Dinesh jain
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The Comptroller and Auditor General of
India ( CAG) has pointed out undue favours
granted by the Department of Space (DoS) to
Tata Sky, a leading direct-to-home (DTH)
operator in India. These range from jumping of
queue in allocation of satellite capacity to giving
the exclusive right of first refusal.
In its report titled ‘Management of satellite
capacity for DTH service by Department of
Space’ (DoS), the CAG has observed that the
transponder lease agreement entered with Tata
Sky gave the DTH major certain benefits which
were not offered to any other service providers.
Jumping the queue:
As per CAG, Tata Sky was fifth in the order of
preference for allocation of satellite capacity.
However, it was granted precedence over
Doordarshan (which operates a subscription-free
DTH service) and allocated capacity on INSAT
4A, which was launched earlier in December
2005. DD, which was first in the precedence list,
was allocated capacity on INSAT 4B, which was
launched later in January 2007.
DoS’s argument : DD was allocated capacity on a
foreign satellite (NSS-6) before allocation of
capacity to Tata Sky on INSAT 4A. As DD had
already started their DTH service from the
foreign satellite, the services were migrated to
INSAT 4B after the end of their contract period.
CAG’s contention: DoS did not state whether
capacity on INSAT 4A at the prime slot of 83°
east was offered to DD and turned down by the
latter, which is significant in the context that
DoS granted Tata Sky exclusive rights to this
prime slot.
Exclusive first right of refusal:
CAG : The principle of allocation of satellite
capacity to the private users on a non exclusive
basis was prescribed by the INSAT Coordination
Committee (ICC). In the agreement signed with
Tata Sky (November 2005), DoS committed the
exclusive first right of refusal to the DTH
operator for using Ku-band transponders at 83°
east orbital slot. This exclusivity clause, however,
was not done in transponder lease agreements
entered with other DTH service providers. The
prime slot of 83° east was advantageous to Tata
Sky, since the communication satellites
occupying this slot could uniformly access the
length and breadth of the country.
The issue of preferential allocation of 83° orbital
slot to Tata Sky was first pointed out in
September 2012. Acknowledging the audit point,
DOS held (July 2013) a meeting with Tata Sky
during which it agreed to relinquish the first right
of refusal on the orbital slot. However, no formal
amendment was effected in this regard as of
March 2014.
DoS: The satellite capacity was allocated to Tata
Sky to improve acceptability of the INSAT/GSAT
system without compromising government
interest. The first right of refusal was given due
to a technical reason because a further
expansion of capacity for DTH service was
possible only at the same orbital location.
CAG : The fact, however, remained that DoS did
not give the exclusive right of first refusal to any
other DTH service provider, indicating that DoS
gave a preferential treatment to Tata Sky over
other DTH service providers.
DoS: The contract with Tata Sky was entered
during the initial period of marketing INSAT/
GSAT with a vision to bring private users to the
INSAT/GSAT system (DoS said in December
2012).
“Such clauses were accepted based on customer
specific request as a part of negotiations and
were intended to provide certain confidence to
the users as well as flexibility in contract
management,” it added in March 2014.
CAG : The reply needs to be viewed in the
context that the special terms benefited Tata
Sky. Besides, substantial differences between
the agreement entered into with Tata Sky and
other transponder lease agreements, especially
grant of exclusive rights to the prime orbital slot,
were also noticed by the Ministry of Finance,
which, on March 2013, requested DoS to re-
negotiate the terms of agreement entered with
Tata Sky. However, this was yet to be done (as
of June 2014).
On transponder swapping issue:
In September 2012 DoS launched GSAT 10 and
placed it in the orbital slot 83° east (same as
INSAT 4A). As INSAT 4A was functioning on
reduced power, DoS offered to swap 12
transponders of INSAT 4A with GSAT 10. Though
Tata Sky initially agreed to the arrangement, it
later backed out stating that it was looking for
additional satellite capacity with a foreign
satellite as a long-term engagement. Fearing
litigation by Tata Sky, DoS did not allocate 12
transponders of the Ku band satellite capacity of
GSAT 10 to any other user. (Detailed report)
CAG points out other benefits:
As per the CAG report, the transponder lease
agreement entered in November 2005 with Tata
Sky entailed a number of benefits for Tata Sky.
For example, commitment for satellite capacity
was open ended, with the provision for additional
transponder capacity, whereas in other
agreements the satellite capacity was committed
for the period of lease only.
It also added that credits were provided in the
case of interruption in service for more than 30
minutes to 24 hours at slab rates; however, in all
other agreements the credits were provided for
interruption of more than one hour on
proportionate basis. Besides, there was a
provision for inspection of customer’s earth
station by DoS at the request of Tata Sky, where
as this facility was not extended to the other
DTH service providers.
Finally, CAG underscored the fact that the Tata
Group chairman was one of the non-functional
directors on the board of Antrix. Although there
might be no direct impact on the decision-making
process within Antrix, the allocation of Ku-band
transponders of INSAT 4A on exclusive basis to
Tata Sky does raise the question of conflict of
interest.
Tata Sky’s comment :
Commenting on the CAG report, Tata Sky MD &
CEO Harit Nagpal said: “While the SATCOM
policy allowed DTH platforms, both Indian and
foreign satellites, it stated that proposals
envisaging use of Indian satellites would receive
preferential treatment. Tata Sky is the only
platform that stayed with DOS, while others
migrated to foreign satellites. While we continue
to wait for allocation of incremental capacity, we
have invested over Rs 500 crore (Rs 5 billion) to
migrate to new compression standards to ensure
carriage of channels for our customers, despite
shortage of transponders.”
