure of INSAT-2D.

George Iype