Why CAG feels that Tata Sky was unduly favoured by DoS | TelevisionPost.com
India ( CAG) has pointed out undue favours
granted by the Department of Space (DoS) to
Tata Sky, a leading direct-to-home (DTH)
operator in India. These range from jumping of
queue in allocation of satellite capacity to giving
the exclusive right of first refusal.
In its report titled ‘Management of satellite
capacity for DTH service by Department of
Space’ (DoS), the CAG has observed that the
transponder lease agreement entered with Tata
Sky gave the DTH major certain benefits which
were not offered to any other service providers.
Jumping the queue:
As per CAG, Tata Sky was fifth in the order of
preference for allocation of satellite capacity.
However, it was granted precedence over
Doordarshan (which operates a subscription-free
DTH service) and allocated capacity on INSAT
4A, which was launched earlier in December
2005. DD, which was first in the precedence list,
was allocated capacity on INSAT 4B, which was
launched later in January 2007.
DoS’s argument : DD was allocated capacity on a
foreign satellite (NSS-6) before allocation of
capacity to Tata Sky on INSAT 4A. As DD had
already started their DTH service from the
foreign satellite, the services were migrated to
INSAT 4B after the end of their contract period.
CAG’s contention: DoS did not state whether
capacity on INSAT 4A at the prime slot of 83°
east was offered to DD and turned down by the
latter, which is significant in the context that
DoS granted Tata Sky exclusive rights to this
prime slot.
Exclusive first right of refusal:
CAG : The principle of allocation of satellite
capacity to the private users on a non exclusive
basis was prescribed by the INSAT Coordination
Committee (ICC). In the agreement signed with
Tata Sky (November 2005), DoS committed the
exclusive first right of refusal to the DTH
operator for using Ku-band transponders at 83°
east orbital slot. This exclusivity clause, however,
was not done in transponder lease agreements
entered with other DTH service providers. The
prime slot of 83° east was advantageous to Tata
Sky, since the communication satellites
occupying this slot could uniformly access the
length and breadth of the country.
The issue of preferential allocation of 83° orbital
slot to Tata Sky was first pointed out in
September 2012. Acknowledging the audit point,
DOS held (July 2013) a meeting with Tata Sky
during which it agreed to relinquish the first right
of refusal on the orbital slot. However, no formal
amendment was effected in this regard as of
March 2014.
DoS: The satellite capacity was allocated to Tata
Sky to improve acceptability of the INSAT/GSAT
system without compromising government
interest. The first right of refusal was given due
to a technical reason because a further
expansion of capacity for DTH service was
possible only at the same orbital location.
CAG : The fact, however, remained that DoS did
not give the exclusive right of first refusal to any
other DTH service provider, indicating that DoS
gave a preferential treatment to Tata Sky over
other DTH service providers.
DoS: The contract with Tata Sky was entered
during the initial period of marketing INSAT/
GSAT with a vision to bring private users to the
INSAT/GSAT system (DoS said in December
2012).
“Such clauses were accepted based on customer
specific request as a part of negotiations and
were intended to provide certain confidence to
the users as well as flexibility in contract
management,” it added in March 2014.
CAG : The reply needs to be viewed in the
context that the special terms benefited Tata
Sky. Besides, substantial differences between
the agreement entered into with Tata Sky and
other transponder lease agreements, especially
grant of exclusive rights to the prime orbital slot,
were also noticed by the Ministry of Finance,
which, on March 2013, requested DoS to re-
negotiate the terms of agreement entered with
Tata Sky. However, this was yet to be done (as
of June 2014).
On transponder swapping issue:
In September 2012 DoS launched GSAT 10 and
placed it in the orbital slot 83° east (same as
INSAT 4A). As INSAT 4A was functioning on
reduced power, DoS offered to swap 12
transponders of INSAT 4A with GSAT 10. Though
Tata Sky initially agreed to the arrangement, it
later backed out stating that it was looking for
additional satellite capacity with a foreign
satellite as a long-term engagement. Fearing
litigation by Tata Sky, DoS did not allocate 12
transponders of the Ku band satellite capacity of
GSAT 10 to any other user. (Detailed report)
CAG points out other benefits:
As per the CAG report, the transponder lease
agreement entered in November 2005 with Tata
Sky entailed a number of benefits for Tata Sky.
For example, commitment for satellite capacity
was open ended, with the provision for additional
transponder capacity, whereas in other
agreements the satellite capacity was committed
for the period of lease only.
It also added that credits were provided in the
case of interruption in service for more than 30
minutes to 24 hours at slab rates; however, in all
other agreements the credits were provided for
interruption of more than one hour on
proportionate basis. Besides, there was a
provision for inspection of customer’s earth
station by DoS at the request of Tata Sky, where
as this facility was not extended to the other
DTH service providers.
Finally, CAG underscored the fact that the Tata
Group chairman was one of the non-functional
directors on the board of Antrix. Although there
might be no direct impact on the decision-making
process within Antrix, the allocation of Ku-band
transponders of INSAT 4A on exclusive basis to
Tata Sky does raise the question of conflict of
interest.
Tata Sky’s comment :
Commenting on the CAG report, Tata Sky MD &
CEO Harit Nagpal said: “While the SATCOM
policy allowed DTH platforms, both Indian and
foreign satellites, it stated that proposals
envisaging use of Indian satellites would receive
preferential treatment. Tata Sky is the only
platform that stayed with DOS, while others
migrated to foreign satellites. While we continue
to wait for allocation of incremental capacity, we
have invested over Rs 500 crore (Rs 5 billion) to
migrate to new compression standards to ensure
carriage of channels for our customers, despite
shortage of transponders.”
Why CAG feels that Tata Sky was unduly favoured by DoS | TelevisionPost.com
